UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K |
(Mark One) | |||
☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the fiscal year ended: December 31, | |||
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.) |
Leawood, Kansas | 66211 | |
(Address of principal executive offices) | (Zip Code) |
(913)327-4200
Securities registered pursuant to Section 12(b)12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
Common Stock | EEFT | Nasdaq Global Select Market |
1.375% Senior Notes due 2026 | EEFT26 | Nasdaq Global Market |
Securities registered pursuant to Section 12(g)12(g) of the Act: None
_________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☑þ No ☐¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)15(d) of the Act. Yes ☐ No ☑☐Noþ
Indicate by check mark whether the registrant (1)(1) has filed all reports required to be filed by Section 13 or 15(d)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)(2) has been subject to such filing requirements for the past 90 days. Yes Yes☑þ No ☐¨
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes Yes☑þ No ☐¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company”company" and “emerging"emerging growth company”company" in Rule 12b-212b-2 of the Exchange Act.
Large accelerated filer | ☑ | Accelerated filer | ☐ | |||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||
Emerging growth company | ☐ | |||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section |
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-212b-2 of the Act). Yes ☐ No ☑☐
No
☑
As of February 28, 2020,21, 2023, the registrant had 53,519,85549,826,180 shares of Common Stock outstanding.
Documents Incorporated By Reference
Portions of the registrant's Proxy Statement for its 20202023 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after December31 2019,, 2022, are incorporated by reference into Part III of this Annual Report on Form 10-K.
Table of Content | Page Number | |||
Item Number | Item Description | |||
Part I | 1 | |
Item | ||
Item 1A. | Risk Factors | 18 |
Item 1B. | 32 | |
Item 2. | 32 | |
Item 3. | 32 | |
Item 4. | 32 | |
32 | ||
Item 5. | 32 | |
Item 6. | 34 | |
Item 7. | 34 | |
Item 7A. | 54 | |
Item 8. | 56 | |
Item 9. | 101 | |
Item 9A. | 101 | |
Item 9B. | 102 | |
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 102 |
Part III | 102 | |
Item 10. | 102 | |
Item 11. | 102 | |
Item 12. | 102 | |
Item 13. | 102 | |
Item 14. | 102 | |
103 | ||
Item 15. | 103 | |
Signatures | 107 | |
References in this report to “we,” “our,” “us,”"we," "our," "us," the “Company”"Company" and “Euronet”"Euronet" refer to Euronet Worldwide, Inc. and its subsidiariessubsidiaries unless the context indicates otherwise.
Business Overview
General Overview
Euronet is a leading electronic payments processing provider. We offer payment and transaction processing and distribution solutions to financial institutions, agents, retailers, servicemerchants, content providers, and individual consumers. Our primary product offerings include comprehensive automated teller machine (“ATM”("ATM"), point-of-sale (“POS”("POS"), card outsourcing, card issuing and merchant acquiring services; software solutions and cloud based payment solutions; electronic distribution of prepaid mobile airtime and other electronic payment products; foreign exchange services and global money transferinternational payment services.
Core Business Segments
We operate in the following three segments as of December 31, 2019:
The epay Segment provides distribution and processing of prepaid mobile airtime and other electronic content and payment processing services for various prepaid products, cards and services throughout our worldwide distribution network. We operate a network that includes approximately 728,000816,000 POS terminals that enable electronic processing of prepaid mobile airtime “top-up”"top-up" services and other digital media content in Europe, the Middle East, Asia Pacific, the United States and South America. We also provide vouchers and physical gift fulfillment services in Europe, gift card distribution and processing services in most of our markets and digital code distribution in a growing number of markets. In 2019,2022, the epay Segment accounted for approximately 28%30% of Euronet's consolidated revenues.
The Money Transfer Segment provides global consumer-to-consumer money transfer services, primarily under the brand names Ria, AFEX, and IME, and global account-to-account money transfer services under the brand name xe. We offer services under the brand names Ria and IME through a network of sending agents, Company-owned stores (primarily in North America, Europe and Malaysia) and our websites (riamoneytransfer.com and online.imeremit.com), disbursing money transfers through a worldwide correspondent network that includes approximately 397,000522,000 locations. xe is a provider of foreign currency exchange information on its currency data websites (www.xe.com and www.x-rates.com). We offer global account-to-account money transfer services through our websites (www.xe.com and https://transferxe.com) and xe customer service representatives. In addition to money transfers, we offer customers bill payment services (primarily in the U.S.), payment alternatives such as money orders, comprehensive check cashing services for a wide variety of issued checks, along with competitive foreign currency exchange services and mobile top-up. Through xe, we offer cash management solutions and foreign currency risk management services to small-and-medium sized businesses. We are one of the largest global money transfer companies measured by revenues and transaction volumes. In 2019,2022, the Money Transfer Segment accounted for approximately 40%42% of Euronet's consolidated revenues.
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Historical Perspective
Business Segment Overview
For a discussion of operating results by segment, please see Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, and Note 16,17, Business Segment Information, to the Consolidated Financial Statements.
EFT Processing Segment
Overview
Our EFT Processing Segment provides comprehensive electronic payment solutions consisting of ATM cash withdrawal and deposit services, ATM network participation, outsourced ATM and POS management solutions, credit, debit and debitprepaid card outsourcing;outsourcing, card issuing and merchant acquiring services. In addition to our core business, we offer a variety of value added services, including ATM and POS dynamic currency conversion,DCC, domestic and international surcharge, foreign currency dispensing, advertising, digital content sales at ATMs, CRM, prepaid mobile top-up, bill payment, money transfer, fraud management, foreign remittance payout, cardless payout, banknote recycling solutions and tax-refund services. We provide these services either through our Euronet-owned ATMs and POS terminals, through contracts under which we operate ATMs and POS terminals on behalf of our customers or, for certain services, as stand-alone products. Through this segment, we also offer a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems.
Sources of Revenues
The primary sources of revenues generated by our ATM network are recurring monthly management fees, transaction-based fees, surcharges and margins earned on dynamic currency conversionDCC transactions. We receive fixed monthly fees under many of our outsourced management contracts. The EFT Processing Segment also generates revenues from POS operations and merchant management, card network management for credit, debit, prepaid and loyalty cards, prepaid mobile airtime recharge and other electronic content on ATMs and ATM advertising. We primarily service financial institutions in the developing markets of Central, Eastern and Southernoperate across Europe, (Hungary, Poland, the Czech Republic, Croatia, Romania, Serbia, Greece and Ukraine),Africa, the Middle East, and Asia Pacific, (India, China, Malaysia, Pakistan and the Philippines), as well as several developed countries in Western Europe.United States. As of December 31, 2019,2022, we operated 46,07045,009 ATMs compared to 40,35442,713 at December 31, 2018. The increase was largely due to the expansion of our ATM networks in Asia Pacific and Europe.31,2021.
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We monitor the number of transactions made by cardholders on our network. These include cash withdrawals, balance inquiries, deposits, prepaid mobile airtime recharge purchases, dynamic currency conversionDCC transactions and certain denied (unauthorized) transactions. We do not bill certain transactions on our network to financial institutions, and we have excluded these transactions for reporting purposes. The number of transactions processed over our networks has increased over the last five years at a compound annual growth rate (“CAGR”("CAGR") of approximately 19.1%24.1% as indicated in the following table:
(in millions) | 2015 | 2016 | 2017 | 2018 | 2019 |
EFT Processing Segment transactions per year | 1,523 | 1,885 | 2,352 | 2,721 | 3,052 |
(in millions) | 2018 | 2019 | 2020 | 2021 | 2022 |
EFT Processing Segment transactions per year | 2,721 | 3,052 | 3,275 | 4,366 | 6,459 |
The increase in transactions for 2021 and 2022 is the result of a significant increase in the volume of lower value, digitally-initiated payment processing transactions for an Asia Pacific customer's bank wallet and e-commerce site.
Our processing centers for the EFT Processing Segment are located in Martinsreid, Germany; Budapest, Hungary; Mumbai, India; Beijing, China;Germany, Hungary, India, China, and Karachi, Pakistan. Our processing centers run two types of proprietary transaction switching software: our legacy ITM software, which we have used and sold to banksfinancial institutions since 1998 through our Software Solutions unit, and a new,an innovative switching software package named “REN”"REN", which is hosted in Germany and India.India, that was released in 2017. The processing centers operatesoperate 24 hours a day, seven days a week. We have been progressively transitioning all of our networks to REN.
EFT Processing Products and Services
Outsourced Management Solutions
Euronet offers outsourced management solutions to financial institutions, merchants, mobile phone operators and other organizations using our processing centers' electronic financial transaction processing software. Our outsourced management solutions include management of existing ATM networks, development of new ATM networks, management of POS networks,
Euronet-Branded ATM Transaction Processing
Our Euronet-branded ATM networks, also known as IAD networks, are primarily managed by a processing center that uses our market-leading internally developed software solutions. The ATMs in our IAD networks are able to process transactions for holders of credit, debit and debit cardsprepaid products issued by or bearing the logos of financial institutions and international card organizations such as American Express®, Visa®, Mastercard®, JCB, Diners Club International®, Discover® and UnionPay International©, as well as international ATM networks such as PLUS, CIRRUS and PULSE®. or domestic networks such as NYCE, Shazam, AFFN, STAR and others across North America. This is accomplished through our agreements and relationships with these institutions, international credit, debit and debitprepaid card issuers, and international card associations and domestic card associations.
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When a bank cardholder conducts a transaction on a Euronet-owned ATM or automatedautomated deposit terminal, we receive a fee from the cardholder's bank for that transaction. The bank pays us this fee either directly or indirectly through a central switching and settlement network. When paid indirectly, this fee is referred to as the “interchange"interchange fee.” All of the banks in a shared ATM and POS switching system establish the amount of the interchange fee by agreement." We receive transaction processing fees for successful transactions and, in certain circumstances, for transactions that are not completed because they fail to receive authorization. The fees paid to us by the card issuers are independent of any fees charged by the card issuers to cardholders in connection with the ATM transactions. In some cases, we may also charge a direct access fee or surcharge to cardholders at the ATM. The direct access fee is added to the amount of the cash withdrawal and debited from the cardholder's account.
We generally receive fees or earn margin from our customers for six types of ATM transactions:
Card Acceptance or Sponsorship Agreements
Our agreements with financial institutions and international card organizations generally provide that all credit and debit cards issued by the financial institution or organization may be used at all ATMs that we operate in a given market. In most markets, we operate under sponsorship by our own e-money or payment service licensed entity, Euronet 360 Finance Limited ("E360").entities. In some markets, we have agreements with a financial institution under whichwhich we are designated as a service provider (which we refer to as “sponsorship agreements”"sponsorship agreements") for the acceptance of domestic cards and/or cards bearing international logos, such as Visa® and Mastercard.Mastercard®. These card acceptance or sponsorship agreements allow us to receive transaction authorization directly from the card issuing institution or international card organizations on a stand-in basis. Our agreements generally provide for a term of three to seven years and renew automatically unless either party providesprovides notice of non-renewal prior to the termination date. In some cases, the agreements are terminable by either party upon six months' notice. We are generally able to connect a financial institution to our network within 30 to 90 days of signing a card acceptance agreement. The financial institution provides the cash needed to complete transactions on the ATM, but we do provide a significant portion of the cash to our IAD network to fund ATM transactions ourselves. Euronet is generally liable for the cash in the ATM networks.
Dynamic Currency Conversion
We offer dynamic currency conversion, (“DCC”)or DCC, over our IAD networks, ATM networks that we operate on an outsourced basis for banks,financial institutions, and over banks'financial institutions' ATM networks or POS devices as a stand-alone service. DCC is a feature of the underlying ATM or POS transaction that is offered to customers completing transactions using a foreign debit or credit card issued in a country with a currency other than the currency where the ATM or POS is located. The customer is offered a choice between completing the transaction in the local currency or in the customer's home currency via a DCC transaction. If a cardholder chooses to perform a DCC transaction, the acquirer or processor performs the foreign exchange conversion at the time that the funds are delivered at an ATM or the transactions are completed through the POS terminal, which results in a pre-defined amount of the customer's home currency being charged to their card. Alternatively, the customer may have the transaction converted by the card issuing bank, in which the amount of local currency is communicated to the card issuing bank and the card issuing bank makes the conversion to the customer's home currency.
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Other Products and Services
Our network of owned or operated ATMs allows for the sale of additional financial and other products or services at a low incremental cost. We have developed value added services in addition to basic cash withdrawal and balance inquiry transactions. These value added services include mobile top-up, fraud management, bill payment, domestic and international surcharge, CRM, foreign remittance payout, cardless payout, banknote recycling, electronic content, ticket and voucher, foreign currency withdrawal and advertising. We are committed to the ongoing development of innovative new products and services to offer our EFT processing customers.
Euronet offers multinational merchants a Single European Payments Area (“SEPA”("SEPA")-compliant cross-border transaction processing solution. SEPA is an area in which all electronic payments can be made and received in euros, whether between or within national boundaries, under the same basic conditions, rights and obligations, regardless of the location. This single, centralized acquiring platform enables merchants to benefit from cost savings and faster, more efficient payments transfer. Although many European countries are not members of the eurozone, our platform can serve merchants in these countries as well, through our multi-currency functionality.
Software Solutions
We also offer a suite of integrated software solutions for electronic payments and transaction delivery systems. We generate revenues for our software products from licensing, professional services and maintenance fees for software and sales of related hardware, primarily to financial institutions around the world.
Our software products are an integral part of the EFT Processing Segment product lines, and our investment in research, development, delivery and customer support reflects our ongoing commitment to an expanded customer base both internally and externally. Our proprietary software is used by our processing centers in the EFT Processing Segment, resulting in cost savings and added value compared to third-party license and maintenance options. Our proprietary software consists of our legacy ITM software, which we have used and sold to banksfinancial institutions since 1998 through our Software Solutions unit, and an innovative switching software package named REN that we released in 2017.
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Complementary services offered by our epay Segment, where we provide prepaid mobile top-up services through POS terminals, strengthens the EFT Processing Segment's line of services. We plan to continue to expand our technology and business methods into other markets where we operate and further leverage our relationships with mobile phone operators and financial institutions to facilitate that expansion.
Seasonality
Our EFT Processing business experiences its heaviest demand for cash withdrawals and DCC during the third quarter of the fiscal year, coinciding with the tourism season. It is also impacted by seasonality during the fourth quarter and first quarter of each year due to higher transaction levels during the holiday season and lower levels after the holiday season. This seasonality is increased due to our practice of "winterizing"seasonally deactivating ATMs in tourist locations that experience significantly higher traffic during the summer. WinterizingSeasonally deactivating involves shutting down the ATMs during the slower winter months and results in lower overall transaction volumes in the EFT Processing Segment during those months. As we have expanded our IAD network in tourist locations, the financial impact of winterizationseasonally deactivating has increased, because we continue to bear the expense of winterizedseasonally deactivated ATMs even though they do not generate transactions during the winterslower months.
Significant Customers and Government Contracts
No individual customer of the EFT Processing Segment makes up greater than 10% of total consolidated revenues. In India, Pakistan and Indonesia we have contracts with government-owned banks and telecommunications companies that are majority-owned by the government to provide certain ATM driving and transaction switching services, digital content distribution and mobile airtime recharge services. Additionally, certain government-owned banks are members of our shared ATM network in India.India and we provide software services to financial institutions partially owned by government-owned banks. In Austria, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Germany, Hungary, Ireland, Italy, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and the United Kingdom, we lease land and other property for certain ATM sites from companies that are majority-owned by the government. In Pakistan,China and Greece, we have a contractcontracts with a government-owned bank to provide software support services.
Competition
Our principal EFT Processing Segment competitors include ATM networks owned by financial institutions and national switches consisting of consortiums of local banks that provide outsourcing and transaction services to financial institutions and independent ATM deployers in a particular country. Additionally, large, well-financed companies that operate ATMs offer ATM network and outsourcing services, and those that provide card outsourcing, POS processing and merchant acquiring services also compete with us in various markets. Small local operators have also recently begun offering their services, particularly in the IAD market. None of these competitors has a dominant market share in any of our markets. Competitive advantages in our
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Overview
We currently offer prepaid mobile airtime top-up services and other electronic content and payment processing services for various prepaid products, cards and services on a network of approximately 728,000816,000 POS terminals across approximately 339,000358,000 retailer locations in Europe, the Middle East, Asia Pacific, the United StatesNorth America and South America. Our processing centers for the epay Segment are located in Billericay, U.K.; Martinsried, Germany; Hamburg, Germany; Milan, Italy; Buena Park, California, USA;the United Kingdom, Germany, Italy, and Kansas City, Missouri, USA.the United States.
Since 2003, we have expanded our prepaid business in new and existing markets by drawing upon our depth of experience to build and expand relationships with content providers, mobile phone operators and retailers. We offer a wide range of products across our retail networks, including prepaid mobile airtime, prepaid debit cards, prepaid gift cards, prepaid electronic content such as music, games and software, prepaid vouchers, transport payments, lottery payments, prepaid long distance and bill payment processing assistance through partnerships with various licensed money transmitters.
Although mobile phone operators in the U.S. and certain European countries have provided service principally through postpaid accounts, the norm in many other countries in Europe and the rest of the world is to offer wireless service on a prepaid basis.
Prepaid mobile phone credits are generally distributed using personal identification numbers ("PINs"). We distribute PINs in two ways. First, we establish an electronic connection to the mobile operator and the retailer. When the sale to a customer is initiated, the terminal requests the PIN from the mobile operator via our transaction processing platform. These transactions obtain the PIN directly from the mobile operator. The customer pays the retailer and the retailer becomes obligated to make settlement to us of the principalpurchased amount of the mobile airtime sold.airtime. We maintain systems that know the amount of mobile top-up sold by the retailer which allows us in turn to bill that retailer for the mobile top-up sold.
Second, we purchase PINs from the mobile operator which are electronically sent to our processing platform. We establish an electronic connection with the POS terminals in retailer locations and our processing platform provides the terminal with a PIN when the mobile top-up is purchased. We maintain systems that monitor transaction levels at each terminal. As sales of prepaid mobile airtime to customers are completed, the inventory on the platform is reduced by the PIN purchased. The customer payment and settlement with the retailer are the same as described above.
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We process prepaid mobile airtime top-up transactions on our international POS network across Europe, the Middle East, Asia Pacific, North America and South America for two types of clients: distributors and retailers. Both types of client transactions start with a consumer in a retail store. The retailer uses a specially programmed POS terminal in the store, the retailer's electronic cash register (ECR) system, or web-based POS device that is connected to our network to buy prepaid mobile airtime. The consumer will select a predefined amount of mobile airtime from the carrier of choice, and the retailer enters the selection into the POS terminal. The consumer will pay that amount to the retailer (in cash or other payment methods accepted by the retailer). The POS device then transmits the selected transaction to our processing center. Using the electronic connection we maintain with the mobile phone operator or drawing from our inventory of PINs, the purchased amount of mobile airtime will be either credited to the consumer's account or delivered via a PIN printed by the terminal and given to the consumer. In the case of PINs printed by the terminal, the consumer must then call the mobile phone operator's toll-free number to activate the purchased airtime to the consumer's mobile account.
One difference in our relationships with various retailers and distributors is the way in which we charge for our services. For distributors and certain very large retailers, we charge a processing fee. However, the majority of our transactions occur with smaller retailers. With these clients, we receive a commission or discount on each transaction that is withheld from the payments made to the mobile phone operator, and we share that commission/discount with the retailers.
Closed loop (private-branded) gift cards are generally described as merchant-specific prepaid cards, used for purchases exclusively at a particular merchant's locations. We distribute closed loop gift cards in various categories, including dining, retail, and digital media, such as music, games and software. Generally, the gift card is activated when a consumer loads funds (with cash, debit or credit card payment) or purchases a preloaded value gift card at a retail store location or online.
Open Loop Gift Cards
Open loop (network-branded) gift cards are prepaid gift cards associated with an electronic payment network (such as Visa® or Mastercard)Mastercard®) and are honored at multiple, unaffiliated locations (wherever cards from these networks are generally accepted). They are not merchant-specific. We distribute and issue single-use, non-reloadable open loop gift cards carrying the Visa® brand in our retail channels. After the consumer purchases the preloaded value gift card at a retail store location or online, the consumer must call the toll-free number on the back of the card to activate it.
Open Loop Reloadable
We distribute Visa® and Mastercard® issued debit cards provided by Green Dot, NetSpend and other card issuers. We also manage and distribute a proprietary debit card that allows a retailer to issue its own reloadable store-branded card. Open loop reloadable cards have features similar to a bank checking account, including direct deposit, purchasing capability wherever a credit card is accepted, bill payment and ATM access. Fees are charged to consumers for the initial load and reload transactions, monthly account maintenance and other transactions.
Our POS network is used for the distribution of other products and services, including games and software, bill payment, lottery tickets and transportation products. Through our Cadooz subsidiary, we also distribute vouchers and physical gifts into the business-to-business ("B2B") channel principally for the purposes of employee and customer incentives and rewards. In certain locations, the terminals used for prepaid services can also be used for electronic funds transfer to process credit, debit and debitprepaid card payments for retail merchandise. We provide promotion and advertising for content providers of their prepaid
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We provide our prepaid services through POS terminals or web-based POS devices installed in retail outlets or, in the case of major retailers, through direct connections between their ECR systems and our processing centers. In markets where we operate proprietary technology (the U.K., Germany, Australia, Poland, Ireland, New Zealand, Spain, Greece, India, Italy, Brazil and the U.S.), we generally own and maintain the POS terminals. In certain countries in Europe, the terminals are sold to the retailers or to distributors who service the retailer. Our agreements with major retailers for the POS services typically have one to three-year terms. These agreements include terms regarding the connection of our networks to the respective retailer's registers or payment terminals or the maintenance of POS terminals, and obligations concerning settlement and liability for transactions processed. Generally, our agreements with individual or small retailers have shorter terms and provide that either party can terminate the agreement upon three to six months' notice.
In Germany, distributors are key intermediaries in the sale of mobile top-up. As a result, our business in Germany is substantially concentrated in, and dependent upon, relationships with our major distributors. The termination of any of our agreements with major distributors could materially and adversely affect our prepaid business in Germany. However, we have been establishing agreements with independent German retailers in order to diversify our exposure to such distributors.
The number of transactions processed on our POS networknetworkshas increased over the last five years areat a CAGR of approximately 35.2% as indicated in the table below:
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(in millions) | 2018 | 2019 | 2020 | 2021 | 2022 |
epay processing transactions per year | 1,149 | 1,542 | 2,395 | 3,120 | 3,836 |
(in millions) | 2015 | 2016 | 2017 | 2018 | 2019 |
epay processing transactions per year | 1,335 | 1,294 | 1,186 | 1,149 | 1,542 |
epay Segment Strategy
Mobile top-up transactions are declining in many developed markets and transaction fees for mobile transactions are being compressed by the mobile operators. epay's strategy is to defend margins in developing markets by providing value added services to mobile operators and to decrease our reliance on mobile top-up by increasing distribution of other electronic content. New product initiatives focus on products such as gift card malls, prepaid debit cards, transport and electronic content, including music, software and games. Strategic execution behind new products includes the development of relationships with global consumer product brands. This strategy leverages the global scale of the epay business allowing global brands to be sold in many or all of the countries in which we have a presence. Examples of global brands we distribute include iTunes, Google Play, Sony, and Microsoft.
As the product mix continues to change, the epay business is impacted by seasonality during the fourth quarter and first quarter of each year due to the higher transaction levels during the holiday season and lower levels following the holiday season.
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Significant Customers and Government Contracts
No individual customer of our epay Segment makes up greater than 10% of total consolidated revenues. In Germany, epay has a contract for the technology and distribution infrastructure for six state-owned lotteries, in Germany.it deploys Know Your Customer (or KYC) technologies on terminals indirectly owned by the Federal Republic of Germany and provides payment processing services for the state of Berlin and the city of Stuttgart, and Cadooz has a contract with Deutsche Bahn, which is majority owned by the German state. In addition, epay has contracts with the state of Florida's (USA) Turnpike partners and Transurban Limited, the largest manager of toll road networks in Australia, Cubic, supporting New South Wales Transport ticketing in Australia, and with New Zealand Transport Authority, which operates all toll roads in New Zealand. In Germany, Cadooz has a contract with Deutsche Bahn,epay distributes mobile top up in post offices in the United Kingdom, which is majorityare owned by the German state. We also have a contractgovernment. epay has contracts in the Middle East for the distributionprocessing of mobile airtime with a Saudi company, which isfor companies that are majority owned by the Saudi government and the UAE government, and epay distributes prepaid electronic content through companies that are owned by the Dubai government and Abu Dhabi government. In India, the epay segment distributes prepaid content through the State Bank of India and distributes telecom airtime on behalf of Bharat Sanchar Nigam, a government owned telecommunications provider based in New Delhi. There are no other government contracts in the epay Segment.
Competition
We face competition in the prepaid business in all of our markets. We compete with a few multinational companies that operate in several of our markets. In other markets, our competition is from smaller, local companies. The mobile operators in all of our markets have retail distribution networks, and in some markets, on-line distribution of their own through which they offer top-up services for their own products.
We believe our size and market share are competitive advantages in many markets. In addition, we believe our processing platforms are a competitive advantage. We have extremely flexible technical platforms that enable us to tailor POS solutions to individual retailers and mobile operator and digital media content provider requirements where appropriate. Our platforms are also able to provide value added services other than processing which makes us a more valuable partner to the content providers and retailers. We have introduced new digital products into the marketplace such as digital payment for online media subscriptions. Many of these products are not offered by our competitors and in many countries, these are new products. We are capitalizing on being the first to market for these products.
The principal competitive factors in the epay Segment include price (that is, the level of commission paid to retailers for each transaction), breadth of products and up-time offered on the system. Major retailers with high volumes are able to demand a larger share of the commission, which increases the amount of competition among service providers. We are seeing signs that some mobile operators are expanding their distribution networks to provide top-up services on-line or via mobile devices, which provides other alternatives for consumers to use.
In addition, we provide global account-to-account money transfer services under the brand name xe. We offer money transfer services via our websites (www.xe.com and https://transferxe.com)website (www.xe.com) and through customer service representatives. xe also provides foreign currency exchange information on its currency data websites (www.xe.com and www.x-rates.com). Through xe, we offer cash management solutions and foreign currency risk management services to small-and-medium sized businesses.
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We monitor the number of transactions made through our money transfer networks. The number of transactions processed on our network has increased over the last five years at a CAGR of approximately 13.7%8.3% as indicated in the following table:
(in millions) | 2015 | 2016 | 2017 | 2018 | 2019 |
Money transfer transactions per year | 68.7 | 82.3 | 92.2 | 107.6 | 114.5 |
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(in millions) | 2018 | 2019 | 2020 | 2021 | 2022 |
Money transfer transactions per year | 107.6 | 114.5 | 116.5 | 135.1 | 147.9 |
Our sending agent network includes a variety of agents, including Walmart, large/medium size regional retailers, convenience stores, bodegas, multi-service shops and phone centers, which are predominantly found in areas with a large immigrant population. Each Ria money transfer transaction is processed using Euronet's proprietary software system and checked for security, completeness and compliance with federal and state regulations at every step of the process. Senders can track the
We are one of the largest global money transfer companies measured by revenues and transaction volumes. Our Money Transfer Segment processed approximately $54$63 billion in money transfers in 2019.
Sources of Revenues
Revenues in the Money Transfer Segment are derived through the charging of a transaction fee, as well as a margin earned from purchasing foreign currency at wholesale exchange rates and selling the foreign currency to customers at retail exchangerates. Sending agents and receiving agents for consumer-to-consumer products each earn fees for cash collection and distribution services.Euronetrecognizes these fees as direct operating costs at the time of sale.
Money Transfer Products and Services
Money transfer products and services are sold primarily through three channelschannels: at agent locations, Company-owned stores and on internet enabled devices at riamoneytransfer.com online.imeremit.com, xe.com, and https://transferxe.com (online transactions).
Through our TeleRia service, customers connect to our call center from a telephone available at an agent location and a representative collects the information over the telephone and enters it directly into our secure proprietary system. As soon as the data capture is complete, our central system automatically faxes a confirmation receipt to the agent location for the customer to review and sign and the customer pays the agent the money to be transferred, together with a fee. The agent then faxes the signed receipt back to Ria to complete the transaction.
In addition to money transfers, Ria also offers customers bill payment services, payment alternatives such as money orders, comprehensive check cashing services for a wide variety of issued checks, along with competitive foreign currency exchange services and mobile top-up. These services are all offered through our Company-owned stores while select services are offered through our agents in certain markets.
Ria money orders are widely recognized and exchanged throughout the United States. Our check cashing services cover payroll and personal checks, cashier checks, tax refund checks, government checks, insurance drafts and money orders. Our bill payment services offer timely posting of customer bills for over 8,0007,800 companies, including electric and gas utilities and telephone/wireless companies. Bill payment services are offered primarily in the U.S.
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xe offers account-to-account international payment service to high-income individuals and small-and-medium sized businesses, complementing our existing consumer-to-consumer money transfer business. xe has a multi-channel platform which allows customers to make transfers, track payments and manage their international payment activity online or through a customer service representative. xe offers cash management solutions and foreign currency risk management services to small-and-medium sized businesses. xe also offers foreign currency exchange subscriptions and advertising on its websites.
Money Transfer Segment Strategy
The Money Transfer Segment's strategy is to increase the volume of money transfers processed by leveraging our existing banking and merchant/retailer relationships to expand our agent and correspondent networks in existing corridors. In addition, we pursue expansion into high-potential money transfer corridors from the U.S. and internationally beyond the traditional U.S. to Mexico corridor. Further, we expect to continue to take advantage of cross-selling opportunities with our epay and EFT Processing Segments by providing prepaid services through our stores and agents and offering our money transfer services at select prepaid retail locations and ATMs we operate in key markets. We will continue to make investments in our systems to support this growth. Additionally, we are expanding our xe business into new markets.
Seasonality
Our money transfer business is significantly impacted by seasonality that varies by region. In most of our markets, we experience increased money transfer transaction levels during the month of May and in the fourth quarter of each year, coinciding with various holidays. Additionally, in the U.S. to Mexico corridor, we usually experience our heaviest volume during the May through October time frame, coinciding with the increase in worker migration patterns and various holidays, and our lowest volumes during the first quarter.
Significant Customers and Government Contracts
No individual customer of our Money Transfer Segment makes up greater than 10% of total consolidated revenues. The Money Transfer Segment maintains correspondent relationships with a number of financial institutions whose ownership includes governments of the correspondents' countries of origin. Those countries include Armenia, Austria, Bangladesh,Belarus, Belgium, Benin, Bhutan, Bolivia, Bosnia-Herzegovina, Botswana, Burkina Faso, Burundi, China,Cameroon, Cape Verde, Chad, Costa Rica, Cote d'Ivoire, Cuba, Djibouti, Dominican Republic, Ecuador, Egypt, El Salvador, Eritrea, Ethiopia, Fiji, Gabon, Gambia, Georgia, Ghana, Guatemala, Mali, Mauritania, Mexico, Pakistan, Philippines, Poland, Romania, Saudi Arabia, Senegal, Tunisia, Uganda, Ukraine, Vietnam, Burkina Faso, El Salvador, Gambia, Georgia, Guinea, Guinea - Bissau, Honduras, India, Indonesia, Italy, Jordan, Kenya, Kyrgyzstan, Laos, Liberia, Madagascar, Malaysia, Mali, Mauritania, Mauritius, Mexico, Moldova, Morocco, Myanmar, Niger, Nigeria, Pakistan, Philippines, Poland, Romania, Russia, Rwanda, Saudi Arabia, Serbia, Senegal, Sierra Leone, Sri Lanka, Suriname, Tanzania, Thailand, Togo, Tunisia, Turkey, Uganda, Ukraine, Uzbekistan, Vietnam, Yemen, Zambia, and Zambia.
Competition
Our primary competitors in the money transfer and bill payment business include other large money transfer companies and electronic money transmitters, together with hundreds of smaller registered and unregistered money transmitters, as well as certain major national and regional banks, financial institutions and independent sales organizations. Our competition includes The Western Union Company, the leading competitor with revenue approximately two times greater than our revenue. The Western Union Company has a significant competitive advantage due to its greater resources and access to capital for expansion. This may allow them to offer better pricing terms to customers, agents or correspondents, which may result in a loss of our current or potential customers or could force us to lower our prices. In addition to traditional money payment services, new technologies are emerging that compete with traditional money payment services, such as stored-value cards, debit networks, and web-based services and digital currencies. Our continued growth also depends upon our ability to compete effectively with these alternative technologies.
We had approximately 7,700, 7,1009,500, 8,800 and 6,6008,100 employees as of December 31, 2019, 2018, and 2017,2022,2021, and2020, respectively. We believe our future success will depend in part on our ability to continue to recruit, retain and motivate qualified management, technical and administrative employees. Currently, no union represents any of our employees, except in one of our Spanish subsidiaries. We experienced no work stoppages or strikes by our workforce in 20192022 and we consider relations with our employees to be good.
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As discussed below, many of our business activities are subject to regulation in our current markets. In the Money Transfer Segment, we are subject to a wide variety of laws and regulations of the U.S., individual U.S. states and foreign governments. These include international, federal and state anti-money laundering and sanctions laws and regulations, money transfer and payment instrument licensing laws, escheat laws, laws covering consumer privacy, data protection and information security and consumer disclosure and consumer protection laws. Our operations have also been subject to increasingly strict requirements intended to help prevent and detect a variety of illegal financial activity, including money laundering, terrorist financing, unauthorized access to personal customer data and other illegal activities. The more significant of these laws and regulations are discussed below. Noncompliance with these laws and requirements could result in the loss or suspension of licenses or registrations required to provide money transfer services through retail agents, Company owned stores or online. For more discussion, see Item 1A - Risk Factors.
Any further expansion of our activity into areas that are qualified as “financial activity”"financial activity" under local legislation may subject us to licensing and we may be required to comply with various conditions to obtain such licenses. Moreover, the interpretations of bank regulatory authorities as to the activity we currently conduct might change in the future. We monitor our business for compliance with applicable laws or regulations regarding financial activities.
Certain of our European product offerings, including in particular, our money transfer services, merchant acquiring and bill payment products, are regulated payment services requiring a license under the Second Payment Services Directive, or PSD2, which replaced the Payment Services Directive, or PSD, effective January 13, 2018. Key changes made by PSD2 to PSD include: creation of two new payment service types, extension of PSD rules on transparency to additional transactions not previously covered by PSD; enhanced cooperation and information exchange between authorities in the context of authorization and supervision of payment institutions and electronic money institutions; and increased obligations around the management of operational and security risk and the notification of incidents, increased obligations relating to complaints handling and additional requirements regarding payment security.
PSD2 requires a license to perform certain defined "payment services" in a European country, whichEconomic Area (“EEA”) Member State and such license may be extended throughout theother Member States of the EEA through passporting.passporting of the license (either on a freedom of service or freedom of establishment basis). Conditions for obtaining the license include minimum capital requirements, establishment of procedures for safeguarding of funds, and certain governance and reporting requirements. In addition, certain obligations relating to internal controls and the conduct of business, in particular, consumer disclosure requirements and certain rules regarding the timing and settlement of payments, must be met. We have payment institution licenses in the U.K., France, Germany, and Spain and are complying with these requirements. To date,Traditionally, we have passported our U.K., German and Spanish payment services authorizations to several Member StatesStates. As a result of Brexit, our U.K, payment institution is no longer capable of passporting its license into the EEA and the relevant EEA business was transferred to our Spanish authorizationother licenses prior to several host Member States.the end of the Brexit transition period. Additionally, in the U.K., we have obtained an e-money license under the 2EMD.license. The e-money license allows Euronet to issue e-money and provide the same payment services as a PSD2 licensee.The e-money license imposes certain requirements similar to those of the payment services license, including minimum capital requirements, consumer disclosure and internal controls and can becontrols. Prior to the end of the Brexit transition period, our e-money license was passported tointo over twenty-five EEA Member States. OurAs a result of Brexit, we have restructured the regulated services provided by our U.K. e-money license holder is currently operatinginstitution in over twenty-onethe EEA Member States.
Money Transfer and Payment Instrument Licensing
Licensing requirements in the U.S. are generally driven by the various state banking departments regulating the businesses of money transfers and issuances of payment instruments. Typical requirements include the meeting of minimum net worth requirements, maintaining permissible investments (e.g., cash, agent receivables, and government-backed securities) at levels commensurate with outstanding payment obligations and the filing of a security instrument (typically in the form of a surety bond) to offset the risk of default of trustee obligations by the license holder. We are required by many state regulators to submit ongoing reports of licensed activity, most often on a quarterly or monthly basis, that address changes to agent and branch locations, operating and financial performance, permissible investments and outstanding transmission liabilities. These periodic reports are utilized by the regulator to monitor ongoing compliance with state licensing laws. A number of major state regulators also conduct periodic examinations of license holders and their authorized delegates, generally with a frequency of every one to two years. Examinations are most often comprehensive in nature, addressing both the safety and soundness and overall compliance by the license holder with regard to state and federal regulations. Such examinations are typically performed on-site at the license holder's headquarters or operations center; however, certain states may choose to perform examinations off-site as well.
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Money transmitters, issuers of payment instruments and their agents are required to comply with U.S. federal, state and/or foreign anti-money laundering laws and regulations. In summary, our Money Transfer Segment, as well as our agent network, is subject to regulations issued by the different state and foreign national regulators who license us, the Office of Foreign Assets
A similar set of regulations applies to our money transfer businesses in most of the foreign countries in which we originate transactions. These laws and regulations include monetary limits for money transfers into or out of a country, rules regarding the foreign currency exchange rates offered, as well as other limitations or rules for which we must maintain compliance.
Regulatory bodies in the U.S. and abroad may impose additional rules on the conduct of our Money Transfer Segment that could have a significant impact on our operations and our agent network. In this regard, the U.S. federal government has implemented U.S. federal regulations for electronic money transfers, including the Electronic Fund Transfer Act, which provides consumer protections for international remittance transfers. The Consumer Financial Protection Bureau ("CFPB"), adopted a rule that provides additional protections for consumers who transmit money internationally, including disclosure requirements, cancellation rights and error resolution procedures for consumer complaints. Under U.S. federal law, it is unlawful for any provider of consumer financial products or services to engage in unfair, deceptive or abusive acts or practices (collectively, "UDAAPs"). The CFPB has rule making and enforcement authority to prevent UDAAPs in connection with transactions for consumer financial products or services. The CFPB audits our compliance with these rules, and we may be subject to fines or penalties for violations of any of such rules.
Escheat Regulations
Our Money Transfer Segment is subject to the unclaimed or abandoned property (i.e., “escheat”"escheat") regulations of the United States and certain foreign countries in which we operate. These laws require us to turn over property held by Euronet on behalf of others remaining unclaimed after specified periods of time (i.e., “dormancy”"dormancy" or “escheat”"escheat" periods). Such abandoned property is generally attributable to the failure of beneficiary parties to claim money transfers or the failure to negotiate money orders, a form of payment instrument. We have policies and programs in place to help us monitor the required information relating to each money transfer or payment instrument for possible eventual reporting to the jurisdiction from which the order was originally received. In the U.S., reporting of unclaimed property by money service companies is performed annually, generally with a due date of on or before November 1. State banking department regulators will typically include a review of Euronet escheat procedures and related filings as part of their examination protocol.
Privacy and Information Security Regulations
Our Money Transfer Segment operations involve the collection and storage of certain types of personal customer data that are subject to privacy and security laws in the U.S. and abroad. In the United States, we are subject to the Gramm-Leach-Bliley Act (“GLBA”("GLBA") and various state laws including California Consumer Privacy Act ("CCPA"), which requires that financial institutions have in place policies regarding the collection, processing, storage and disclosure of information considered nonpublic personal information. Laws in other countries include the E.U.'s General Data Protection Regulation (2016/679) ("GDPR"), which became effective from May 25, 2018, as well as the laws of other countries.
Recently, as identity theft has been on the rise, there has been increased public attention to concerns about information security and consumer privacy, accompanied by laws and regulations addressing the issue. We believe we are compliant with these laws and regulations; however, this is a rapidly evolving area and there can be no assurance that we will continue to meet the existing and new regulations, which could have a material, adverse impact on our Money Transfer Segment business.
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Sanctions Compliance
In addition to anti-money laundering laws and regulations, our products and services are subject to economic and trade sanctions laws and regulations promulgated by OFAC and other jurisdictions in which our products and services are offered.The sanctions laws and regulations prohibit or restrict transactions to or from (or dealings with or involving) certain countries, regions, governments, and in certain circumstances, specified foreign nationals, as well as with certain individuals and entities such as narcotics traffickers, terrorists, and terrorist organizations. These sanctions laws and regulations require screening of transactions against government watch-lists, including but not limited to, the watch-lists maintained by OFAC, and include transactional and other reporting to government agencies.
Compliance Policies and Programs
We have developed risk-based policies and programs to comply with existing and new laws, regulations and other requirements outlined above, including having dedicated compliance personnel, training programs, automated monitoring systems and support functions for our offices and agents. To assist in managing and monitoring our money laundering and terrorist financing risks, we continue to have our compliance programs, in many countries, independently examined on an annual basis. In addition, we continue to enhance our anti-money laundering and counter-terrorist financing compliance policy, procedures and monitoring systems, as well as our consumer protection policies and procedures.
Each of our three operating segments utilizes intellectual property which is protected in varying degrees by a combination of trademark, patent and copyright laws, as well as trade secret protection, license and confidentiality agreements.
The brand names of “Ria,” “Ria"Ria," "Ria Financial Services,” “Ria" "Ria Envia,” “xe,”" "xe," "AFEX," "IME," derivations of those brand names and certain other brand names are material to our Money Transfer Segment and are registered trademarks and/or service marks in most of the markets in which our Money Transfer Segment operates. Consumer perception of these brand names is important to the growth prospects of our money transfer business. We also hold a U.S. patent on a card-based money transfer and bill payment system that allows transactions to be initiated primarily through POS terminals and integrated cash register systems.
With respect to our EFT Processing Segment, we have registered or applied for registration of our trademarks, including the names “Euronet”"Euronet" and “Bankomat”"Bankomat" and/or our blue diamond logo, as well as other trade names in most markets in which these trademarks are used. Certain trademark authorities have notified us that they consider these trademarks to be generic and, therefore, not protected by trademark laws. This determination does not affect our ability to use the Euronet trademark in those markets, but it would prevent us from stopping other parties from using it in competition with Euronet. We have registered the “Euronet”"Euronet" trademark in the class of ATM machines in Germany, the U.K. and certain other Western European countries. We have filed pending applications and/or obtained patents for a number of our new software products and our processing technology, including certain top-up services and DCC services.
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Additionally, we have filed a trademark application for the “epay” brand inwith the U.S., U.K.,Madrid Protocol, which, if granted, will simplify the E.U. through a Community Trademark application, Brazil, India, Australia and New Zealand. Theprocess to extending the international protection of the epay trademark has issued to registration in the U.S., U.K., the E.U., Australia, New Zealand and Brazil. The trademark application in India is still pending.trademark. We cannot be certain that we are entitled to use the epay trademark in any markets other than those in which we have registered the trademark.trademark; however, before entering new markets, we conduct searches to understand our usage rights. We have filed patent applications for some of ourcertain POS top-up and certain other products in support of epay technology. Certain patents have been granted while others have been refused or are still pending. We also hold a patent license covering certain of epay's operations in the U.S.
Technology in the areas in which we operate is developing very rapidly, and we are aware that many other companies have filed patent applications for products, processes and services similar to those we provide. The procedures of the U.S. patent office make it impossibledifficult for us to predict whether our patent applications will be approved or will be granted priority dates that are earlier than other patents that have been filed for similar products or services. Moreover, many “process patents”"process patents" have been filed in the U.S. over recent years covering processes that are in wide use in the money transfer, EFT and prepaid processing industries. If any of these patents are considered to cover technology that has been incorporated into our systems, we may be required to obtain additional licenses and pay royalties to the holders of such patents to continue to use the affected technology or be prohibited from continuing the offering of such services if licenses are not obtained. This could materially and adversely affect our business.
Information about our Executive Officers
The name, age, period of service and position held by each of our Executive Officers as ofFebruary 28, 202022, 2023are as follows:
Name | Age | Served Since | Position Held |
Michael J. Brown | 66 | July 1994 | Chairman, Chief Executive Officer and President |
Rick L. Weller | 65 | November 2002 | Executive Vice President - Chief Financial Officer |
Scott D. Claassen | 56 | May 2020 | General Counsel and Secretary |
Kevin J. Caponecchi | 56 | July 2007 | Executive Vice President - Chief Executive Officer, epay, Software and EFT Asia Pacific Division |
Juan C. Bianchi | 52 | April 2007 | Executive Vice President - Chief Executive Officer, Money Transfer Segment |
Nikos Fountas | 59 | September 2009 | Executive Vice President - Chief Executive Officer, EFT Europe, Middle East and Africa Division |
Martin L. Bruckner | 47 | January 2014 | Senior Vice President - Chief Technology Officer |
MICHAEL J. BROWN, Chairman, Chief Executive Officer and President. Mr. Brown is one of the founders of Euronet and has served as our Chairman of the Board and Chief Executive Officer since 1996, and has served as President since December 2014. He also co-founded our predecessor company in 1994. Mr. Brown has been a Director of Euronet since our incorporation in December 1996 and previously served on the boards of Euronet's predecessor companies. In 1979, Mr. Brown founded Innovative Software, Inc., a computer software company that was merged in 1988 with Informix. Mr. Brown served as President and Chief Operating Officer of Informix from February 1988 to January 1989. He served as President of the Workstation Products Division of Informix from January 1989 until April 1990. In 1993, Mr. Brown was a founding investor of Visual Tools, Inc. Visual Tools, Inc. was acquired by Sybase Software in 1996. Mr. Brown received a B.S. in Electrical Engineering from the University of Missouri - Columbia in 1979 and a M.S. in Molecular and Cellular Biology at the University of Missouri - Kansas City in 1997.
RICK L. WELLER, Executive Vice President, Chief Financial Officer. Mr. Weller has been Executive Vice President and Chief Financial Officer of Euronet since he joined Euronet in November 2002. From January 2002 to October 2002, he was the sole proprietor of Pivotal Associates, a business development firm. From November 1999 to December 2001, Mr. Weller held the position of Chief Operating Officer of ionex telecommunications, inc., a local exchange company. He is a certified public accountant and received his B.S. in Accounting from the University of Central Missouri.
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SCOTT D. CLAASSEN, General Counsel. Counsel and Secretary. Mr. NewmanClaassen has been Executive Vice President and General Counsel and Secretary of Euronet since January 2000. He joined Euronetjoining the Company in December 1996 as Vice President and General Counsel.May 2020. Prior to this, he practiced corporate law with the Washington, D.C. based law firm of Arent Fox Kintner Plotkin & KahnStinson LLP and the Paris based law firm of Salans Hertzfeld & Heilbronn.Shook, Hardy and Bacon LLP. He is a member of the District of Columbia, CaliforniaKansas and Paris, FranceMissouri bars. He received a B.A.B.S. in Political Science and FrenchAgriculture from Ohio University in 1976 and law degrees from OhioKansas State University, andan MBA from the University of Paris.
NIKOS FOUNTAS, Executive Vice President - Chief Executive Officer, EFT Europe, Middle East and Africa Division. Mr. Fountas has been Executive Vice President of the Company's EFT Processing Segment in Europe since December 2012. Mr. Fountas joined Euronet subsequent to the Company's 2005 acquisition of Instreamline S.A. (now Euronet Card Services) in Greece. He served as managing director of the Company's Greece EFT subsidiary, responsible for Euronet's European card processing and cross-border acquiring operations until September 2009. In September 2009, Mr. Fountas took over responsibilities as managing director of Euronet's Europe EFT Processing Segment. Prior to joining Euronet, Mr. Fountas spent over 20 years working in management and executive-level positions in the IT field for several companies, including IBM for 12 years. He has a degree in computer science (Honors) from York University in Canada and post graduate studies in business administration from Henley Management School and IBM Business Professional Institute.
MARTIN L. BRUCKNER, Senior Vice President - Chief Technology Officer. Mr. Bruckner has been Senior Vice President and Chief Technology Officer of Euronet since January 2014. Mr. Bruckner joined Euronet in 2007 as head of software development and IT operations for Transact GmbH. In 2009, he was promoted to Chief Technology Officer of Euronet's epay segment. Prior to joining Euronet, Mr. Bruckner established his own IT company called MLB Development GmbH, where he developed software systems for various European companies. Mr. Bruckner has more than 20 years of software development experience and published his first software product (BBS systems) at the age of 15. He received a Doctorate of Law from the University of Rostock and a law degree from the University of Bielefeld.
Our Website addresses are www.euronetworldwide.com and www.eeft.com. We make available all SEC public filings, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act") on our Websites free of charge as soon as reasonably practicable after these documents are electronically filed with, or furnished to, the SEC. The information on our Websites is not, and shall not be deemed to be, a part of this report or incorporated into any other filings we make with the SEC. In addition, our SEC filings are made available via the SEC's EDGAR filing system accessible at www.sec.gov.
The charters for our Audit, Compensation, and Corporate Governance and Nominating Committees, as well as the Code of Business Conduct&Ethics for our employees, including our Chief Executive Officer and Chief Financial Officer, are available on our Website at www.euronetworldwide.com in the “For Investors”"For Investors" section under "Document"Corporate Governance / Documents and Charters".
If any of the following risks actually occurs, our business, financialcondition or results of operations could be materially adversely affected. Inthat case, the trading price of our Common Stock could decline substantially.
This Annual Report also contains forward-looking statements that involve risksand uncertainties. Our actual results could differ materially from thoseanticipated in the forward-looking statements as a result of a number offactors, including the risks described below and elsewhere in this Annual Report.
Because we are a multinational company conducting a complex business in many Report.
Operating outside of the U.S. creates difficulties associated with our international operations, as well as complying with local legal and regulatory requirements. We operate financial transaction processing networks that offer new products and services to customers, and the laws and regulations in the markets in which we operate evolve and are subject to rapid change. Although we have knowledgeable local staff in countries in which we deem it appropriate, we cannot assure you that we will continue to be ablefound to successfully integrate,be operating in compliance with all applicable customs, currency exchange control, data protection, anti-money laundering, sanctions, employment, transfer pricing and other laws or otherwise realize anticipated benefitsregulations to which we may be subject. We also cannot assure you that these laws will not be modified in ways that may adversely affect our business.
For our epay Segment, as we continue to expand our electronic payment product and service offerings, certain of those products and/or services may become regulated by state, federal or foreign laws, rules and regulations. New payment product and/or service offerings may trigger payment regulation within the jurisdiction in which we are offering such payment products and services which may require licensure for epay and/or our partner entities distributing or processing such products. If such products become more highly regulated and ultimately require licensure, our epay business may be adversely affected. Further, if regulations regarding the expiration of gift vouchers change in the countries where we offer them, the revenue epay recognizes from our recent acquisitions or any future acquisitions. Failureunredeemed vouchers may be negatively affected.
Our money transfer services are subject to successfully integrate or otherwise realizeregulation by the anticipated benefitsU.S. states in which we operate, by the U.S. federal government and the governments of the other countries in which we operate. Changes in the laws, rules and regulations of these acquisitions could adversely impact our long-term competitivenessgovernmental entities, and profitability. The integration of any future acquisitions will involve a number of risks that could harm our financial condition, results of operations and competitive position. In particular:
A prolonged economic slowdown or lengthy or severe recession in
Additionally, the U.S. orelsewhere could harm our operations.
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We conduct a significant portion of our business in Central and EasternEuropean countries, and we have subsidiaries in the Middle East, Asia Pacific, Africa and South America, where the risk of continued political, economic andregulatory change that could impact our operating results is greater than inthe U.S. or Western Europe.
We have subsidiaries in Central and Eastern Europe, the Middle East, Asia Pacific, Africa and South America. We expect to continue to expand our operations to other countries in these regions. Some of these countries have undergone significant political, economic and social change in recent years and the risk of new, unforeseen changes in these countries remains greater than in the U.S. or Western Europe. Recent changes to the political climate in certain Eastern European countries increases the risk that a potential military conflict may adversely impact our operations in that region and disrupt our ATM network. In particular, changes in laws or regulations or in the interpretation of existing laws or regulations, whether caused by a change in government or otherwise, could materially adversely affect our business, growth, financial condition or results of operations.
For example, currently there are no limitations in any of the countries in which we have subsidiaries on the repatriation of profits from these countries, but foreign currency exchange control restrictions, taxes or limitations may be imposed or tightened in the future with regard to repatriation of earnings and investments from these countries. If exchange control restrictions, taxes or limitations are imposed or tightened, our ability to receive dividends or other payments from affected subsidiaries could be reduced, which may have a material adverse effect on us. As discussed under "Liquidity and Capital Resources" in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, under existing U.S. tax laws, repatriation of certain assets to the U.S. could have adverse tax consequences.
We conduct business in many international markets with complex and evolving taxrules, including value added tax rules, which subjects us to international taxcompliance risks which could adversely affect our operating results.
While we obtain advice from legal and tax advisors as necessary to help assure compliance with tax and regulatory matters, most tax jurisdictions that we operate in have complex and subjective rules regarding the valuation of intercompany services, cross-border payments between affiliated companies and the related effects on income tax, value added tax (“VAT”), transfer tax and share registration tax. Our foreign subsidiaries frequently undergo VAT reviews, and from time to time undergo comprehensive tax reviews and may be required to make additional tax payments should the review result in different interpretations, allocations or valuations of our services.
Our operations in countries outside the United States are subject to anti-corruption laws and regulations, including restrictions imposed by the FCPA. The FCPA and similar anti-corruption laws in other jurisdictions, such as the U.K. Bribery Act, generally prohibit companies and their intermediaries from making improper payments to government officials or employees of commercial enterprises for the purpose of obtaining or retaining business. We operate in many parts of the world that have experienced corruption to some degree and, in certain circumstances, strict compliance with anti-corruption laws may conflict with local customs and practices.
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Future acquisitions may be effected through the issuance of our common stock or securities convertible into our common stock, which could substantially dilute the ownership percentage of our current stockholders. In addition, shares issued in connection with future acquisitions could be publicly tradable, which could result in a material decrease in the market price of our common stock. Certain factors on which our ability to expand each of our divisions is dependent are set forth at Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - Opportunities and Challenges. If any of such factors impede our ability to expand our businesses, our results of operations and financial condition could be materially and adversely affected.
Our operating results depend, in part, on the volume of transactions on ATMs in our network and the fees we can collect from processing these transactions. We generally have little control over the ATM transaction fees established in the markets where we operate, and therefore, cannot control any potential reductions in these fees which may adversely affect our results of operations.
Transaction fees from banks, customers and international card organizations for transactions processed on our ATMs have historically accounted for a substantial portion of our revenues. These fees are set by agreement among all banks in a particular market. The future operating results of our ATM business depend on the following factors:
• the acceptance of our ATM processing and management services in our target markets;
• the maintenance of the level of transaction fees we receive;
• the continued use of our ATMs by credit and debit cardholders; and
• our ability to generate revenues from interchange fees and from other value added services, including dynamic currency conversion.
The amount of fees we receive per transaction is set in various ways in the markets in which we do business. We have card acceptance agreements or ATM management agreements with some banks under which fees are set. However, we derive a significant portion of our revenues in many markets from interchange fees, surcharges or cash withdrawal related services that are set by the central ATM processing switch or various card organizations. The banks that participate in these switches or the card organizations that enable the services or transactions set the interchange fee and/or establish the rules regarding the services allowed, and we are not in a position in any market to greatly influence these fees or rules, which may change over time. A significant decrease in the interchange fee, or limitations placed on our ability to offer value added services via our ATM network, in any market could adversely affect our results in that market.
Although we believe that the volume of transactions in developing countries may increase due to growth in the number of cards being issued by banks in these markets, we anticipate that transaction levels on any given ATM in developing markets will not increase significantly. We can attempt to improve the levels of transactions on our ATM network overall by acquiring good sites for our ATMs, eliminating poor locations, entering new, less-developed markets and adding new transactions, including new value added services, to the sets of transactions that are available on our ATMs. However, we may not be successful in materially increasing transaction levels through these measures. Per-transaction fees paid by international card organizations have declined in certain markets in the past and competitive factors have required us to reduce the transaction fees we charge customers. If we cannot continue to increase our transaction levels and per-transaction fees generally decline, our results would be adversely affected.
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If consumer confidence in our business or brands declines, our business may be adversely affected.
Our business relies on customer confidence in our brands and our ability to provide efficient and reliable products and services across each of our segments. For our Money Transfer division, a decline in customer confidence in our business or brands, or in traditional money transfer providers as a means to transfer money, may adversely impact transaction volumes which would, in turn, be expected to adversely impact our business and possibly result in recording charges for the impairment of goodwill and/or other long-lived assets.
CAPITAL MARKETS AND ECONOMIC CONDITIONS
The outbreak of COVID-19 (coronavirus) has negatively impacted and could continue to negatively impact the global economy. In addition, the COVID-19 pandemic could disrupt or otherwise negatively impact global credit markets and our operations, including the demand for our products and services.
The significant outbreak of COVID-19 has resulted in a widespread health crisis, which has negatively impacted and could continue to negatively impact the global economy. In addition, the global and regional impact of the outbreak, including official or unofficial quarantines and governmental restrictions on activities taken in response to such event, has had, and could continue to have a negative impact on our operations, reduced consumer demand for our products and services due to reduced consumer traffic in, or closure of, retail and other locations where our products and services are offered, including voluntary or mandatory temporary closures of our facilities or those of our agents orcustomers;interruptions in our supply chain, which could impact the cost or availability of equipment; disruptions or restrictions on our ability to travel or to market and distribute our products andservices;and labor shortages.
For example, the COVID-19 pandemic has resulted in travel restrictions within and between countries, including mandatory quarantine requirements for travelers from certain locations, and varying degrees of social distancing orders in most of the countries where we do business, beginning in early 2020. These travel restrictions and orders, as well as increased unemployment and general economic uncertainty caused by the pandemic, have negatively impacted our financial results. The EFT 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. The Money Transfer Segment has experienced the impacts by the pandemic-related restrictions in certain markets that limit customers' ability to access our network of company-owned stores and agents. All of these factors, in turn, may not only impact our operations, financial condition and demand for our products and services but our overall ability to react timely to mitigate the impact of this event.
The COVID-19 outbreak could disrupt or otherwise negatively impact credit markets, which could adversely affect the availability and cost of capital. Such impacts could limit our ability to fund our operations and satisfy our obligations.
The extent and potential impact of the COVID-19 outbreak on our operational and financial performance will depend on future developments, including the duration, severity and spread of the virus, the effectiveness of vaccines and treatments against variants of the virus, actions that may be taken by governmental authorities and the impact on our supply chain, customers, operations, workforce and the financial markets, all of which are highly uncertain and cannot be predicted. These and other potential impacts of an epidemic, pandemic or other health crisis, such as COVID-19, could therefore materially and adversely affect our business, financial condition and results of operations.
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We are subject to political tension, the outbreak of wars, economic downturns all over the world
Economic conditions around the world, and in certain markets in which the Company does business, could impact sales price and volume. As a result, market uncertainty or an economic downturn driven by inflationary pressures; political tensions; war, including the ongoing conflict between Russia and Ukraine and the related sanctions and export restrictions; terrorism; epidemics; pandemics; or political instability in the geographic regions or industries in which the Company provides services and products could reduce demand and result in decreased sales volume, which could have a negative impact on the Company’s results of operations.
In February 2022, Russia invaded Ukraine resulting in the United States, Canada, the European Union and other countries imposing economic sanctions on Russia. Euronet suspended its operations and product offerings in Russia. This action has not had a material impact on the Company's financial condition or results of operations. However, the fluidity and continuation of the conflict may result in additional economic sanctions and other impacts which could have a negative impact on the Company’s financial condition, results of operations and cash flows. These include decreased sales; potential disruptions in neighboring countries where Euronet has operations; volatility in foreign exchange rates and interest rates; inflationary pressures; and heightened cybersecurity threats.
We are subject to business cycles, seasonality and other outside factors that may negatively affect our business.
A recessionary economic environment in any of our markets or other countriesoutside factors could have a negative impact on banks, mobile phone operators, content providers, retailers and our individual customers and could reduce the level of transactions in all of our divisions, which would, in turn, negatively impact our financial results. If banks, mobile phone operators and content providers experience decreased demand for their products and services, or if the locations where we operate, then itprovide services decrease in number, we will process fewer transactions, resulting in lower revenues. In addition, a recessionary economic environment could affectreduce the mannerlevel of transactions taking place on our networks, which will have a negative impact on our business.
Our experience is that the level of transactions on our networks is also subject to substantial seasonal variation. In the EFT Processing Segment, mostly in Europe, we usually experience our heaviest demand for dynamic currency conversion during the third quarter of the fiscal year, coinciding with the tourism season in Europe. As a result, our revenues earned in the third quarter of the year will usually be greater than other quarters of the fiscal year. Additionally, transaction levels have consistently been higher in the fourth quarter of the fiscal year due to increased use of ATMs, prepaid products and money transfer services during the holiday season. Generally, the level of transactions drops in the first quarter, during which transaction levels are generally the lowest we provideexperience during the year, which reduces the level of revenues that we record. In the Money Transfer Segment, we experience increased transaction levels during the May through October time frame, coinciding with certain holidays and the increase in worker migration patterns. As a result of these seasonal variations, our servicesquarterly operating results may fluctuate materially and could lead to volatility in the price of our shares.
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Additionally, economic or political instability, wars, civil unrest, terrorism, epidemics and natural disasters may make money transfers to, from or within a particular country more difficult. The inability to timely complete money transfers could adversely affect our business.
Economic cycles may lead us to recognize impairment charges related to long-lived assets and goodwill recorded in connection with our acquisitions, which would adversely impact our results of operations. Our total assets include approximately $1,017 million, or 19% of total assets, in goodwill and acquired intangible assets recorded as a result of acquisitions. We assess our goodwill, intangible assets and other long-lived assets as and when required by accounting principles generally accepted in the U.S. to determine whether they are impaired. We have had material impairment write-downs of goodwill and acquired intangible assets in the past and we may have additional impairment write-downs in the future. If operating results in any of our key markets, including Australia, Germany, Greece, Malaysia, India, New Zealand, the U.S., U.K., Poland and Romania, deteriorate or our plans do not progress as expected when we acquired these entities, or if capital markets depress our value or that of similar companies, we may be required to record additional impairment write-downs of goodwill, intangible assets or other long-lived assets. This could have a material adverse effect on our results of operations and financial results.
We have a substantial amount of debt and other contractual commitments, and while the cost of servicing those obligations is not expected to adversely affect our business, the risk could increase if we incur more debt. We may be required to prepay our obligations under the credit facility.
As of December 31, 2022, total liabilities were $4,159 million, of which $1,805 million represents long-term liabilities, and total assets were $5,404 million. We may not have sufficient funds to satisfy all such obligations as a result of a variety of factors, some of which may be beyond our control. If the opportunity of a strategic acquisition arises or if we enter into new contracts that require the installation or servicing of infrastructure, such as processing centers, ATM machines or POS terminals on a faster pace than anticipated, we may be required to incur additional debt for these purposes and to fund our working capital needs, including ATM network cash, which we may not be able to obtain. The level of our indebtedness could have important consequences to investors, including the following:
• | our ability to obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements or other purposes may be limited or financing may be unavailable; | |
• | a portion of our cash flows must be dedicated to the payment of principal and interest on our indebtedness and other obligations and will not be available for use in our business; | |
• | our level of indebtedness could limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate; | |
• | our level of indebtedness will make us more vulnerable to changes in general economic conditions and/or a downturn in our business, thereby making it more difficult for us to satisfy our obligations; and | |
• | because a portion of our debt bears interest at a variable rate of interest, our actual debt service obligations could increase as a result of adverse changes in interest rates. |
If we fail to make required debt payments, or if we fail to comply with other covenants in our debt service agreements, we would be in default under the terms of these agreements. This default would permit the holders of the indebtedness to accelerate repayment of this debt and could cause defaults under other indebtedness that we have.
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Restrictive covenants in our credit facilities may adversely affect us. Our Credit Facility (as defined below) contains two financial covenants that we must meet as defined in the agreement: (1) Consolidated Total Leverage Ratio, and (2) Consolidated Interest Coverage Ratio. To remain in compliance with our debt covenants, we may be required to increase Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), repay debt, or both. We cannot assure you that we will have sufficient assets, liquidity or EBITDA to meet or avoid these obligations, which could have an adverse impact on our financial condition.
Our ability to secure additional financing for growth or to refinance any of our existing debt is also dependent upon the availability of credit in the marketplace, which has experienced severe disruptions in the past. If we are unable to secure additional financing or such financing is not available at acceptable terms, we may be unable to secure financing for growth or refinance our debt obligations, if necessary.
Because we derive our revenues from a multitude of countries with differentcurrencies, our business may be adversely affected by local inflation and foreign currencyexchange rates and policies.
Because our business is highly dependent on the proper operation of our computer networks and telecommunications connections, significant technical disruptions to these systems would adversely affect our revenues and financial results.
Our business involves the operation and maintenance of sophisticated computer networks and telecommunications connections with financial institutions, mobile phone operators, other content providers, retailers and agents. This, in turn, requires the maintenance of computer equipment and infrastructure, including telecommunications and electrical systems, and the integration and enhancement of complex software applications. There are operational risks inherent in this type of business that can result in the temporary shutdown of part or all of our processing systems, such as failure of electrical supply, failure of computer hardware, security breaches and software errors. Any operational problem in our processing centers may have various mechanismsa significant adverse impact on the operation of our networks. Even with disaster recovery procedures in place, these risks cannot be eliminated entirely, and any technical failure that prevents operation of our systems for a significant period of time will prevent us from processing transactions during that period of time and will directly and adversely affect our revenues and financial results.
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We are subject to discourage takeover attempts, whichsecurity breaches of our systems. Any such breach mayreduce or eliminate cause us to incur financial losses, liability, harm to our stockholders'reputation, litigation, regulatory enforcement actions and limitations on our ability to sell their sharesconduct our businesses.
We capture, transmit, handle and store sensitive information in conducting and managing electronic, financial and mobile transactions, such as card information, PIN numbers and personal information of various types. These businesses involve certain inherent security risks, in particular: the risk of electronic interception and theft of the information for ause in fraudulent or other card transactions by persons outside the Company, including third party vendors or by our own employees; and the use of fraudulent cards on our network of owned or outsourced ATMs premium in a changeand POS devices. We incorporate industry-standard encryption technology and processing methodology into our systems and software, and maintain controls and procedures regarding access to our computer systems by employees and others, to maintain high levels of control transaction.
Any breach in our security systems could result in the perpetration of fraudulent financial transactions for which we may bear the liability. We are insured against various risks, including theft and negligence, but such insurance coverage is subject to deductibles, exclusions and limits that may leave us bearing some or all of any losses arising from security breaches.
We also collect, transfer and retain personal data as intended shouldpart of our businesses. These activities are subject to certain privacy laws and regulations in the notesU.S. and in other jurisdictions where our services are offered. We maintain technical and operational safeguards designed to comply with applicable legal requirements. Despite these safeguards, there remains a risk that these safeguards could be converted.breached resulting in improper access to, and disclosure of, sensitive customer information. Under state, federal and foreign laws requiring consumer notification of security breaches, the costs to remediate security breaches can be substantial. Breaches of our security policies or applicable legal requirements resulting in a compromise of customer data could expose us to regulatory enforcement action, subject us to litigation, limit our ability to provide services and/or cause harm to our reputation.
In addition to electronic fraud issues and breaches of our systems, the possible theft and vandalism of ATMs or cash in the ATMs present risks for our ATM business. We install ATMs at high-traffic sites and consequently our ATMs are exposed to theft and vandalism, and to attacks whereby the security of the ATM is breached electronically by transmitting a command to the ATM to dispense cash without a card being present.We constantly monitor ATM security and take measures to protect our systems from such attacks and other breaches, but we cannot be certain that our measures will be effective against new, rapidly developing methods used by criminal elements. Although we are insured against such risks, deductibles, exclusions or limitations in such insurance may leave us bearing some or all of any losses arising from theft or vandalism of ATMs or loss of cash due to security breaches of our ATM networks. In addition, we have experienced increases in claims under our insurance, which has increased our insurance premiums.
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Failures of third-party service providers we rely upon could lead to financial loss.
We rely on third party service providers to support key portions of our operations. We also rely on third party service providers to provide part or all of certain services we deliver to customers. While we have selected these third-party vendors carefully, we do not control their actions. A failure of these services by a third party could have a material impact upon our delivery of services to customers. Such a failure could lead to damage claims, loss of customers, and reputational harm, depending on the duration and severity of the failure. Third parties perform significant operational services on our behalf. These third-party vendors are subject to similar risks as us relating to cybersecurity, breakdowns or failures of their own systems or employees. One or more of our vendors may experience a cybersecurity event or operational disruption and, if any such event does occur, it may not be adequately addressed, either operationally or financially, by the third-party vendor. Certain of our vendors may have limited indemnification obligations or may not have the financial capacity to satisfy their indemnification obligations. If a critical vendor is unable to meet our needs in a timely manner or if the services or products provided by such a vendor are terminated or otherwise delayed and if we are not able to develop alternative sources for these services and products quickly and cost-effectively, our customers could be negatively impacted and it could have a material adverse effect on our business.
Our competition in the EFT Processing Segment, epay Segment and Money TransferSegment includes large, well-financed companies and financial institutionslarger than us with earlier entry into the market. As a result, we may lack thefinancial resources and access to capital needed to capture increased marketshare.
share.
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Our epay and money transfer businesses may be susceptible to fraud and/orcredit risks occurring at the retailer, correspondent and/or consumer level, which could adversely affect our results of operations.
Certain developments in the field of payments may reduce the need for ATMs, prepaid product POS terminals and money transfer agents. An example of this type of development is the use of near field technology in retail transactions, which if widely accepted in a market reduces the need for cash and can negatively impact the level of ATM transactions in that market. Advances in biometric payment solutions could have similar adverse impacts. These developments may reduce the transaction levels that we experience on our networks in the markets where they occur. Financial institutions, retailers and agents could elect to increase fees to their customers for using our services, which may cause a decline in the use of our services and have an adverse effect on our revenues. If transaction levels over our existing network of ATMs, POS terminals, agents and other distribution methods do not increase, growth in our revenues will depend primarily on increased capital investment for new sites and developing new markets, which reduces the margin we realize from our revenues.
The mobile phone industry is a rapidly evolving area, in which technological developments, in particular the development of new billing models (such as "all you can eat" plans) and distribution methods or services, may affect the demand for other services in a dramatic way. The development of any new models or technology that reduce the need or demand for prepaid mobile airtime could materially and adversely affect our business.
In some cases, we are dependent upon international card organizations andnational transaction processing switches to provide assistance in obtainingsettlement from card issuers of funds relating to transactions on our ATMs, and any failure by them to provide the required cooperation could result in our inability to obtain settlement of funds relating to transactions.
The developing markets in which we have done business have matured over the years, resulting in increasing competition. In addition, as consolidation of financial institutions in Central and Eastern Europe continues, certain of our customers have established or are establishing internal ATM management and processing capabilities. As a result of these developments, negotiations regarding renewal of contracts have become increasingly challenging and in certain cases we have reduced fees to extend contracts beyond their original terms. In certain other cases, contracts have been, and in the future may be, terminated by financial institutions resulting in a substantial reduction in revenue. Contract termination payments, if any, may be inadequate to replace revenues and operating income associated with these contracts. Although
GOVERNANCE MATTERS
We have various mechanisms in place to discourage takeover attempts, which may reduce or eliminate our stockholders' ability to sell their shares for a premium in a change of control transaction.
Various provisions of our certificate of incorporation and bylaws and of Delaware corporate law may discourage, delay or prevent a change in control or takeover attempt of our company by a third party which our management and board of directors opposes. Public stockholders who might desire to participate in such a transaction may not have the opportunity to do so. These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change of control or change in our management and board of directors. These provisions include:
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Additionally, we are authorized to issue up to a total of 90 million shares of common stock, potentially diluting equity ownership of current holders and the share price of our common stock.We believe that it is necessary to maintain a sufficient number of available authorized shares of our common stock in order to provide us with the flexibility to issue common stock for business purposes that may arise as deemed advisable by our Board. These purposes could include, among other things, (i) to declare future stock dividends or stock splits, which may increase the liquidity of our shares; (ii) the sale of stock to obtain additional capital or to acquire other companies or businesses, which could enhance our growth strategy or allow us to reduce debt if needed; (iii) use in additional stock incentive programs and (iv) other bona fide purposes. Our Board of Directors may issue the available authorized shares of common stock without notice to, or further action by, our stockholders, unless stockholder approval is required by law or the rules of the Nasdaq Global Select Market. The issuance of additional shares of common stock may significantly dilute the equity ownership of the current holders of our common stock. Further, over the course of time, all of the issued shares have the potential to be publicly traded, perhaps in large blocks. This may result in dilution of the market price of the common stock.
An additional 13.1 million shares of common stock, representing approximately 26% of the shares outstanding as of December 31, 2022, could be added to our total common stock outstanding through the exercise of options or the issuance of additional shares of our common stock pursuant to existing convertible debt and other agreements. Once issued, these shares of common stock could be traded into the market and result in a decrease in the market price of our common stock.
As of December 31, 2022, we had 4.7 million and 0.7 million options and restricted stock awards outstanding, respectively, held by our directors, officers and employees, which entitle these holders to acquire an equal number of shares of our common stock. Of this amount, 1.5 million options are vested and exercisable as of December 31, 2022. Approximately 4.9 million additional shares of our common stock may be issued in connection with our stock incentive and employee stock purchase plans. Accordingly, based on current trading prices of our common stock, approximately 2.2 million shares could potentially be added to our total current common stock outstanding through the exercise of options and the vesting of restricted stock awards, which could adversely impact the trading price for our stock.
Of the 5.4 million total options and restricted stock awards outstanding, an aggregate of 2.2 million options and restricted stock awards are held by persons who may be deemed to be our affiliates and who would be subject to Rule 144. Thus, upon exercise of their options or sale of shares for which restrictions have lapsed, these affiliates' shares would be subject to the trading restrictions imposed by Rule 144. The remainder of the common shares issuable under option and restricted stock award arrangements would be freely tradable in the public market. Over the course of time, all of the issued shares have the potential to be publicly traded, perhaps in large blocks.
Upon the occurrence of certain events, another 2.8 million shares of common stock could be issued upon conversion of the Company's convertible notes issued in March 2019; in certain situations, the number of shares issuable could be higher. While we have historically consideredstated that we intend to settle any conversion of these notes by issuing cash for the riskprincipal value of non-renewalthe notes and issuing shares of major contractscommon stock for the conversion value in excess of the principal, which would significantly reduce the number of shares issued upon conversion, if our financial condition significantly and adversely changes, we may not be able to settle as intended should the notes be relatively low because of complex interfacesconverted.
KEY PERSONNEL
Retaining the founder and operational procedures established for those contracts, the risk of non-renewal or early termination is increasing.
The development and implementation of our strategy has depended in large part on workers who migrate to foreign countries in searchthe co-founder of employment and then send a portionour company, Michael J. Brown. The retention of their earnings to family members in their home countries. Changes in U.S. and foreign government policies or enforcement, including changes that have been, or may be, implemented by the U.S. President or Congress, toward immigration may have a negative effect on immigration in the U.S. and other countries, which could also have an adverse impact on our money transfer revenues.
Our officers and some of our other E.U. licenseskey personnel have entered into service or obtain additional licenses by the dateemployment agreements containing non-competition, non-disclosure and non-solicitation covenants, which grant incentive stock options and/or restricted stock with long-term vesting requirements. However, most of these contracts do not guarantee that the U.K. leaves the E.U., then we may have a disruption to the services that we provide in the E.U. under our U.K. licenses. Any disruptionthese individuals will continue their employment with us. The loss of our business following Brexitkey personnel could have a material adverse effect on our business, or financial results.
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None.
Our executive offices are located in Leawood, Kansas. As of December 31, 2019,2022, we also have 36 principal offices in Europe, 14 in Asia Pacific, 10 in North America, three in the Middle East, two in South America and one in Africa. Our office leases generally provide for initial terms ranging from two to twelve years.
Our processing centers for the EFT Processing Segment are located in Martinsreid, Germany; Budapest, Hungary; Mumbai, India; Beijing, China;Germany, Hungary, India, China, and Karachi, Pakistan. Processing centers we operate for the epay Segment are located in Billericay,the U.K.; Martinsried, Germany; Hamburg, Germany; Milan, Italy; Buena Park, California, USA;, Germany, Italy, and Kansas City, Missouri, USA.the U.S. Our processing centers for the Money Transfer Segment are located in Buena Park, California, USA; Bracknell,the U.S., the U.K.; Auckland,, New Zealand; Kansas City, Missouri, USA;Zealand, and Kuala Lumpur, Malaysia.
The Company is, from time to time, a party to legal or regulatory proceedings arising in the ordinary course of its business.
The discussion regarding litigation in Part II, Item 8 - Financial Statements and Supplementary Data and Note 18,19, Litigation and Contingencies, to the Consolidated Financial Statements included elsewhere in this report is incorporated herein by reference.
Currently, there are no legal or regulatory proceedings that management believes, either individually or in the aggregate, would have a material adverse effect upon the Consolidated Financial Statements of the Company. In accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"), we record a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These liabilities are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case or proceeding.
Not applicable.
Market Information
Our Common Stock,common stock, $0.02 par value per share, is quoted on the NASDAQNasdaq Global Select Market under the symbol EEFT.
Dividends
Since our inception, no dividends have been paid on our Common Stock or Preferred Stock.common stock. We do not intend to distribute dividends for the foreseeable future.
Holders
At December 31, 20192022, we had 44 50stockholders of record of our Common Stock, and none of our Preferred Stock was outstanding. This figure does not include an estimate of the indeterminate number of beneficial holders whose shares may be held of record by brokerage firms and clearing agencies.
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Private Placements and Issuances of Equity
During
2019During2022, we did not issue any equity securities that were not registered under the Securities Act of 1933, which have not been previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
The following graph comparing thecompares Euronet Worldwide Inc.’s annual percentage change in cumulative total cumulative return on our Common Stock fromcommon shares over the past five years with the cumulative total return of companies comprising the Nasdaq Composite index and the Nasdaq US Benchmark Financial Services TR Index. This presentation assumes that $100 was invested in shares of the relevant issuers on December 31, 2014 through December 31, 2019 with the Total Returns Index for U.S. companies traded on the NASDAQ Global Select Market (the “Market Group”)2017, and an index group of peer companies, the Total Returns Index for U.S. NASDAQ Financial Stocks (the “Peer Group”). Returns are based on monthly changesthat dividends received were immediately invested in price and assume reinvested dividends. These calculations assumeadditional shares. The graph plots the value of anthe initial $100 investment inat one-year intervals for the Common Stock, the Market Group and the Peer Group was $100 on December 31, 2014.
The following performance graph and related text are being furnished to and not filed with the SEC, and will not be deemed to be “soliciting material”"soliciting material" or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent we specifically incorporate such information by reference into such filing.
Equity Compensation Plan Information
Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 16, Stock Plans, and Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, for information related to our equity compensation plans.
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The following table below sets forthprovides information with respect to shares of the Company's Common Stock that may be issued under our equity compensation plans as of were purchased during the three months ended December 31, 2019.2022.
| ||||||||||||||
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) | ||||||
October 1 - October 31, 2022 |
| — |
|
| $ | — |
|
| — |
|
| $ | 475,049 |
|
November 1 - November 30, 2022 |
| __ |
|
| __ |
|
| __ |
|
| 475,049 |
| ||
December 1 - December 31, 2022 |
| __ |
|
| __ |
|
| __ |
|
| 475,049 |
| ||
Total |
| __ |
|
| $ | __ |
|
| __ |
|
|
|
(a) | (b) | (c) | ||||||||
Plan category | Number of Securities to be Issued Upon Exercise of Outstanding Options and Rights | Weighted Average Exercise Price of Outstanding Options and Rights (1) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))(2) | |||||||
Equity compensation plans approved by security holders: | 2,388,186 | |||||||||
Stock option awards | 3,015,775 | $ | 81.29 | |||||||
Restricted stock unit awards | 493,948 | — | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||
Total | 3,509,723 | $ | 81.29 | 2,388,186 |
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) | ||||||||||
October 1 - October 31, 2019 | 217,829 | $ | 142.89 | 217,829 | $ | 249,124 | ||||||||
November 1 - November 30, 2019 | — | — | — | 249,124 | ||||||||||
December 1 - December 31, 2019 | — | — | — | 249,124 | ||||||||||
Total | 217,829 | $ | — | 217,829 |
Year Ended December 31, | ||||||||||||||||||||
(dollar amounts in thousands, except per share amounts) | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
Income statement data: | ||||||||||||||||||||
Revenues | $ | 2,750,109 | $ | 2,536,629 | $ | 2,252,422 | $ | 1,958,615 | $ | 1,772,262 | ||||||||||
Operating expenses (1) | 2,163,171 | 2,072,694 | 1,891,395 | 1,628,313 | 1,497,396 | |||||||||||||||
Depreciation and amortization | 111,744 | 106,021 | 95,030 | 80,529 | 70,025 | |||||||||||||||
Operating income (1) | 475,194 | 357,914 | 265,997 | 249,773 | 204,841 | |||||||||||||||
Other expenses, net | (41,387 | ) | (62,998 | ) | (9,662 | ) | (16,880 | ) | (63,747 | ) | ||||||||||
Income from continuing operations before income taxes | 433,807 | 294,916 | 256,335 | 232,893 | 141,094 | |||||||||||||||
Income tax expense | (87,112 | ) | (62,785 | ) | (99,395 | ) | (58,795 | ) | (42,602 | ) | ||||||||||
Income from continuing operations | $ | 346,695 | $ | 232,131 | $ | 156,940 | $ | 174,098 | $ | 98,492 | ||||||||||
Earnings per share from continuing operations: | ||||||||||||||||||||
Basic | $ | 6.49 | $ | 4.52 | $ | 2.99 | $ | 3.34 | $ | 1.89 | ||||||||||
Diluted | $ | 6.31 | $ | 4.26 | $ | 2.85 | $ | 3.23 | $ | 1.83 | ||||||||||
Balance sheet data (at period end): | ||||||||||||||||||||
Assets | $ | 4,657,666 | $ | 3,321,155 | $ | 3,140,029 | $ | 2,712,872 | $ | 2,192,714 | ||||||||||
Debt obligations, long-term portion | 1,090,939 | 589,782 | 404,012 | 561,663 | 405,472 | |||||||||||||||
Finance lease obligations, long-term portion | 8,054 | 8,199 | 9,753 | 6,969 | 4,147 | |||||||||||||||
Summary network data | ||||||||||||||||||||
Number of operational ATMs at end of period | 46,070 | 40,354 | 37,133 | 33,973 | 21,360 | |||||||||||||||
EFT processing transactions during the period (millions) | 3,052 | 2,721 | 2,352 | 1,885 | 1,523 | |||||||||||||||
Number of operational prepaid processing POS terminals at end of period (rounded) | 728,000 | 719,000 | 683,000 | 661,000 | 674,000 | |||||||||||||||
Prepaid processing transactions during the period (millions) | 1,542 | 1,149 | 1,186 | 1,294 | 1,335 | |||||||||||||||
Money transfer transactions during the period (millions) | 114.5 | 107.6 | 92.2 | 82.3 | 68.7 |
The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K. This section of this Form 10-K generally discusses 20192022 and 20182021 items and year-to-year comparisons between 20192022 and 2018.2021. Discussions of 20172021 items and year-to-year comparisons between 20182021 and 20172020 that are not included in this Form 10-K can be found in “Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations”Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Company Overview, Geographic Locations and Principal Products and Services
Euronet is a leading electronicfinancial technology solutions and 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:
1) The EFT Processing Segment, which processes transactions for a network of 45,009ATMsand approximately 613,000POS terminals across Europe, the Middle East, Africa, 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, debit and prepaid 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.
2) TheepaySegment, which provides distribution, processing and collection services for prepaid mobile airtime and other electronic content. We operate a network of approximately 816,000 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.
34 | |
3) The Money Transfer Segment, which provides global consumer-to-consumer money transfer services, primarily under the brand names Ria, IME, AFEX, and xe and global account-to-account money transfer services under the brand name xe. We offer services under the brand names Ria and IME through a network of sending agents, Company-owned stores (primarily in North America, Europe and Malaysia) and our websites (riamoneytransfer.com and online.imeremit.com), disbursing money transfers through a worldwide correspondent network that includes approximately 522,000 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.
The EFT Processing Segment, which processes transactions for a network of 46,070 ATMs and approximately 330,000 POS terminals across Europe, the Middle East, Asia Pacific, and the United States. We provide comprehensive electronic payment solutions consisting of ATM cash withdrawal and deposit services, ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing, DCC, and other value added services. Through this segment, we also offer a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems.
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’ssegment's sources of revenues are described below.
EFT Processing Segment— Revenues in the EFT Processing Segment, which represented approximately32% 28% of total consolidated revenues for the year ended December 31, 2019,2022, 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
epay Segment— Revenues in the epay Segment, which represented approximately 28%30% of total consolidated revenues for the year ended December 31, 2019,2022, are primarily derived from commissions or processing fees received from mobile phone operators for the processing and distribution of prepaid mobile airtime and commissions earned from the distribution of other electronic content, vouchers, and physical gifts. The proportion of epay Segment revenues earned from the distribution of prepaid mobile phone time as compared with other electronic products has decreased over time, and digital media content now produces approximately 63%67% of epay Segment revenues. Other electronic content offered by this segment includes digital content such as music, games and software, as well as other products including prepaid long distance calling card plans, prepaid Internet plans, prepaid debit cards, gift cards, vouchers, transport payments, lottery payments, bill payment, and money transfer.
Money Transfer Segment— Revenues in the Money Transfer Segment, which represented approximately40% 42%of total consolidated revenues for the year ended December 31, 2019,2022, are primarily derived from transaction fees, as well as the margin earned from purchasing foreign currency at wholesale exchange rates and selling the foreign currency to customers at retail exchange rates. We have a sending agent network in place comprised of agents, customer service representatives, Company-owned stores, primarily in North America, Europe and Malaysia, and Ria, and xe branded websites, along with a worldwide network of correspondent agents, consisting primarily of financial institutions in the transfer destination countries. Sending and correspondent agents each earn fees for cash collection and distribution services, which are recognized as direct operating costs at the time of sale.
35 |
The Company offers a money transfer product called Walmart-2-Walmart Money Transfer Service which allows customers to transfer money to and from Walmart stores in the U.S. Our Ria business executes the transfers with Walmart serving as both the sending agent and payout correspondent. Ria earns a lower margin from these transactions than its traditional money transfers; however, the arrangement has added a significant number of transactions to Ria's business. The agreement with Walmart establishes Ria as the only party through which Walmart will sell U.S. domestic money transfers branded with Walmart marks. The agreement is effective until April 2020.2026. 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"Corporate Services, Eliminations and Other”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.
36 |
3)The Money Transfer Segment opportunities include expanding our portfolio of products and services to new and existing customers around 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 populationglobe, which in our markets;
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 2021 and part of 2022. These types of orders were first put into effect in the first half of 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. During 2022, we experienced a significant recovery from the previous business closures and travel restrictions that were in place in many of our markets during 2020 and 2021. However, the travel industry has not yet fully recovered as the airlines and airports have not returned their staffing levels to pre-COVID levels, which has limited the level of recovery. 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 has experienced the impacts by the pandemic-related restrictions in certain markets that limit customers' ability to access our network of Company-owned stores and agents.
In response to the COVID-19pandemic driven impacts, we implemented several key measures to offset the impact across the business, including re-negotiating certain third party contracts, reducing travel and decreasing capital expenditures.
Segment Revenues and Operating Income For The Years Ended December 31, 20192022 and and 2021
|
| Revenues |
| Operating Income (Expense) | ||||||||||||
(in thousands) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||||
EFT Processing |
| $ | 924,208 |
|
| $ | 591,138 |
|
| $ | 183,891 |
| $ | (501 | ) | |
epay |
| 998,009 |
|
| 1,011,482 |
|
| 120,950 |
|
| 123,037 |
| ||||
Money Transfer |
| 1,444,304 |
|
| 1,400,957 |
|
| 154,254 |
|
| 119,595 |
| ||||
Total |
| 3,366,521 |
|
| 3,003,577 |
|
| 459,095 |
|
| 242,131 |
| ||||
Corporate services, eliminations and other |
| (7,780 | ) |
| (8,134 | ) |
| (73,756 | ) |
| (58,115 | ) | ||||
Total |
| $ | 3,358,741 |
|
| $ | 2,995,443 |
|
| $ | 385,339 |
|
| $ | 184,016 |
|
2018
37 |
Revenues | Operating Income (Expense) | |||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
EFT Processing | $ | 888,712 | $ | 753,651 | $ | 296,640 | $ | 197,245 | ||||||||
epay | 769,329 | 743,784 | 89,204 | 78,997 | ||||||||||||
Money Transfer | 1,096,226 | 1,042,962 | 134,790 | 122,526 | ||||||||||||
Total | 2,754,267 | 2,540,397 | 520,634 | 398,768 | ||||||||||||
Corporate services, eliminations and other | (4,158 | ) | (3,768 | ) | (45,440 | ) | (40,854 | ) | ||||||||
Total | $ | 2,750,109 | $ | 2,536,629 | $ | 475,194 | $ | 357,914 |
Summary
Our annual consolidated revenues increased by 8%12% for 20192022 compared to 2018.
Our annual consolidated operating income increased by 109% for 2022 compared to 2021. The increasesincrease in operating income for 20192022 was primarily due to the increaseincreases in ATMs under management, along with the increase in demand for DCC, domestic and international surcharge and other value added services, the increase in the number of money transfer transactions processed, and the increase in the number of transactions processed for epay.
Net income attributable to Euronet for 2019 and 20182022 was $346.7$231.0 million,, or $6.31$4.41 per diluted share and $232.9 compared to a net income attributable to Euronet for 2021 of $70.7 million, or $4.26$1.32 per diluted share, respectively.share.
Impact of changes in foreign currency exchange rates
Our revenues and local expenses are recorded in the functional currencies of our operating entities, and then are translated into U.S. dollars for reporting purposes; therefore, amounts we earn outside the U.S. are negatively impacted by a stronger U.S. dollar and positively impacted by a weaker U.S. dollar. Considering the results by country and the associated functional currency, our 20192022 consolidated operating income was approximately 5% less(12%) lower due to changes in foreign currency exchange rates when compared to 2018.2021. 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.
Average Translation Rate Year Ended December 31, | 2019 Increase (Decrease) Percent | |||||||||||||||||||||
| Average Translation Rate Year Ended December 31, |
| 2022 Increase (Decrease) Percent | |||||||||||||||||||
Currency | 2019 | 2018 |
| 2022 |
| 2021 |
| |||||||||||||||
Australian dollar | $ | 0.6954 | $ | 0.7476 | (7 | )% |
| $ | 0.6949 |
|
| $ | 0.7513 |
|
| (8) | % | |||||
British pound | $ | 1.2771 | $ | 1.3352 | (4 | )% |
| $ | 1.2374 |
|
| $ | 1.3755 |
|
| (10) | % | |||||
Canadian dollar | $ | 0.7691 | $ | 0.7979 | (4) | % | ||||||||||||||||
euro | $ | 1.1194 | $ | 1.1809 | (5 | )% |
| $ | 1.0541 |
|
| $ | 1.1830 |
|
| (11) | % | |||||
Hungarian forint | $ | 0.0034 | $ | 0.0037 | (8 | )% |
| $ | 0.0027 |
|
| $ | 0.0033 |
|
| (18) | % | |||||
Indian rupee | $ | 0.0142 | $ | 0.0147 | (3 | )% |
| $ | 0.0127 |
|
| $ | 0.0135 |
|
| (6) | % | |||||
Malaysian ringgit | $ | 0.2416 | $ | 0.2482 | (3 | )% |
| $ | 0.2278 |
|
| $ | 0.2415 |
|
| (6) | % | |||||
New Zealand dollar | $ | 0.6591 | $ | 0.6924 | (5 | )% |
| $ | 0.6361 |
|
| $ | 0.7073 |
|
| (10) | % | |||||
Polish zloty | $ | 0.2606 | $ | 0.2774 | (6 | )% |
| $ | 0.2255 |
|
| $ | 0.2595 |
|
| (13) | % |
38 |
Comparison of Operating Results For The Years Ended December 31, 20192022 and 20182021 - By Operating Segment
EFT Processing Segment
The following table summarizes the results of operations for our EFT Processing Segment for the years ended December 31, 20192022 and 2021:
|
| Year Ended December 31, |
| Year-over-Year Change | |||||||||||
(dollar amounts in thousands) |
| 2022 |
| 2021 |
| Increase (Decrease) Amount |
| Increase (Decrease) Percent | |||||||
Total revenues |
| $ | 924,208 |
|
| $ | 591,138 |
|
| $ | 333,070 |
|
| 56 | % |
Operating expenses: |
|
|
|
|
|
|
|
| |||||||
Direct operating costs |
| 475,785 |
|
| 354,254 |
|
| 121,531 |
|
| 34 | % | |||
Salaries and benefits |
| 111,997 |
|
| 98,584 |
|
| 13,413 |
|
| 14 | % | |||
Selling, general and administrative |
| 57,049 |
|
| 47,832 |
|
| 9,217 |
| 19 | % | ||||
Depreciation and amortization |
| 95,486 |
|
| 90,969 |
|
| 4,517 |
|
| 5 | % | |||
Total operating expenses |
| 740,317 |
|
| 591,639 |
|
| 148,678 |
|
| 25 | % | |||
Operating income / (loss) |
| $ | 183,891 |
| $ | (501 | ) |
| $ | 184,392 |
|
| n/m | ||
Transactions processed (millions) |
| 6,459 |
|
| 4,366 |
|
| 2,093 |
|
| 48 | % | |||
Active ATMs as of December 31 |
| 45,009 |
|
| 42,713 |
|
| 2,296 |
|
| 5 | % | |||
Average active ATMs |
| 47,166 |
|
| 41,461 |
|
| 5,705 |
| 14 | % |
2018_________________
:n/m: not meaningful
Year Ended December 31, | Year-over-Year Change | ||||||||||||||
(dollar amounts in thousands) | 2019 | 2018 | Increase (Decrease) Amount | Increase Percent | |||||||||||
Total revenues | $ | 888,712 | $ | 753,651 | $ | 135,061 | 18 | % | |||||||
Operating expenses: | |||||||||||||||
Direct operating costs | 397,132 | 366,977 | 30,155 | 8 | % | ||||||||||
Salaries and benefits | 87,603 | 75,791 | 11,812 | 16 | % | ||||||||||
Selling, general and administrative | 35,518 | 46,925 | (11,407 | ) | (24 | )% | |||||||||
Depreciation and amortization | 71,819 | 66,713 | 5,106 | 8 | % | ||||||||||
Total operating expenses | 592,072 | 556,406 | 35,666 | 6 | % | ||||||||||
Operating income | $ | 296,640 | $ | 197,245 | $ | 99,395 | 50 | % | |||||||
Transactions processed (millions) | 3,052 | 2,721 | 331 | 12 | % | ||||||||||
ATMs as of December 31 | 46,070 | 40,354 | 5,716 | 14 | % | ||||||||||
Average ATMs | 44,756 | 40,094 | 4,662 | 12 | % |
Revenues
EFT Processing Segment total revenues were $924.2 million for 2019 were $888.7 million,the year ended December 31, 2022, an increase of $135.1$333.1 million or 18% as 56% compared to 2018. The increasethe same period in total revenues is primarily due to an increase in the number2021. In2021, we began increasing our estate of active ATMs under management and additionalas certain countries began easing COVID-19 restrictions; however, remaining cross-border travel patterns prevented our volume of DCC and surcharge transactions from returning to pre-COVID-19 levels. During 2022 we saw further easing of COVID-19 restrictions. Revenues increased for the year ended December 31, 2022 compared to the same period in 2021 as cross-border travel and corresponding DCC and surcharge revenues increased. Also, the acquisition of Merchant Acquiring Business of Piraeus Bank in 2022 added $88.8 million of revenues. Foreign currency movements decreased total revenues for 2019 by approximately 45.4($110.9) million asfor the year ended December 31, 2022, compared to 2018.
Average monthly revenues per ATM were $1,655 increased to $1,633 for 2019the year ended December 31, 2022 compared to $1,566$1,188 for 2018. the same period in 2021. Revenues per transaction were $0.29was $0.14 for 2019both years ended December 31, 2022 and $0.28 for 2018. The increases in average monthly revenues per ATM and revenues per transaction were attributable to the revenue growth from DCC, which earns higher revenues per transaction than other ATM or card based services, surcharges partially offset by the U.S. dollar strengthening against key foreign currencies.
Direct operating costs
EFT Processing Segment direct operating costs were $397.1$475.8 millionfor 2019,the year ended December 31, 2022, an increase of $30.2$121.5 million or 8% as 34% compared to 2018. the same period in 2021.Direct operating costs in the EFT Processing Segmentprimarily consist primarily of site rental fees, cash delivery costs, cash supply costs, maintenance, insurance, telecommunications, payment scheme processing fees, data center operations-related personnel, as well as the processing centers’ facility-related costs and other processing center-related expenses and commissions paid to retail merchants, banks and card processors involved with POS DCC transactions. The For the year ended December 31, 2022, the increase in direct operating costs was primarily due to the increase in the numbertransaction volumes, and costs associated with modifying our estate of ATMs under management.. Foreign currency movements decreasedoffset direct operating costs for 2019increases by approximately $22.0($54.8) million asfor the year ended December 31, 2022 compared to 2018.the same period in 2021.
39 |
Gross profit
Gross profit, which is calculated as revenues less direct operating costs, was $491.6$448.4 million for 2019the year ended December 31, 2022, an increase of $211.5 million or 89% compared to $386.7$236.9 million for 2018. The increasethe same period in gross profit was primarily due to the growth in revenues from the increases in ATMs under management, DCC transactions and domestic and international surcharge.2021. Gross profit as a percentage of revenues (“gross margin”) was 55.3% and 51.3%increased to 48.5% for 2019 and 2018, respectively. Thethe year ended December 31, 2022, compared to 40.1% for the same period in 2021. For the year ended December 31, 2022, the increase in gross profit and gross margin was attributable toprimarily driven by the increasesincrease in DCChigher-margin cross-border transactions and domestic and international surcharge.
Salaries and benefits
Salaries and benefits increased $11.8expenses were $112.0 million for the year ended December 31, 2022, an increase of $13.4 million or 16% for 201914% compared to 2018. the same period in 2021. The increase in salaries and benefits for the year ended December 31, 2022 compared to the same period in 2021 was primarily attributable to additional headcount to supportdriven by an increase in salaries and bonus expense offset by ($14.0) million decrease from foreign currency movements in the number of ATMs and POS devices under management. As a percentage of revenues, these costs decreased to 9.9% for 2019 from 10.1% for 2018.
Selling, general and administrative
Selling, general and administrative expenses were $57.0 million for the year ended December 31, 2022, an increase of $9.2 million or 19% compared to the same period in 2021.The increase in these expenses is primarily driven by a $16.8 million increase in professional fees, travel & meals, advertising and other expenses offset by ($7.6) million decrease from 6.2%foreign currency movements. As a percentage of revenues, these expenses decreased to 6.2% for 2018. The decrease was primarily duethe year ended December 31, 2022, compared to non-recurring VAT benefits.
Depreciation and amortization
Depreciation and amortization expense increased $5.1expenses were $95.5 million for 2019the year ended December 31, 2022, an increase of $4.5 million or 5% compared to 2018. The increase was primarily attributablethe same period in 2021.Foreign currency movements offset these increases by ($10.1) million for the year ended December 31, 2022, compared to the deploymentsame period in 2021, with the remainder of the increase driven by the acquisition of additional ATMs and software assets. As a percentage of revenues, depreciation and amortization expensethese expenses decreased to 8.1%10.3% for 2019 from 8.9%the year ended December 31, 2022, compared to 15.4% for 2018. The decrease is primarily due to certain intangible assets becoming fully depreciatedthe same period in 2019.
Operating income
EFT Processing Segment had operating income of $183.9 million for 2019 was $296.6the year ended December 31, 2022, compared to operating losses of $0.5 million in 2021, an increase of $99.4$184.4 million or 50% as compared to 2018. Operatingthe same period in 2021. Operating income for 2019 increased primarily due to higher revenues from the additional number of ATMs under management, growth in revenues earned from DCC, surcharges and other value-added service transactions.
The following table summarizes the results of operations for our epay Segment for the years endedDecember 31, 20192022 and 2018:
Year Ended December 31, | Year-over-Year Change | |||||||||||||||||||||||||||||
Increase (Decrease) Amount | Increase (Decrease) Percent |
| Year Ended December 31, |
| Year-over-Year Change | |||||||||||||||||||||||||
(dollar amounts in thousands) | 2019 | 2018 |
| 2022 |
| 2021 |
| Increase Amount |
| Increase (Decrease) Percent | ||||||||||||||||||||
Total revenues | $ | 769,329 | $ | 743,784 | $ | 25,545 | 3 | % |
| $ | 998,009 |
|
| $ | 1,011,482 |
|
| $ | (13,473 | ) |
| (1) | % | |||||||
Operating expenses: |
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Direct operating costs | 576,757 | 564,252 | 12,505 | 2 | % |
| 753,149 |
|
| 760,891 |
|
| (7,742 | ) |
| (1) | % | |||||||||||||
Salaries and benefits | 61,540 | 57,748 | 3,792 | 7 | % |
| 81,680 |
|
| 79,451 |
|
| 2,229 |
|
| 3 | % | |||||||||||||
Selling, general and administrative | 35,054 | 35,749 | (695 | ) | (2 | )% |
| 36,006 |
|
| 39,602 |
|
| (3,596 | ) |
| (9) | % | ||||||||||||
Depreciation and amortization | 6,774 | 7,038 | (264 | ) | (4 | )% |
| 6,224 |
|
| 8,501 |
|
| (2,277 | ) |
| (27) | % | ||||||||||||
Total operating expenses | 680,125 | 664,787 | 15,338 | 2 | % |
| 877,059 |
|
| 888,445 |
|
| (11,386 | ) |
| (1) | % | |||||||||||||
Operating income | $ | 89,204 | $ | 78,997 | $ | 10,207 | 13 | % |
| $ | 120,950 |
|
| $ | 123,037 |
|
| $ | (2,087 | ) |
| (2) | % | |||||||
Transactions processed (billions) | 1.54 | 1.15 | 0.39 | 34 | % |
| 3.86 |
|
| 3.12 |
|
| 1 |
|
| 24 | % |
Revenues
epay Segment total revenues were $998.0 million for 2019 were $769.3 million, an increasethe year ended December 31, 2022, a decrease of $25.5($13.5) million or 3% as(1%) compared to 2018.the same period in 2021. Foreign currency movements decreased revenues by approximately ($95.3) million for the year ended December 31, 2022, compared to the same period in 2021. The increasedecrease in total revenues was primarily due to foreign currency movements was offset by an increase in the numberrevenues of transactions processed. Foreign currency movements decreased total revenues by approximately $35.0$81.8 million as compareddue to 2018.increase in transaction volumes in all markets where we operate.
Direct operating costs
epay Segment direct operating costs were $576.8$753.1 million for 2019, an increasethe year ended December 31, 2022, a decrease of $12.5($7.7) million or 2% as(1%) compared to 2018.the same period in 2021. Direct operating costs in our epay Segment includeprimarily consist of the commissions we paypaid 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 increasedecrease in direct operating costs was primarily due to foreign currency movements of approximately ($69.8) million offset by the increase in the numbercost for transaction volumes of low-value mobile top-up transactions processed.
Gross profit
Gross profit was $192.6$244.9 million for 2019the year ended December 31, 2022, a decrease of ($5.7) million or (2%) compared to $179.5$250.6 million for 2018. the same period in 2021. Gross margin decreased to 24.5% for the year ended December 31, 2022, compared to 24.8% for the same period in 2021. The decrease in gross profit and gross margin was primarily driven by foreign currency movements.
41 |
Salaries and benefits
Salaries and benefits expenses were $81.7 million for the year ended December 31, 2022, an increase of $2.2 million or 3% compared to the same period in 2021. The increase in gross profitsalaries and benefits was primarily duedriven by an increase in headcount to growth in transactions processed. Gross margin increased to 25% for 2019 from 24.1% for 2018, due to overallsupport the growth of the business.
Selling, general and administrative
Selling, general and administrative expenses were $36.0 million for the year ended December 31, 2022, a decrease of ($3.6) million or (9%) compared to the same period in 2021. Foreign currency movements decreased these expenses by ($3.5) million for the year ended December 31, 2022, compared to the same period in 2021. As a percentage of revenues, these expenses decreased to 3.6% for the yearended December 31, 2022, compared to 3.9%for the same period in 2021.
Depreciation and amortization
Depreciation and amortization expenses were $6.2 million for the year ended December 31, 2022, a decrease of ($2.3) million or (27%) compared to the same period in 2021.Depreciation and amortization expense primarily represents depreciation of POS terminals we install in retail stores and amortization of acquired intangible assets. Depreciation and amortization expense decreased $0.3 million or 4% in 2019 as compared to 2018. The decrease is primarily due to certain fixed assets becoming fully depreciated in 2019. As a percentage of revenues, these expenses remained flat at 0.9%decreased to 0.6% for both the year ended December 31, 2022, compared to 0.8% for the same period in 2021.
2019 and 2018.
epay Segment operating income was $121.0 million for 2019 was $89.2 million, an increasethe year ended December 31, 2022, a decrease of $10.2($2.1) million or 13% as(2%) compared to 2018. the same period in 2021. Operating margin increaseddecreased to 11.6%12.1% for 2019 from 10.6%the year ended December 31, 2022, compared to 12.2% for 2018. the same period in 2021. Operating income per transaction decreasedwas $0.03for the year ended December 31, 2022, compared to $0.06$0.04 for 2019 from $0.07 for 2018. the same period 2021. The increases ofdecrease in operating income was due to foreign currency movements and the decrease in operating margin were mainlywas primarily due to an increase in the portionnumber of lower-margin mobilelow-margin digital transactions.
Money Transfer Segment
The following table summarizes the results of operations for our Money Transfer Segment for the years ended December 31, 2019 2022and 20182021:
|
| Year Ended December 31, |
| Year-over-Year Change | |||||||||||
(dollar amounts in thousands) |
| 2022 |
| 2021 |
| Increase (Decrease) Amount |
| Increase (Decrease) Percent | |||||||
Total revenues |
| $ | 1,444,304 |
|
| $ | 1,400,957 |
|
| $ | 43,347 |
|
| 3 | % |
Operating expenses: |
|
|
|
|
|
|
|
| |||||||
Direct operating costs |
| 796,951 |
|
| 793,218 |
|
| 3,733 |
|
| 0 | % | |||
Acquired contract cost impairment | — | 38,634 | (38,634 | ) | n/a | ||||||||||
Salaries and benefits |
| 277,012 |
|
| 255,816 |
|
| 21,196 |
|
| 8 | % | |||
Selling, general and administrative |
| 182,360 |
|
| 157,955 |
|
| 24,405 |
|
| 15 | % | |||
Depreciation and amortization |
| 33,727 |
|
| 35,739 |
|
| (2,012 | ) |
| (6) | % | |||
Total operating expenses |
| 1,290,050 |
|
| 1,281,362 |
|
| 8,688 |
|
| 1 | % | |||
Operating income |
| $ | 154,254 |
|
| $ | 119,595 |
|
| $ | 34,659 |
|
| 29 | % |
Transactions processed (millions) |
| 147.9 |
|
| 135.1 |
|
| 13 |
|
| 9 | % |
42 |
Year Ended December 31, | Year-over-Year Change | ||||||||||||||
(dollar amounts in thousands) | 2019 | 2018 | Increase Amount | Increase Percent | |||||||||||
Total revenues | $ | 1,096,226 | $ | 1,042,962 | $ | 53,264 | 5 | % | |||||||
Operating expenses: | |||||||||||||||
Direct operating costs | 586,730 | 560,930 | 25,800 | 5 | % | ||||||||||
Salaries and benefits | 208,792 | 194,808 | 13,984 | 7 | % | ||||||||||
Selling, general and administrative | 133,068 | 125,647 | 7,421 | 6 | % | ||||||||||
Goodwill and acquired intangible assets impairment | — | 7,049 | (7,049 | ) | n/m | ||||||||||
Depreciation and amortization | 32,846 | 32,002 | 844 | 3 | % | ||||||||||
Total operating expenses | 961,436 | 920,436 | 41,000 | 4 | % | ||||||||||
Operating income | $ | 134,790 | $ | 122,526 | $ | 12,264 | 10 | % | |||||||
Transactions processed (millions) | 114.5 | 107.6 | 6.9 | 6 | % |
Money Transfer Segment total revenues were $1,096.2$1,444.3 million for 2019,the year ended December 31, 2022, an increase of $53.3$43.3 million or 5% as3% compared to 2018.the same period in 2021. The increase in revenues was primarily due to increases13% growth in US-outbound transactions, 13% growth in international-originated money transfers - which included 13% growth in transfers initiated largely in Europe and 14% growth in transfers initiated in the number of money transfers processed, driven byMiddle-East and Asia and 25% growth in our U.S. and foreign agent and correspondent payout networks. xe transactions, partially offset by a 17% decline in the intra-US business. These transaction growth rates include 38% growth in direct-to-consumer digital transactions. Revenues per transaction was essentially flat at $9.57 decreased to $9.77for 2019 as the year ended December 31, 2022, compared to $9.69 $10.37for 2018. the same period in2021. Foreign currency movements decreased total revenues for 2019 by approximately $26.7($86.1) million asfor the year ended December 31, 2022, compared to 2018.the same period in 2021.
Direct operating costs
Money Transfer Segment direct operating costs were $586.7$797.0 million for 2019,the year ended December 31, 2022, an increase of $25.8$3.7 million or 5% as compared to 2018. the same period in 2021.Direct operating costs in the Money Transfer Segment primarily consist of commissions paid to agents who originate money transfers on our behalf and correspondent agents who disburse funds to the customers’ destination beneficiaries, together with less significant costs, such as bank depository fees. The increase in direct operating costs in 2019 was primarily due to growththe increase in the number of U.S. outbound and international-originated money transfer transactions processedand corresponding increase in bothagent commissions. Foreign currency movements decreased direct operating costs by approximately ($42.9) million for the U.S.year ended December 31, 2022, compared to the same period in 2021.
Acquired contract cost impairment
During the fourth quarter of 2021, we identified certain contract assets that had a carrying balance greater than the estimated remaining cash flows in the contracts and foreign markets, partially offset byrecorded a corresponding $38.6 million non-cash impairment of costs to fulfill a contract. The impairment charge is the impactresult of the U.S. dollar strengthening against key foreign currencies.
Gross profit
Gross profit was $509.5$647.4 million for 2019the year ended December 31, 2022, an increase of $39.6 million or 7% compared to $482.0$607.7 million for 2018.the same period in 2021. Gross margin increased to 44.8% for the year ended December 31, 2022, compared to 43.4% for the same period in 2021. The increase in gross profit was primarily dueattributable to growththe increase in transaction volume for the number of money transfer transactions processed in both the U.S. and foreign markets. Gross margins remained flat at 46.5% for 2019 compared to 46.2% for 2018.
Salaries and benefits
Salaries and benefits increased $14.0expenses were $277.0 million for the year ended December 31, 2022, an increase of $21.2 million or 7% for 20198% compared to 2018the same period in 2021. The increase in salaries and benefits was primarily duedriven by an increase in headcount to support the growth of the business. Foreign currency movements in the countries where we employ our workforce decreased these expenses by ($15.1) million for the year ended December 31, 2022, compared to the expansion of our operations. same period in 2021. As a percentage of revenues, salaries and benefitsthese expenses increased slightly to 19.0%19.2% for 2019 from 18.7% the year ended December 31, 2022, compared to 18.3% for 2018.the same period in 2021
Selling, general and administrative
Selling, general and administrative expenses were $182.4 million for 2019 were $133.1 million,the year ended December 31, 2022, an increase of $7.4$24.4 million or 6% as15% compared to 2018. the same period in 2021. The increase in these expenses was primarily duedriven by an increase in marketing expenses, professional fees and travel related expenses. Foreign currency movements decreased these expenses by ($8.9) million for the year ended December 31, 2022, compared to expenses incurred to support the growth of our money transfer services and the expansion of new productssame period in both the U.S. and foreign markets. 2021. As a percentage of revenues, selling, general and administrativethese expenses remained flat at 12.1%increased to 12.6% for 2019the year ended December 31, 2022, compared to 12.0% for 2018.
43 |
Year Ended December 31, | Year-over-Year Change | ||||||||||
(dollar amounts in thousands) | 2019 | 2018 | 2019 Increase (Decrease) Percent | ||||||||
Salaries and benefits | $ | 36,809 | $ | 32,085 | 15 | % | |||||
Selling, general and administrative | 8,326 | 8,501 | (2 | )% | |||||||
Depreciation and amortization | 305 | 268 | 14 | % | |||||||
Total operating expenses | $ | 45,440 | $ | 40,854 | 11 | % |
|
| Year Ended December 31, |
| Year-over-Year Change | ||||||||||
(dollar amounts in thousands) |
| 2022 |
| 2021 |
| Increase (Decrease) Amount | Increase (Decrease) Percent | |||||||
Salaries and benefits |
| $ | 63,549 |
|
| $ | 50,988 |
|
| $ | 12,561 | 25 | % | |
Selling, general and administrative |
| 9,758 |
|
| 6,582 |
|
| 3,176 | 48 | % | ||||
Depreciation and amortization |
| 427 |
|
| 545 |
|
| (118 | ) | (22) | % | |||
Total operating expenses |
| $ | 73,734 |
|
| $ | 58,115 |
|
| $ | 15,619 | 27 | % |
Corporate operating expenses
Total Corporate operating expenses were $73.7 million for the year ended December 31, 2022, an increase of $15.6 million or 27%, compared to 2018the same period in 2021. The increase is primarily attributable to the increase in salaries and benefits expenses mainly attributable to an increase in incentive compensation related to the Company's performance relative to its targets, partly offset by a decrease in selling, general and administrative expensewas primarily due to a decrease$7.6 million increase in professional services.share based compensation and a $4.8 million increase in bonuses as a result of improved performance for the year ended December 31, 2022, compared to the same period in 2021.
44 |
Other Expense, Net
|
| Year Ended December 31, |
| Year-over-Year Change | ||||||||||
(dollar amounts in thousands) |
| 2022 |
| 2021 |
| Increase (Decrease) Amount | Increase (Decrease) Percent | |||||||
Interest income |
| $ | 2,066 |
|
| $ | 664 |
|
| $ | 1,402 | 211 | % | |
Interest expense |
| (37,585 | ) |
| (38,198 | ) |
| 613 | (2) | % | ||||
Foreign currency exchange loss, net |
| (28,175 | ) |
| (10,866 | ) |
| (17,309 | ) | 159 | % | |||
Other gains, net |
| 950 |
|
| 59 |
| 891 | 1,510 | % | |||||
Other expense, net |
| $ | (62,744 | ) |
| $ | (48,341 | ) |
| $ | (14,403 | ) | 30 | % |
Year Ended December 31, | Year-over-Year Change | ||||||||||
(dollar amounts in thousands) | 2019 | 2018 | 2019 (Decrease) Increase Percent | ||||||||
Interest income | $ | 1,969 | $ | 1,320 | 49 | % | |||||
Interest expense | (36,237 | ) | (37,573 | ) | (4 | )% | |||||
(Loss) Income from unconsolidated affiliates | — | (117 | ) | n/m | |||||||
Other gains, net | (9,820 | ) | 27 | n/m | |||||||
Foreign currency exchange (loss) gain, net | 2,701 | (26,655 | ) | n/m | |||||||
Other expense, net | $ | (41,387 | ) | $ | (62,998 | ) | (34 | )% |
Foreign currency exchange (loss) gain,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 remeasurementre-measurement 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 comprisedcomposed of U.S. dollar functional currency entities, to certain European entities that use the euro as the functional currency. As the U.S. dollar strengthens against the euro, foreign currency exchange losses are recognized by our corporate entities because the number of euros to be received in settlement of the loans decreases in U.S. dollar terms. Conversely, in this example, in periods where the U.S. dollar weakens, our corporate entities will record foreign currency exchange gains.
We recorded a net foreign currency exchange gain of $2.7 million in 2019 and a loss of $26.7$28.2 million for the year ended December 31, 2022, compared to a net foreign currency exchange loss of $10.9 million for the same period in 2018.2021. These realized and unrealized foreign currency exchange gains and losses primarily reflect the respective weakening and strengtheningfluctuation in the value of the U.S. dollar against the currencies of the countries in which we operate.operated during the respective periods.
Our effective income tax rates as reported and as adjusted are calculated below:
Year Ended December 31, |
| Year Ended December 31, | ||||||||||||||
(dollar amounts in thousands) | 2019 | 2018 |
| 2022 |
| 2021 | ||||||||||
Income before income taxes | $ | 433,807 | $ | 294,916 |
| $ | 322,595 |
|
| $ | 135,675 |
| ||||
Income tax expense | (87,112 | ) | (62,785 | ) |
| (91,853 | ) |
| (65,088 | ) | ||||||
Net income | $ | 346,695 | $ | 232,131 |
| $ | 230,742 |
|
| $ | 70,587 | |||||
Effective income tax rate | 20.1 | % | 21.3 | % |
| 28.5 | % |
| 48.0 | % | ||||||
Income before income taxes | $ | 433,807 | $ | 294,916 |
| $ | 322,595 |
|
| $ | 135,675 |
| ||||
Adjust: Goodwill and acquired intangible assets impairment | — | (7,049 | ) | |||||||||||||
Adjust: Acquired contract cost impairment | — | (38,634 | ) | |||||||||||||
Adjust: Other gains, net | (9,820 | ) | 27 |
| 950 |
| 59 |
| ||||||||
Adjust: Foreign currency exchange (loss) gain, net | 2,701 | (26,655 | ) |
| (28,175 | ) |
| (10,866 | ) | |||||||
Income before income taxes, as adjusted | $ | 440,926 | $ | 328,593 |
| $ | 349,820 |
|
| $ | 185,116 |
| ||||
Income tax expense | $ | (87,112 | ) | $ | (62,785 | ) |
| $ | (91,853 | ) |
| $ | (65,088 | ) | ||
Adjust: Income tax benefit (expense) attributable to 2017 U.S. tax reform | 25,728 | 12,262 | ||||||||||||||
Adjust: Income tax benefit attributable to acquired intangible assets impairment | — | 1,506 | ||||||||||||||
Adjust: Income tax benefit (expense) attributable to foreign currency exchange (loss) gain, net | 10,990 | 8,743 | ||||||||||||||
Adjust: Income tax benefit attributable to foreign currency exchange loss, net |
| (12,487 | ) |
| 1,716 |
| ||||||||||
Income tax expense, as adjusted | $ | (123,830 | ) | $ | (85,296 | ) |
| $ | (79,366 | ) |
| $ | (66,804 | ) | ||
Effective income tax rate, as adjusted | 28.1 | % | 26.0 | % |
| 22.7 | % |
| 36.1 | % |
We calculate our effective income tax rate by dividing income tax expense by pre-tax book income. Our effective income tax rates were 20.1%28.5% and 21.3%48.0% for the years ended December 31, 20192022 and 2018,2021, respectively. On December 22, 2017, the U.S. enacted into law what is informally called the Tax Cuts and Jobs Act of 2017 ("U.S. Tax Reform"). In 2017 we had a net provisional tax expense of $41.6 million resulting from U.S. Tax Reform. In the fourth quarter of 2018, we adjusted our accounting for the tax effects of U.S. Tax Reform. The net provisional tax expense was decreased in that period by approximately $12.3 million to $29.3 million. In the fourth quarter of 2019 after additional regulatory guidance was issued by applicable taxing authorities, the Company elected to claim U.S. tax credits for foreign tax paid on foreign source income, which reduced the net tax expense by $25.7 million for a total tax expense from U.S. Tax Reform of $3.6 million. See Note 13, Income Taxes, to the Consolidated Financial Statements for further information. The effective income tax rates were also significantly influenced by the impact of acquired contract cost impairment, and foreign currency exchange gains (losses). Excluding theseforeign currency exchange gains (losses), and acquired contract cost impairment items from pre-tax income, as well as the related tax effects for these items, our adjusted effective income tax rates were 28.1%22.7% and 26.0%36.1% for the years ended December 31, 20192022 and 2018,2021, respectively.
The effective income tax rate, as adjusted, for 2019 and 20182022 was higher 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 and certain foreign earnings being subject to higher local statutory tax rates.The effective income tax rate, as adjusted, was offset by a decrease in the valuation allowance related to the projected utilization of U.S. tax benefits.The effective income tax rate, as adjusted, for 2021 was higher than the applicable statutory income tax rate of 21% primarily because of higher incomean increase in the valuation allowance related to the projected utilization of U.S. tax ratesbenefits, the non-recognition of tax benefits from losses in certain foreign countries where we have significant operationsa limited history of profitable earnings and the tax effects of the global intangible low-taxed income ("GILTI") provision of U.S. Tax Reform. The effective income tax rate, as adjusted, for 2019 is higher than 2018 as a result of substantially morecertain foreign earnings of the Company being subject to higher foreignlocal statutory income tax rates.
Income before income taxes, as adjusted, income tax expense, as adjusted and effective income tax rate, as adjusted, are non-U.S. GAAP financial measures that management believes are useful for understanding why our effective income tax rates are significantly different than would be expected. These non-U.S. GAAP measures are used by management to conduct and evaluate its business during its regular review of operating results for the periods presented.
46 |
Our total liability for uncertain tax positions under Accounting Standards Codification ("ASC") 740-10-25 and -30 was $42.8 million as of December 31, 2022. The application of ASC 740-10-25 and -30 requires significant judgment in assessing the outcome of future income tax examinations and their potential impact on the Company's estimated effective income tax rate and the value of deferred tax assets, such as those related to the Company's net operating loss carryforwards. It is reasonably possible that the balance of gross unrecognized tax benefits could significantly change within the next twelve months, as a result of the resolution of audit examinations and expirations of certain statutes of limitations and, accordingly, materially affect our Consolidated Financial Statements. At this time, it is not possible to estimate the range of change due to the uncertainty of potential outcomes.
Net (Income) Loss Attributable To Noncontrolling Interest
for 2019 and
$0.7 million for 2018. Noncontrolling interests represent the elimination of net income or loss attributable to the minority shareholders’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 $346.7$231.0 million and $232.9 for the year ended December 31, 2022, an increase of $160.3 million for 2019 and 2018, respectively. Net income attributable to Euronet increased $113.9 million in 2019 compared to 2018. Thenet income in the same period in 2021. For the year ended December 31, 2022, the increase in net income for 2019 was primarily dueattributable to the $245.4 million increase in gross profit driven by an increase in operating income of $117.3 million, transaction volumes across all three segments, an increase of $29.4 $38.6million in net foreign currency exchange gain, a decrease in interest expense of $1.3contract asset impairment,partially offset by an $49.4 million an increase in interest income of $0.6salaries and benefits, a $26.8 million and an increase in income from unconsolidated affiliates of $0.1 million. The increases were partly offset by an increase in income tax expense, of $24.3a $33.2 million an increase in net loss attributable to early retirement of debt of $9.8 million,selling, general and administrative expenses, and a decrease of net loss attributable to noncontrolling interests of $0.7 million.$46.1 million increase in foreign currency exchange losses
Translation gains and losses are the result of translating our foreign entities' balance sheets from local functional currency to the U.S. dollar reporting currency prior to consolidation and are recorded in comprehensive (loss) income. As required by U.S. GAAP, during this translation process, asset and liability accounts are translated at current foreign currency exchange rates and equity accounts are translated at historical rates. Historical rates represent the rates in effect when the balances in our equity accounts were originally created. By using this mix of rates to convert the balance sheet from functional currency to U.S. dollars, differences between current and historical exchange rates generate this translation adjustment.
We recorded a net loss on translation adjustments of$13.9 million in 2019 $78.4 millionfor2022and a net loss of $56.7$78.5 million in 2018. During 2019for 2021. In 2021 and 2018, 2022, the U.S. dollar strengthened compared to mostkey foreign currencies, resulting in translation losses which were recorded in comprehensive (loss) income.
Liquidity and Capital Resources
Working capital
As of December 31, 2019,2022, we had working capital of $1,284.8$1,372.6 million, which is calculated as the difference between total current assets and total current liabilities, compared to working capital of $1,455.8$709.2 million as of December 31, 2018.2021. The increasedecrease in working capital is primarilywas due to several changes in working capital line items, mainly due to 2022 ending in the issuance Convertible Notes and Senior Notes in 2019.weekend, which impacts funding needs for our agents. Our ratio of current assets to current liabilities was 1.58 and 1.79 and 1.51 as ofat December 31, 20192022 and December 31, 2018,2021, respectively.
47 |
We require substantial working capital to finance operations. The Money Transfer Segment funds the payout of the majority of our consumer-to-consumer money transfer services before receiving the benefit of amounts collected from customers by agents. Working capital needs increase due to weekends and banking holidays. As a result, we may report more or less working capital for the Money Transfer Segment based solely upon the day on which the reporting period ends. The epay Segment produces positive working capital, but much of it is restricted in connection with the administration of its customer collection and vendor remittance activities. In our EFT Processing Segment, we obtain a significant portion of the cash required to operate our ATMs through various cash supply arrangements, the amount of which is not recorded on Euronet's Consolidated Balance Sheets. However, in certain countries, we fund the cash required to operate our ATM network from borrowings under the revolving credit facilities and cash flows from operations. As of December 31, 2019,2022, we had approximately $665.6$515.6 million of our own cash in use or designated for use in our ATM network, which is recorded in ATM cash on Euronet's Consolidated Balance Sheet.
The Company has $1,131.2 million of unrestricted cash as of December 31, 2022 compared to $1,260.5 million as of December 31, 2021.The decrease in unrestricted cash was primarily due to the $175.0 million of shares repurchased under the stock repurchase programs, the acquisition of the Piraeus Bank Merchant Acquiring business of Piraeus Bank for $343.0 million (see Note 6, Acquisitions, to our Consolidated Financial Statements for additional information) and $109.1 million of capital expenditures, partially offset by the $750.4 million of cash provided by operating activities and an increase in borrowings of $171.4 million. Including the $515.6 million of cash in ATMs at December 31, 2022, the Company has access to $1,990.9 million in available cash,and $740.6 million availableunder the Credit Facility with no significant long-term debt principal payments until March 2025.
We had cash, cash equivalents and restricted cash of $1,990.9 million as of December 31, 2022, of which $1,504$1,533.0 million was held outside of the U.S. and is expected to be indefinitely reinvested for continued use in foreign operations. Repatriation of these assets to the U.S. could have negative tax consequences.
The following table identifies cash and cash equivalents provided by/(used in) our operating, investing and financing activities for the years ended December 31, 2019 and 2018 (in2022and2021(in thousands):
|
| Year Ended December 31, | ||||||
Liquidity |
| 2022 |
| 2021 | ||||
Cash and cash equivalents and restricted cash provided by (used in): |
|
|
|
| ||||
Operating activities |
| $ | 748,290 |
|
| $ | 406,576 |
|
Investing activities |
| (453,776 | ) |
| (98,109 | ) | ||
Financing activities |
| (1,154 | ) |
| (212,236 | ) | ||
Effect of foreign currency exchange rate changes on cash and cash equivalents and restricted cash |
| (388,602 | ) |
| (109,637 | ) | ||
(Decrease) in cash and cash equivalents and restricted cash |
| $ | (95,242 | ) |
| $ | (13,406 | ) |
Year Ended December 31, | ||||||||
Liquidity | 2019 | 2018 | ||||||
Cash and cash equivalents and restricted cash provided by (used in): | ||||||||
Operating activities | $ | 504,488 | $ | 397,233 | ||||
Investing activities | (229,027 | ) | (132,283 | ) | ||||
Financing activities | 416,298 | 2,024 | ||||||
Effect of foreign currency exchange rate changes on cash and cash equivalents and restricted cash | (5,332 | ) | (36,540 | ) | ||||
Increase in cash and cash equivalents and restricted cash | $ | 686,427 | $ | 230,434 |
Operating cash flow
Cash flows provided by operating activities were $748.3 million f$504.5 million for 2019or the year ended December 31, 2022 compared to $397.2$406.6 million for 2018.the same period in 2021. The increase in operating cash flows was primarily due to improved operating results, partly offset by the increase in net income and 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.
48 |
Investing activity cash flow
Cash flows used in investing activities were $229.0$453.8 millionfor the year ended December 31, 2022 compared to $98.1 million for 2019 compared to $132.3the same period in 2021. We used $109.1 million for 2018. The increase was primarily due to acquisitions and increased capital expenditures mainly related to our ATM network expansion. During 2019, we used $94.2 million for acquisitions. The Company completed four investments in 2019 and two investments in 2018. The acquisitions have been accounted for in accordance with U.S. GAAP and the results of operations have been included from the respective dates of acquisition. Purchasespurchases of property and equipment were $131.3 million and $112.5for the year ended December 31, 2022 compared to $92.2 million for 2019the same period in 2021 and 2018, respectively. Cash used for software development and long-term assets totaled $7.3$343.0 million for 2019 and $8.5 million for 2018. Other investing activities consist mainlythe acquisition of proceeds from the sale Piraeus Bank Merchant Acquiring business of property and equipment of $3.7 million for 2019 and $1.6 millionPiraeus Bank. There were no acquisitions in 2018.
Financing activity cash flow
Cash flows provided byused in financing activities were $416.3$1.2 million for the year ended December 31, 2022 compared to$212.2 million for 2019 compared to $2.0 million for 2018. We generally borrow amounts under our revolving credit facility seasonally to fund our independent ATM network as well as several times each month to support the short-termsame period in 2021. The decrease in cash needs of our Money Transfer segmentused in order to fund the correspondent network in advance of collecting remittance amounts from the agency network. These borrowings related to the Money Transfer Segment are repaid over a very short period of time, generally within a few days. Net borrowings on debt obligations were $500.2 million in 2019 compared to net repayments of $170.5 million for 2018. The increase in net borrowings as compared to 2018financing activities was primarily the result of borrowing additional amounts under the revolving credit facility$171.4 million net borrowings on debt obligations for ATM cash needs. Additionally, for 2019 and 2018, we paid $6.5 million and $6.1 million, respectively, for finance lease obligations. We used $74.5 million and $177.9the year ended December 31, 2022 compared to $13.0 million for the repurchasesame period in 2021. We repurchased $175.0 million of sharescommon stock during 2019 and 2018, respectively. Of the $74.5 year ended December 31, 2022 compared to repurchases of $229.9 million repurchased shares, $70.9 millionfor the same period in value of Euronet Common Stock were under the Repurchase Program. Further, we2021. We received proceeds of $15.0$9.1 million and $18.6$10.8 million during 2019the year ended December 31, 2022 and 2018,2021, respectively, for the issuance of stock in connection with our Stock Incentive Plan.
Other sources of capital
Credit Facility — - On October 17, 2018,24, 2022, the Company entered into a new $1.0 billion unsecuredamended its revolving credit agreement (the "Credit Facility"“Credit Facility”) that expires onto increase the facility from $1.03 billion to $1.25 billion and to extend the expiration to October 17, 2023. The Credit Facility allows for borrowings in Australian Dollars, British Pounds Sterling, Canadian Dollars, Czech Koruna, Danish Krone, Euros, Hungarian Forints, Japanese Yen, New Zealand Dollars, Norwegian Krone, Polish Zlotys, Swedish Krona, Swiss Francs, and U.S. Dollars. 24, 2027. The revolving credit facility contains a $200sublimit of up to $250 million, sublimitwith $150 million committed, for the issuance of letters of credit, a $50$75 million sublimit for U.S. Dollardollar swingline loans and a $90$75 million sublimit for swingline loans in euros or British pounds sterling. The Credit Facility allows for borrowings in British pounds sterling, euro and U.S. dollars. Subject to certain foreign currencies swingline loans.
Uncommitted Line of Credit - On June 24, 2022, the Company entered into an Uncommitted Loan Agreement for $150 million, for the sole purpose of providing vault cash for ATMs, that expires no later than June 23, 2023. The loan was fully repaid and there was no balance at December 31, 2022. The loan was either a Prime rate loan, a Bloomberg Short-term Bank Yield rate loan or bears interest at the rate agreed to by the bank and the Company at the time such loan is made. The weighted average interest rate underfrom the revolving credit facilityloan inception date to December 31, 2022 was 2.7%, excluding amortization of deferred financing costs.2.76%.
49 |
Contractual lease obligations— The Company has entered into contractually binding operating and finance lease commitments to operate the business. Operating lease expenses were $51.0 million and $55.6 million for the years ended December 31, 2022 and 2021, respectively. Finance lease expenses were not material for 2022 or 2021. For additional information on operating and finance lease obligations, see Note 13, Leases, to the Consolidated Financial Statements.
At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on hand and amounts available under our revolving credit facilityCredit Facility and other existing and potential future financingfinancings 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
On December 8, 2021, the Company put a stock repurchase program ("Repurchase Program"), allowing Euronetin place to repurchase up to $375$300 million in value, or 10.0but not more than 5.0 million shares of common stock through MarchDecember 8, 2023. For the year ended December 31, 2020. On March 11, 2019, in connection with2022, the issuance ofCompany repurchased 1.6 million shares under the Convertible Notes, the Board of Directors authorized an additional repurchase program at a weighted average purchase price of $120$106.71 for a total value of $175.0 million. On September 13, 2022, the Company put a repurchase program in place to repurchase up to $350 million in value, but not more than 7.0 million shares of the Company's common stock through March 11, 2021. September 13, 2024. Repurchases under either programthe 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. For the year end December 31, 2019, the Company repurchased 0.5 million shares under the Repurchase Program at a weighted average purchase price of $143.76 for a total value of $70.9 million. For the year ended December 31, 2018, the Company repurchased 2.0 million shares under the Repurchase Program at a weighted average purchase price of $86.10 for a total value of $175.0 million.
Inflation and functional currencies
Generally, the countries in which we operate have experienced low and stable inflation in recent years. Therefore,years, further 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.
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Off-balance sheet arrangements
We have certain significant off balanceoff-balance sheet items described below, in the following section, “Contractual Obligations” and in Note 19,20, Commitments, to the Consolidated Financial Statements.
Payments due by period | ||||||||||||||||||||
(in thousands) | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Long-term debt obligations, including interest | $ | 1,278,106 | $ | 13,197 | $ | 26,395 | $ | 26,395 | $ | 1,212,119 | ||||||||||
Obligations under operating leases | 392,525 | 125,231 | 154,609 | 69,580 | 43,105 | |||||||||||||||
Obligations under finance leases | 14,585 | 6,322 | 7,665 | 598 | — | |||||||||||||||
Purchase obligations | 14,168 | 8,646 | 2,733 | 1,867 | 922 | |||||||||||||||
Total | $ | 1,699,384 | $ | 153,396 | $ | 191,402 | $ | 98,440 | $ | 1,256,146 |
Our total liability for uncertain tax positions under Accounting Standards Codification ("ASC") 740-10-25 and -30 was $44.5 million as of December 31, 2019. The application of ASC 740-10-25 and -30 requires significant judgment in assessing the outcome of future income tax examinations and their potential impact on the Company's estimated effective income tax rate and the value of deferred tax assets, such as those related to the Company's net operating loss carryforwards. It is reasonably possible that the balance of gross unrecognized tax benefits could significantly change within the next twelve months, as a result of the resolution of audit examinations and expirations of certain statutes of limitations and, accordingly, materially affect our consolidated financial statements. At this time, it is not possible to estimate the range of change due to the uncertainty of potential outcomes.
The preparation of financial statements in conformity with U.S. GAAP which requires management to make estimates, judgments and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Management considers an accounting policy and estimate to be critical if it requires the use of assumptions that were uncertain at the time the estimate was made and if changes in the estimate or selection of a different estimate could have a material effect on the Company’sCompany's financial condition and results of operations. Our most critical estimates and assumptions are used for computing income taxes, allocating the purchase price to assets acquired and liabilities assumed in acquisitions, and potential impairment of long-livedintangible assets and goodwill. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from these estimates. For a summary of all of the Company’sCompany's significant accounting policies, see Note 3, Summary of Significant Accounting Policies and Practices, to the accompanying Consolidated Financial Statements.
Accounting for income taxes
The deferred income tax effects of transactions reported in different periods for financial reporting and income tax return purposes are recorded under the asset and liability method prescribed under ASC Topic 740,Income Taxes(“"ASC 740”740"). This method gives consideration to the future tax consequences of deferred income or expense items and immediately recognizes changes in income tax laws upon enactment. The consolidated statement of incomeoperations effect is generally derived from changes in deferred income taxes, net of valuation allowances, on the balance sheet as measured by differences in the book and tax bases of our assets and liabilities.
We have significant tax loss carryforwards, and other temporary differences, which are recorded as deferred tax assets and liabilities. Deferred tax assets realizable in future periods are recorded net of a valuation allowance based on an assessment of each entity's, or group of entities', ability to generate sufficient taxable income within an appropriate period, in a specific tax jurisdiction.
In assessing the recognition of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will be realized. As more fully described in Note 13,14, Income Taxes, to the Consolidated Financial Statements, gross deferred tax assets were$278.6265.0 million as of December 31, 20192022, partially offset by a valuation allowance of $83.290.4 million. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We make judgments and estimates on the scheduled reversal of deferred tax liabilities, historical and projected future taxable income in each country in which we operate, and tax planning strategies in making this assessment.
Based upon the level of historical taxable income and current projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe it is more likely than not that we will realize the benefits of these deductible differences, net of the existing valuation allowance at December 31, 20192022. If we have a history of generating taxable income in a certain country in which we operate, and baseline forecasts project continued taxable income in this country, we will reduce the valuation allowance for those deferred tax assets that we expect to realize.
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Additionally, we follow the provisions of ASC 740-10-25 and -30 to account for uncertainty in income tax positions. Applying the standard requires substantial management judgment and use of estimates in determining whether the impact of a tax position is “more"more likely than not”not" of being sustained on audit by the relevant taxing authority. We consider many factors when evaluating and estimating our tax positions, which may require periodic adjustments and which may not accurately anticipate actual outcomes. It is reasonably possible that amounts reserved for potential exposure could change significantly as a result of the conclusion of tax examinations and, accordingly, materially affect our operating results.
Business combinations
In accordance with ASC Topic 805,Business Combinations(“"ASC 805”805"), we allocate the acquisition purchase price of an acquired entity to the assets acquired, including identifiable intangibles, and liabilities assumed based on their estimated fair values at the date of acquisition. Management applies various valuation methodologies to these acquired assets and assumed liabilities which often involve a significant degree of judgment, particularly when liquid markets do not exist for the particular item being valued. Examples of such items include loans, deposits, identifiable intangible assets and certain other assets and liabilities acquired or assumed in business combinations. Management uses significant estimates and assumptions to value such items, including, projected cash flows and discount rates. For larger or more complex acquisitions, we generally obtain third-party valuations to assist us in estimating fair values. The use of different valuation techniques and assumptions could change the amounts and useful lives assigned to the assets and liabilities acquired and related amortization expense. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
Goodwill and intangible assets
In accordance with ASC Topic 350, Intangibles - Goodwill and Other (“ASC 350”350”), we evaluate the carrying value of our indefinite-lived assets, including goodwill, at least annually or more frequently whenever events or changes in circumstances indicate that the asset may be impaired, or in the case of goodwill, that the fair value of the reporting unit may be less than its carrying amount. ImpairmentOur annual impairment tests are performed annually during the fourth quarter and are performed at the reporting unit level. Our annual process for evaluating goodwill requiresallows us to perform a qualitative assessment for all reporting units, not subjected directly to theand then perform a quantitative goodwill impairment test.test for those reporting units in which it is deemed necessary. The qualitative factors evaluated by the Company include: economic conditions of the local business environment, overall financial performance, sensitivity analysis from the most recent quantitative test, and other entity specific factors as deemed appropriate. If we determine a quantitative goodwill impairment test is appropriate, the test involves comparing the fair value of a reporting unit to its carrying amount, including goodwill, after any long-lived asset impairment charges. Generally, the fair value representsis determined using discounted projected future cash flows and market multiple of earnings. If the carrying amount of the reporting unit's goodwillunit exceeds the fair value of the reporting unit, a goodwill an impairment loss is recognized in an amount equal to the excess. Determining the fair value of reporting units requires significant management judgment in estimating future cash flows and assessing potential market and economic conditions. It is reasonably possible that our operations will not perform as expected, or that estimates or assumptions could change, which may result in the recording of material non-cash impairment charges during the year in which these determinations take place.
Acquired finite-lived intangible assets are amortized over their estimated useful lives. We evaluate the recoverability of our intangiblefinite-intangible assets, as a part of our long-lived assets, for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely
As of December 31, 2019,2022, the Consolidated Balance SheetsSheet includes goodwill of $743.8$828.3 million and acquired intangible assets, net of accumulated amortization, of $141.8$188.3 million. For the year ended December 31, 2019,2022, no impairment of goodwill or acquired intangible assets has been identified.
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Recently Issued Accounting Pronouncements
See Item 8 of Part II, "Financial Statements and Supplementary Data - Note 3 - Summary of Significant Accounting Policies and Practices.
Forward-Looking Statements
This document contains statements that constitute forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934 (“("Exchange Act”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:
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; inflation; the war in Ukraine and the related economic sanctions; our ability to successfully integrate the operations of Piraeus Merchant Services; 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 privacy 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 (including fluctuations in interest rates), availability of credit and terms of and compliance with debt covenants; impacts from the COVID-19 virus; and renewal of sources of funding as they expire and the availability of replacement funding and those factors referred to above and as set forth and more fully described in Part I, Item 1A — Risk Factors. Any forward-looking statements made in this Form 10-K speak only as of the date of this report. Except as required by law, we do not intend, and do not undertake, any obligation to update any forward looking statements to reflect future events or circumstances after the date of such statements.
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Interest rate risk
As of December 31 2019,, 2022, our total debt outstanding, excluding unamortized debt issuance costs, was $1.1 billion.$1,622.1 million. Of this amount, $437.0$525 million, net of debt discounts, or 39% 32%of our total debt obligations, relates to our contingent convertible notes havingConvertible Notes that have a fixed coupon rate. Our $525.0 million outstanding principal amount of contingent convertible notesConvertible Notes accrue cash interest at a rate of 0.75% of the principal amount per annum. Based on quoted market prices, as of December 31, 2019,2022, the fair value of our fixed rate convertible notesConvertible Notes was $569.4$525.0 million, compared to a carrying value of $437.0 million. Interest expense for these notes, including accretion and amortization $520.8 million. Further, as of deferredDecember 31, 2022, we had $454.8 million outstanding under our Credit Facility, or28% of our total debt issuance costs, has a weighted averageobligations. The carrying values of the Credit Facility approximates fair value because interest rate of 4.4% annually. Further, as of December 31, 2019 we had no borrowings under our Credit Facility.2022, was based on Secured Overnight Financing Rate (SOFR) that reset at various intervals of less than one year. Additionally, $673.4$642.1 million, or 60% 40%of our total debt obligations, relates to Senior Notes having a fixed coupon rate. Our €600 million outstanding principal amount of Senior Notes accrue cash interest at a rate of 1.375% of the principal per annum. Based on quoted market prices, as of December 31, 2019,2022, the fair value of our fixed rate Senior Notes was $668.2$568.9 million, compared to a carrying value of $673.4 million.$642.1 million. The remaining $6.2$0.2 million, or 1% less than 0%of our total debt obligations, is related to borrowings by certain subsidiaries to fund, from time to time, working capital requirements. These arrangements generally are due within one year and accrue interest at variable rates.
Additionally, as of December 31, 2019,2022, we had approximately $14.0$4.3 million of finance leases with fixed payment and interest terms that expire between the years of 2020 and 2024 and bear interest at rates between 0.8% and 16.8%.
Our excess cash is invested in instruments with original maturities of three months or less or in certificates of deposit that may be withdrawn at any time without penalty; therefore, as investments mature and are reinvested, the amount we earn will increase or decrease with changes in the underlying short-term interest rates.
Foreign currency exchange rate risk
For the years ended December 31, 2019 and 2018, 74% and 72% 2022 and2021,75% and73%of our revenues, respectively, were generated in non-U.S. dollar countries. We expect to continue generating a significant portion of our revenues in countries with currencies other than the U.S. dollar.
We are particularly vulnerable to fluctuations in exchange rates of the U.S. dollar to the currencies of countries in which we have significant operations, primarily the euro, British pound, Australian dollar, Polish zloty, Indian rupee, New Zealand dollar, Malaysian ringgit and Hungarian forint. As of December 31, 2019,2022, we estimate that a 10% fluctuation in these foreign currency exchange rates would have the combined annualized effect on reported net income and working capital of approximately $77 $110million to $82 million.$115million. This effect is estimated by applying a 10% adjustment factor to our non-U.S. dollar results from operations, intercompany loans that generate foreign currency gains or losses and working capital balances that require translation from the respective functional currency to the U.S. dollar reporting currency.
Additionally, we have other non-current, non-U.S. dollar assets and liabilities on our balance sheet that are translated to the U.S. dollar during consolidation. These items primarily represent goodwill and intangible assets recorded in connection with acquisitions in countries other than the U.S. We estimate that a 10% fluctuation in foreign currency exchange rates would have a non-cash impact on total comprehensive (loss) income of approximately $140($110) million to $145 ($115)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.
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We believe this quantitative measure has inherent limitations and does not take into account any governmental actions or changes in either customer purchasing patterns or our financing or operating strategies. Because a majority of our revenues and expenses are incurred in the functional currencies of our international operating entities, the profits we earn in foreign currencies are positively impacted by a weakening of the U.S. dollar and negatively impacted by a strengthening of the U.S. dollar. Additionally, our debt obligations are primarily in U.S. dollars; therefore, as foreign currency exchange rates fluctuate, the amount available for repayment of debt will also increase or decrease.
We use derivatives to minimize our exposures related to changes in foreign currency exchange rates and to facilitate foreign currency risk management services by writing derivatives to customers. Derivatives are used to manage the overall market risk associated with foreign currency exchange rates; however, we do not perform the extensive record-keeping required to account 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.Operations. As of December 31, 2019,2022, we had foreign currency derivative contracts outstanding with a notional value of $159.0$398.6 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.Operations. As of December 31, 2019,2022, we held foreign currency derivative contracts outstanding with a notional value of $1.2$1.0 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
See Note 11,12, Derivative Instruments and Hedging Activities to our Consolidated Financial Statements for additional information.
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To the Stockholders and Board of Directors
Euronet Worldwide, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Euronet Worldwide, Inc. and subsidiaries (the Company) as of December 31, 20192022 and 2018,2021, the related consolidated statements of income,operations, comprehensive income (loss), changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2019,2022, and the related notes (collectively, the consolidated financial statements.)statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2019,2022, based on criteria established in Internal Control -– Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20192022 and 2018,2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019,2021, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 20192022 based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
The Company acquired the Euronet Merchant Services Payment Institution S.M.S.A (formerly the Merchant Acquiring Business of Piraeus Bank) during 2022 and management excluded from its assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2022, Euronet Merchant Services Payment Institution S.M.S.A. internal control over financial reporting associated with total assets of $520.8 million and total revenues of $88.8 million included in the consolidated financial statements of the company as of and for the year ended December 31, 2022. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Euronet Merchant Services Payment Institution S.M.S.A.
Change in Accounting Principle
As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2019convertible instruments as of January 1, 2022 due to the adoption of ASU 2020-06, Accounting Standards Codification Topic 842, Leases.
Revenue from Contracts with Customers.
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report On Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit mattersmatter communicated below are mattersis a matter arising from the current period audit of the consolidated financial statements that werewas communicated or required to be communicated to the audit committee and that: (1) relaterelates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit mattersmatter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit mattersmatter below, providing a separate opinionsopinion on the critical audit matters or on the accounts or disclosures to which they relate.it relates.
Sufficiency of audit evidence over revenue
As discussed in Note 3 to the consolidated financial statements, the Company earned $2.75$3.4 billion of revenue in 2019.2022. The Company earned revenue by payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers (collectively services). The services were provided to customers in 170approximately 200 countries through 66 different business offices in 4143 countries within 3 different reportable operating segments.
We identified the evaluation of the sufficiency of audit evidence over revenue as a critical audit matter. The Company’scompany’s geographical dispersion of services worldwide, amongst various business lines required especially subjective auditor judgment in evaluating the sufficiency of audit evidence over revenue. Further, our audit team consisted of auditors located in various countries worldwide. This required especially challenging auditor judgment in the level of audit procedures and supervision applied at each country.
The following are the primary procedures we performed to address this critical audit matter includedmatter. We applied auditor judgment to determine the following. Wenature and extent of procedures to be performed over revenue, including the determination of locations at which those procedures were to be performed.At each Company location selected, we:
— evaluated the design and tested the operating effectiveness of certain internal controls overrelated to the Company’s revenue process, including controls related toover the consolidationaccurate recording of global revenue amounts. We amounts
— assessed the training and experience of the auditors on our audit team that were located in countries other than the United States. We States
— tested a sample of individual revenue transactions at certain locations by comparing amounts recognized by the Company to relevant contracts and or payment and transaction support. After completion of these procedures, we evaluated the overall sufficiency of the audit evidence over revenues.
We evaluated the Company’s forecastedsufficiency of audit evidence obtained over revenue growth rates and forecasted EBITDA margin assumptions by comparing them to external market and industry data. We comparedassessing the Company’s historical forecasted results to actual results to assessof procedures performed, including the Company’s ability to accurately forecast. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating 1) the Company’s discount rate
We have served as the Company's auditor since 2003.
Kansas City, Missouri
February 28, 2020
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(in thousands, except share and per share data)
As of December 31, | December 31, | |||||||||||||
2019 | 2018 | 2022 |
| 2021 | ||||||||||
ASSETS |
|
|
| |||||||||||
Current assets: |
|
|
| |||||||||||
Cash and cash equivalents | $ | 786,081 | $ | 385,031 | $ | 1,131,207 |
|
| $ | 1,260,466 |
| |||
ATM cash | 665,641 | 395,378 | 515,643 |
|
| 543,422 |
| |||||||
Restricted cash | 34,301 | 31,237 | 7,374 |
|
| 3,693 |
| |||||||
Settlement assets | 1,013,067 | 915,460 | 1,442,692 |
|
| 1,102,389 |
| |||||||
Trade accounts receivable, net | 201,935 | 202,514 | ||||||||||||
Trade accounts receivable, net of credit loss allowance of $4,021 and $4,469 | 270,828 |
|
| 203,010 |
| |||||||||
Prepaid expenses and other current assets | 217,707 | 157,967 | 358,929 |
|
| 195,443 |
| |||||||
Total current assets | 2,918,732 | 2,087,587 | 3,726,673 |
|
| 3,308,423 |
| |||||||
Operating right of use lease assets | 377,543 | — | 149,667 |
|
| 161,494 |
| |||||||
Property and equipment, net of accumulated depreciation of $410,243 at December 31, 2019 and $373,180 at December 31, 2018 | 359,980 | 291,869 | ||||||||||||
Property and equipment, net of accumulated depreciation of $576,433 and $532,631 | 336,601 |
|
| 345,381 |
| |||||||||
Goodwill | 743,823 | 704,197 | 828,344 |
|
| 641,605 |
| |||||||
Acquired intangible assets, net of accumulated amortization of $204,853 at December 31, 2019 and $190,920 at December 31, 2018 | 141,847 | 114,485 | ||||||||||||
Other assets, net of accumulated amortization of $46,788 at December 31, 2019 and $50,821 at December 31, 2018 | 115,741 | 123,017 | ||||||||||||
Acquired intangible assets, net of accumulated amortization of $199,237 and $185,054 | 188,275 |
|
| 97,793 |
| |||||||||
Other assets, net of accumulated amortization of $68,015 and $62,349 | 174,073 |
|
| 189,580 |
| |||||||||
Total assets | $ | 4,657,666 | $ | 3,321,155 | $ | 5,403,633 |
|
| $ | 4,744,276 |
| |||
LIABILITIES AND EQUITY |
|
|
| |||||||||||
Current liabilities: |
|
|
| |||||||||||
Settlement obligations | $ | 1,013,067 | $ | 915,460 | $ | 1,442,692 |
|
| $ | 1,102,389 |
| |||
Trade accounts payable | 81,743 | 72,908 | 222,448 |
|
| 193,529 |
| |||||||
Accrued expenses and other current liabilities | 294,557 | 252,557 | 505,685 |
|
| 367,692 |
| |||||||
Current portion of operating lease obligations | 127,353 | — | 50,183 |
|
| 52,136 |
| |||||||
Short-term debt obligations and current maturities of long-term debt obligations | 6,089 | 38,017 | 149 |
|
| 821 |
| |||||||
Income taxes payable | 52,583 | 40,159 | 67,534 |
|
| 59,037 |
| |||||||
Deferred revenue | 58,588 | 59,293 | 65,380 |
|
| 77,037 |
| |||||||
Total current liabilities | 1,633,980 | 1,378,394 | 2,354,071 |
|
| 1,852,641 |
| |||||||
Debt obligations, net of current portion | 1,090,939 | 589,782 | 1,609,098 |
|
| 1,420,085 |
| |||||||
Operating lease obligations, net of current portion | 241,977 | — | 102,649 |
|
| 111,355 |
| |||||||
Deferred income taxes | 56,067 | 57,145 | 28,372 |
|
| 46,505 |
| |||||||
Other long-term liabilities | 55,361 | 62,992 | 65,037 |
|
| 58,166 |
| |||||||
Total liabilities | 3,078,324 | 2,088,313 | 4,159,227 |
|
| 3,488,752 |
| |||||||
Equity: |
|
|
| |||||||||||
Euronet Worldwide, Inc. stockholders’ equity: | ||||||||||||||
Preferred Stock, $0.02 par value. 10,000,000 shares authorized; none issued | — | — | ||||||||||||
Common Stock, $0.02 par value. 90,000,000 shares authorized; 62,775,762 issued at December 31, 2019 and 59,897,309 issued at December 31, 2018 | 1,256 | 1,198 | ||||||||||||
Euronet Worldwide, Inc. stockholders' equity: |
|
|
| |||||||||||
Preferred Stock, $0.02 par value. 10,000,000 shares authorized; 0 issued | — |
|
| — |
| |||||||||
Common Stock, $0.02 par value. 90,000,000 shares authorized; shares issued 64,091,387 and 63,779,009 | 1,282 |
|
| 1,275 |
| |||||||||
Additional paid-in capital | 1,190,058 | 1,104,264 | 1,251,837 |
|
| 1,274,118 |
| |||||||
Treasury stock, at cost, 8,554,908 shares at December 31, 2019 and 8,077,311 shares at December 31, 2018 | (463,704 | ) | (391,551 | ) | ||||||||||
Treasury stock, at cost, shares issued 14,269,645 and 12,631,125 | (1,105,813 | ) |
| (931,212 | ) | |||||||||
Retained earnings | 1,016,554 | 669,805 | 1,348,266 |
|
| 1,083,882 |
| |||||||
Accumulated other comprehensive loss | (164,890 | ) | (151,043 | ) | (250,989 | ) |
| (172,582 | ) | |||||
Total Euronet Worldwide, Inc. stockholders’ equity | 1,579,274 | 1,232,673 | ||||||||||||
Total Euronet Worldwide, Inc. stockholders' equity | 1,244,583 |
|
| 1,255,481 |
| |||||||||
Noncontrolling interests | 68 | 169 | (177 | ) |
| 43 |
| |||||||
Total equity | 1,579,342 | 1,232,842 | 1,244,406 |
|
| 1,255,524 |
| |||||||
Total liabilities and equity | $ | 4,657,666 | $ | 3,321,155 | $ | 5,403,633 |
|
| $ | 4,744,276 |
|
See accompanying notes to the Consolidated Financial Statements.
59 |
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(in thousands, except share and per share data)
|
| Year Ended December 31, | ||||||||||
|
| 2022 |
| 2021 |
| 2020 | ||||||
Revenues |
| $ | 3,358,741 |
|
| $ | 2,995,443 |
|
| $ | 2,482,700 |
|
Operating expenses: |
|
|
|
|
|
| ||||||
Direct operating costs |
| 2,018,127 |
|
| 1,900,267 |
|
| 1,576,699 |
| |||
Acquired contract cost impairment | — | 38,634 | — | |||||||||
Salaries and benefits |
| 534,238 |
|
| 484,839 |
|
| 404,142 |
| |||
Selling, general and administrative |
| 285,173 |
|
| 251,933 |
|
| 221,614 |
| |||
Goodwill and acquired intangible assets impairment |
| — |
|
| — |
|
| 106,602 |
| |||
Depreciation and amortization |
| 135,864 |
|
| 135,754 |
|
| 127,021 |
| |||
Total operating expenses |
| 2,973,402 |
|
| 2,811,427 |
|
| 2,436,078 |
| |||
Operating income |
| 385,339 |
|
| 184,016 |
|
| 46,622 |
| |||
Other income (expense): |
|
|
|
|
|
| ||||||
Interest income |
| 2,066 |
|
| 664 |
|
| 1,040 |
| |||
Interest expense |
| (37,585 | ) |
| (38,198 | ) |
| (36,604 | ) | |||
Foreign currency exchange (loss) gain, net |
| (28,175 | ) |
| (10,866 | ) |
| (3,756 | ) | |||
Other gains (losses), net |
| 950 |
| 59 |
| 869 | ||||||
Other expense, net |
| (62,744 | ) |
| (48,341 | ) |
| (38,451 | ) | |||
Income before income taxes |
| 322,595 |
|
| 135,675 |
|
| 8,171 |
| |||
Income tax expense |
| (91,853 | ) |
| (65,088 | ) |
| (11,475 | ) | |||
Net income (loss) |
| 230,742 |
| 70,587 |
| (3,304 | ) | |||||
Less: Net loss (income) attributable to noncontrolling interests |
| 252 |
| 140 |
| (95 | ) | |||||
Net income (loss) attributable to Euronet Worldwide, Inc. |
| $ | 230,994 |
| $ | 70,727 |
| $ | (3,399 | ) | ||
|
|
|
|
|
|
| ||||||
Earnings (loss) per share attributable to Euronet Worldwide, Inc. stockholders: |
|
|
|
|
|
| ||||||
Basic |
| $ | 4.60 |
|
| $ | 1.34 |
| $ | (0.06 | ) | |
Diluted |
| $ | 4.41 |
|
| $ | 1.32 |
| $ | (0.06 | ) | |
|
|
|
|
|
|
| ||||||
Weighted average shares outstanding: |
|
|
|
|
|
| ||||||
Basic |
| 50,175,614 |
|
| 52,585,674 |
|
| 52,659,551 |
| |||
Diluted |
| 53,463,308 |
|
| 53,529,576 |
|
| 52,659,551 |
|
See accompanying notes to the Consolidated Financial Statements.
60 |
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(in thousands)
|
| Year Ended December 31, | ||||||||||
|
| 2022 |
| 2021 |
| 2020 | ||||||
Net income (loss) |
| $ | 230,742 |
| $ | 70,587 |
| $ | (3,304 | ) | ||
Other comprehensive (loss) income |
|
|
|
|
|
| ||||||
Translation adjustment |
| (78,375 | ) |
| (78,466 | ) |
| 70,794 | ||||
Comprehensive (loss) income |
| 152,367 |
| (7,879 | ) |
| 67,490 |
| ||||
Comprehensive loss (income) attributable to noncontrolling interests |
| (220 | ) |
| 238 |
| (213 | ) | ||||
Comprehensive (loss) income attributable to Euronet Worldwide, Inc. |
| $ | 152,147 |
| $ | (7,641 | ) |
| $ | 67,277 |
|
See accompanying notes to the Consolidated Financial Statements.
61 |
Number of Shares Outstanding (Common and Treasury) | 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 income | — | — | — | — | |||||||||||
Stock issued under employee stock plans | 608,878 | 11 | 16,437 | 435 | |||||||||||
Share-based compensation | — | — | 21,951 | — | |||||||||||
Repurchase of shares | (2,095,683 | ) | — | — | (239,763 | ) | |||||||||
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 | 413,835 | 8 | 9,132 | (416) | |||||||||||
Share-based compensation | — | — | 36,540 | — | |||||||||||
Repurchase of shares | (2,000,000 | ) | — | — | (227,764 | ) | |||||||||
Balance as of December 31, 2021 | 51,147,884 | 1,275 | 1,274,118 | (931,212 | ) | ||||||||||
Net income (loss) | — | — | — | — | |||||||||||
Other comprehensive loss | — | — | — | — | |||||||||||
Adoption of ASU-2020-60 on Convertible bond | — | — | (74,080 | ) | — | ||||||||||
Stock issued under employee stock plans | 314,358 | 7 | 7,699 | 350 | |||||||||||
Share-based compensation | — | — | 44,100 | — | |||||||||||
Repurchase of shares | (1,639,535 | ) | — | — | (174,951 | ) | |||||||||
Balance as of December 31, 2022 | 49,822,707 | $ | 1,282 | $ | 1,251,837 | $ | (1,105,813 | ) |
62 |
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Revenues | $ | 2,750,109 | $ | 2,536,629 | $ | 2,252,422 | ||||||
Operating expenses: | ||||||||||||
Direct operating costs | 1,556,483 | 1,488,406 | 1,356,250 | |||||||||
Salaries and benefits | 394,744 | 360,432 | 310,787 | |||||||||
Selling, general and administrative | 211,944 | 216,807 | 190,302 | |||||||||
Goodwill and acquired intangible assets impairment | — | 7,049 | 34,056 | |||||||||
Depreciation and amortization | 111,744 | 106,021 | 95,030 | |||||||||
Total operating expenses | 2,274,915 | 2,178,715 | 1,986,425 | |||||||||
Operating income | 475,194 | 357,914 | 265,997 | |||||||||
Other income (expense): | ||||||||||||
Interest income | 1,969 | 1,320 | 2,443 | |||||||||
Interest expense | (36,237 | ) | (37,573 | ) | (32,571 | ) | ||||||
(Loss) Income from unconsolidated affiliates | — | (117 | ) | 48 | ||||||||
Foreign currency exchange gain (loss), net | 2,701 | (26,655 | ) | 20,300 | ||||||||
Other (losses) gains, net | (9,820 | ) | 27 | 118 | ||||||||
Other expense, net | (41,387 | ) | (62,998 | ) | (9,662 | ) | ||||||
Income before income taxes | 433,807 | 294,916 | 256,335 | |||||||||
Income tax expense | (87,112 | ) | (62,785 | ) | (99,395 | ) | ||||||
Net income | 346,695 | 232,131 | 156,940 | |||||||||
Less: Net loss (income) attributable to noncontrolling interests | 54 | 720 | (95 | ) | ||||||||
Net income attributable to Euronet Worldwide, Inc. | $ | 346,749 | $ | 232,851 | $ | 156,845 | ||||||
Earnings per share attributable to Euronet Worldwide, Inc. stockholders: | ||||||||||||
Basic | $ | 6.49 | $ | 4.52 | $ | 2.99 | ||||||
Diluted | $ | 6.31 | $ | 4.26 | $ | 2.85 | ||||||
Weighted average shares outstanding: | ||||||||||||
Basic | 53,449,834 | 51,487,557 | 52,523,272 | |||||||||
Diluted | 54,913,887 | 54,627,747 | 55,116,327 |
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) | (3,399 | ) | — | 95 | (3,304 | ) | |||||||||||||
Other comprehensive income | — | 70,676 | 118 | 70,794 | |||||||||||||||
Stock issued under employee stock plans | — | — | — | 16,883 | |||||||||||||||
Share-based compensation | — | — | — | 21,951 | |||||||||||||||
Repurchase of shares | — | — | — | (239,763 | ) | ||||||||||||||
Balance as of December 31, 2020 | 1,013,155 | (94,214 | ) | 281 | 1,445,903 | ||||||||||||||
Net (loss) income | 70,727 | — | (140 | ) | 70,587 | ||||||||||||||
Other comprehensive loss | — | (78,368 | ) | (98 | ) | (78,466 | ) | ||||||||||||
Stock issued under employee stock plans | — | — | — | 8,724 | |||||||||||||||
Share-based compensation | — | — | — | 36,540 | |||||||||||||||
Repurchase of shares | — | — | — | (227,764 | ) | ||||||||||||||
Balance as of December 31, 2021 | 1,083,882 | (172,582 | ) | 43 | 1,255,524 | ||||||||||||||
Net income (loss) | 230,994 | — | (252 | ) | 230,742 | ||||||||||||||
Other comprehensive loss | — | (78,407 | ) | 32 | (78,375 | ) | |||||||||||||
Adoption of ASU-2020-06 on Convertible bond | 33,390 | — | — | (40,690 | ) | ||||||||||||||
Stock issued under employee stock plans | — | — | — | 8,056 | |||||||||||||||
Share-based compensation | — | — | — | 44,100 | |||||||||||||||
Repurchase of shares | — | — | — | (174,951 | ) | ||||||||||||||
Balance as of December 31, 2022 | $ | 1,348,266 | $ | (250,989 | ) | $ | (177 | ) | $ | 1,244,406 |
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(in thousands)
| Year Ended December 31, | ||||||||||
| 2022 |
| 2021 |
| 2020 | ||||||
Net income (loss) | $ | 230,742 |
|
| $ | 70,587 |
| $ | (3,304 | ) | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
| ||||||
Depreciation and amortization | 135,864 |
|
| 135,754 |
|
| 127,021 |
| |||
Share-based compensation | 44,100 |
|
| 36,540 |
|
| 21,951 |
| |||
Unrealized foreign exchange loss (gain), net | 28,175 |
| 10,866 |
| 3,756 | ||||||
Non-cash impairment of goodwill and acquired intangible assets | — |
|
| — |
|
| 106,602 |
| |||
Deferred income taxes | 7,885 |
| (2,255 | ) |
| (23,946 | ) | ||||
Accretion of convertible debt discount and amortization of debt issuance costs | 3,741 |
|
| 20,239 |
|
| 18,924 |
| |||
Changes in working capital, net of amounts acquired: |
|
|
|
|
| ||||||
Income taxes payable, net | 10,805 |
| 23,912 |
| (16,823 | ) | |||||
Trade accounts receivable, including amounts in settlement assets | (299,409 | ) |
| (107,478 | ) |
| 63,629 | ||||
Prepaid expenses and other current assets, including amounts in settlement assets | (192,591 | ) |
| 93,475 |
| (168,256 | ) | ||||
Trade accounts payable, including amounts in settlement obligations | 178,052 |
| (33,218 | ) |
| 88,687 |
| ||||
Deferred revenue | (8,389 | ) |
| 7,472 |
|
| 10,945 |
| |||
Accrued expenses and other current liabilities, including amounts in settlement obligations | 608,252 |
|
| 93,040 |
| 118,618 | |||||
Changes in non-current assets and liabilities | 1,063 |
| 57,642 |
| (94,299 | ) | |||||
Net cash provided by operating activities | 748,290 |
|
| 406,576 |
|
| 253,505 |
| |||
Cash flows from investing activities: |
|
|
|
|
| ||||||
Acquisitions, net of cash acquired | (342,951 | ) |
| — |
| (1,100 | ) | ||||
Purchases of property and equipment and proceeds of sale property and equipment | (104,257 | ) |
| (92,207 | ) |
| (97,628 | ) | |||
Purchases of other long-term assets | (7,728 | ) |
| (7,752 | ) |
| (7,770 | ) | |||
Other, net | 1,160 |
|
| 1,850 |
|
| 967 |
| |||
Net cash used in investing activities | (453,776 | ) |
| (98,109 | ) |
| (105,531 | ) | |||
Cash flows from financing activities: |
|
|
|
|
| ||||||
Proceeds from issuance of shares | 9,081 |
|
| 10,848 |
|
| 18,101 |
| |||
Repurchase of shares | (175,965 | ) |
| (229,877 | ) |
| (241,518 | ) | |||
Borrowings from revolving credit agreements | 7,904,600 |
|
| 5,074,000 |
|
| 3,113,800 |
| |||
Repayments of revolving credit agreements | (7,733,200 | ) |
| (5,061,000 | ) |
| (2,843,400 | ) | |||
Net borrowings (repayments) from short-term debt obligations | 1,193 |
| 52 |
| (5,157 | ) | |||||
Debt issuance costs | (3,014 | ) |
| — |
| — | |||||
Other, net | (3,849 | ) |
| (6,259 | ) |
| (6,428 | ) | |||
Net cash (used in) provided by financing activities | (1,154 | ) |
| (212,236 | ) |
| 35,398 | ||||
Effect of exchange rate changes on cash and cash equivalents and restricted cash | (388,602 | ) |
| (109,637 | ) |
| 98,757 | ||||
(Decrease) increase in cash and cash equivalents and restricted cash | (95,242 | ) |
| (13,406 | ) |
| 282,129 |
| |||
Cash and cash equivalents and restricted cash at beginning of period | 2,086,102 |
|
| 2,099,508 |
|
| 1,817,379 |
| |||
Cash and cash equivalents and restricted cash at end of period | $ | 1,990,860 |
|
| $ | 2,086,102 |
|
| $ | 2,099,508 |
|
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Net income | $ | 346,695 | $ | 232,131 | $ | 156,940 | ||||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Translation adjustment | (13,894 | ) | (56,656 | ) | 116,401 | |||||||
Comprehensive income | 332,801 | 175,475 | 273,341 | |||||||||
Comprehensive (income) loss attributable to noncontrolling interests | 101 | 791 | (292 | ) | ||||||||
Comprehensive income attributable to Euronet Worldwide, Inc. | $ | 332,902 | $ | 176,266 | $ | 273,049 |
Supplemental Cash Flow Disclosures: |
|
| |||||||||
Interest paid during the period | $ | 29,067 |
|
| $ | 18,503 |
|
| $ | 17,319 |
|
Income taxes paid during the period | $ | 86,208 |
|
| $ | 48,688 |
|
| $ | 60,170 |
|
See accompanying notesaccompanyingnotes to the Consolidated Financial Statements.
64 |
Number of Shares Outstanding | Common Stock | Additional Paid-in Capital | Treasury Stock | ||||||||||||
Balance as of December 31, 2016 | 52,303,401 | $ | 1,168 | $ | 1,045,663 | $ | (215,462 | ) | |||||||
Net income | |||||||||||||||
Other comprehensive loss | |||||||||||||||
Stock issued under employee stock plans | 504,757 | 10 | 10,104 | (1,699 | ) | ||||||||||
Share-based compensation | 15,618 | ||||||||||||||
Repurchase of shares | |||||||||||||||
Other | 620 | ||||||||||||||
Balance as of December 31, 2017 | 52,808,158 | 1,178 | 1,072,005 | (217,161 | ) | ||||||||||
Net income (loss) | |||||||||||||||
Other comprehensive loss | |||||||||||||||
Stock issued under employee stock plans | 1,039,480 | 20 | 15,634 | 610 | |||||||||||
Share-based compensation | 16,764 | ||||||||||||||
Repurchase of shares | (2,032,599 | ) | (175,000 | ) | |||||||||||
Other | 4,959 | (139 | ) | ||||||||||||
Balance as of December 31, 2018 | 51,819,998 | 1,198 | 1,104,264 | (391,551 | ) | ||||||||||
Net income (loss) | |||||||||||||||
Other comprehensive loss | |||||||||||||||
Stock issued under employee stock plans | 405,617 | 8 | 13,216 | (1,277 | ) | ||||||||||
Share-based compensation | 21,439 | ||||||||||||||
Issuance of convertible notes, net of tax | 71,659 | ||||||||||||||
Repurchase of shares | (493,010 | ) | (70,876 | ) | |||||||||||
Redemptions and conversions of convertible notes, net of tax | 2,488,249 | $ | 50 | (20,517 | ) | ||||||||||
Other | (3 | ) | |||||||||||||
Balance as of December 31, 2019 | 54,220,854 | $ | 1,256 | $ | 1,190,058 | $ | (463,704 | ) |
Retained Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interests | Total | |||||||||||||
Balance as of December 31, 2016 | $ | 278,842 | $ | (210,662 | ) | $ | 1,008 | $ | 900,557 | |||||||
Net income | 156,845 | 95 | 156,940 | |||||||||||||
Other comprehensive income | 116,204 | 197 | 116,401 | |||||||||||||
Stock issued under employee stock plans | 8,415 | |||||||||||||||
Share-based compensation | 15,618 | |||||||||||||||
Repurchase of shares | — | |||||||||||||||
Other | 1,267 | (340 | ) | 1,547 | ||||||||||||
Balance as of December 31, 2017 | 436,954 | (94,458 | ) | 960 | 1,199,478 | |||||||||||
Net income (loss) | 232,851 | (720 | ) | 232,131 | ||||||||||||
Other comprehensive loss | (56,585 | ) | (71 | ) | (56,656 | ) | ||||||||||
Stock issued under employee stock plans | 16,264 | |||||||||||||||
Share-based compensation | 16,764 | |||||||||||||||
Repurchase of shares | (175,000 | ) | ||||||||||||||
Other | (139 | ) | ||||||||||||||
Balance as of December 31, 2018 | 669,805 | (151,043 | ) | 169 | 1,232,842 | |||||||||||
Net income (loss) | 346,749 | (54 | ) | 346,695 | ||||||||||||
Other comprehensive loss | (13,847 | ) | (47 | ) | (13,894 | ) | ||||||||||
Stock issued under employee stock plans | 11,947 | |||||||||||||||
Share-based compensation | 21,439 | |||||||||||||||
Issuance of convertible notes, net of tax | 71,659 | |||||||||||||||
Repurchase of shares | (70,876 | ) | ||||||||||||||
Redemptions and conversions of convertible notes, net of tax | (20,467 | ) | ||||||||||||||
Other | (3 | ) | ||||||||||||||
Balance as of December 31, 2019 | $ | 1,016,554 | $ | (164,890 | ) | 68 | $ | 1,579,342 |
Year Ended December 31, | |||||||||||
2019 | 2018 | 2017 | |||||||||
Net income | $ | 346,695 | $ | 232,131 | $ | 156,940 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 111,744 | 106,021 | 95,030 | ||||||||
Share-based compensation | 21,439 | 16,764 | 15,618 | ||||||||
Unrealized foreign exchange (gain) loss, net | (2,701 | ) | 26,655 | (20,300 | ) | ||||||
Non-cash impairment of goodwill and acquired intangible assets | — | 7,049 | 34,056 | ||||||||
Deferred income taxes | 17,113 | 2,425 | (10,861 | ) | |||||||
Loss on early retirement of debt | 9,831 | — | — | ||||||||
Loss (income) from unconsolidated affiliates | — | 117 | (48 | ) | |||||||
Accretion of convertible debt discount and amortization of debt issuance costs | 17,088 | 14,121 | 13,504 | ||||||||
Changes in working capital, net of amounts acquired: | |||||||||||
Income taxes payable, net | 13,177 | (13,317 | ) | 23,183 | |||||||
Trade accounts receivable | (87,882 | ) | 26,497 | (198,089 | ) | ||||||
Prepaid expenses and other current assets | (68,945 | ) | (29,066 | ) | 35,451 | ||||||
Trade accounts payable | 53,550 | 45,562 | 3,840 | ||||||||
Deferred revenue | 132 | 9,349 | 3,724 | ||||||||
Accrued expenses and other current liabilities | 98,459 | (37,595 | ) | 106,350 | |||||||
Changes in non-current assets and liabilities | (25,212 | ) | (9,480 | ) | 27,878 | ||||||
Net cash provided by operating activities | 504,488 | 397,233 | 286,276 | ||||||||
Cash flows from investing activities: | |||||||||||
Acquisitions, net of cash acquired | (94,187 | ) | (12,854 | ) | — | ||||||
Purchases of property and equipment | (131,287 | ) | (112,484 | ) | (97,235 | ) | |||||
Purchases of other long-term assets | (7,274 | ) | (8,528 | ) | (6,039 | ) | |||||
Other, net | 3,721 | 1,583 | 1,416 | ||||||||
Net cash used in investing activities | (229,027 | ) | (132,283 | ) | (101,858 | ) | |||||
Cash flows from financing activities: | |||||||||||
Proceeds from issuance of shares | 14,979 | 18,608 | 10,990 | ||||||||
Repurchase of shares | (74,456 | ) | (177,855 | ) | (3,065 | ) | |||||
Borrowings from revolving credit agreements | 2,498,298 | 5,773,294 | 2,409,203 | ||||||||
Repayments of revolving credit agreements | (2,714,203 | ) | (5,560,089 | ) | (2,566,621 | ) | |||||
Repayments of long-term debt obligations | (446,702 | ) | (52,199 | ) | (8,907 | ) | |||||
Repayments of finance lease obligations | (6,474 | ) | (6,137 | ) | (4,883 | ) | |||||
Net borrowing from short-term debt obligations | (32,091 | ) | 9,472 | 1,853 | |||||||
Proceeds from long-term debt obligations | 1,194,900 | — | — | ||||||||
Debt issuance costs | (17,947 | ) | (3,071 | ) | — | ||||||
Other, net | (6 | ) | 1 | 281 | |||||||
Net cash provided by (used in ) financing activities | 416,298 | 2,024 | (161,149 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents and restricted cash | (5,332 | ) | (36,540 | ) | 65,161 | ||||||
Increase in cash and cash equivalents and restricted cash | 686,427 | 230,434 | 88,430 | ||||||||
Cash and cash equivalents and restricted cash at beginning of period | 1,130,952 | 900,518 | 812,088 | ||||||||
Cash and cash equivalents and restricted cash at end of period | $ | 1,817,379 | $ | 1,130,952 | $ | 900,518 |
Cash and cash equivalents | $ | 786,081 | $ | 385,031 | $ | 280,128 | |||||
Restricted cash | 34,301 | 31,237 | $ | 32,185 | |||||||
ATM cash | 665,641 | 395,378 | 253,847 | ||||||||
Settlement cash and cash equivalents | 282,188 | 273,948 | 285,169 | ||||||||
Settlement restricted cash | 49,168 | 45,358 | 49,189 | ||||||||
Cash and cash equivalents and restricted cash at end of period | $ | 1,817,379 | $ | 1,130,952 | $ | 900,518 | |||||
Supplemental Cash Flow Disclosures: | |||||||||||
Interest paid during the period | $ | 13,125 | $ | 23,554 | $ | 20,457 | |||||
Income taxes paid during the period | $ | 74,086 | $ | 84,382 | $ | 48,644 | |||||
Supplemental disclosure of non-cash investing and financing activities: | |||||||||||
Non-cash consideration received from sale of investment | $ | — | $ | — | $ | — |
The consolidated financial statementsConsolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States (“("U.S. GAAP”GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”("SEC"). The consolidated financial statementsConsolidated Financial Statements include the accounts of Euronet and its wholly owned and majority owned subsidiaries and all significant intercompany balances and transactions have been eliminated. Euronet's investments in companies that it does not control, but has the ability to significantly influence, are accounted for under the equity method. Euronet is not involved with anyhas no variable interest entities. Results from operations related to entities acquired during the periods covered by the consolidated financial statementsConsolidated Financial Statements are reflected from the effective date of acquisition.
The preparation of the consolidated financial statementsConsolidated Financial Statements in conformity with U.S. GAAP requires that management make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Significant items subject to such estimates and assumptions include computing income taxes, contingent purchase price consideration, estimating the useful lives and potential impairment of long-lived assets and goodwill, as well as allocating the purchase price to assets acquired and liabilities assumed in acquisitions and revenue recognition. Actual results could differ from those estimates.
Seasonality
Foreign currencies
Assets and liabilities denominated in currencies other than the functional currency of a subsidiary are remeasured at rates of exchange on the balance sheet date. Resulting gains and losses on foreign currency transactions are included in the Consolidated Statements of Income.
The financial statements of foreign subsidiaries where the functional currency is not the U.S. dollar are translated to U.S. dollars using (i) exchange rates in effect at period end for assets and liabilities, and (ii) weighted average exchange rates during the period for revenues and expenses. Adjustments resulting from translation of such financial statements are reflected in accumulated other comprehensive (loss) income (loss) as a separate component of consolidated equity.
65 |
Cash equivalents
The Company considers all highly liquid investments, with an original maturity of three months or less, and certificates of deposit, which may be withdrawn at any time at the discretion of the Company without penalty, to be cash equivalents.
ATM Cash
ATM cash represents cash within the ATM network either included within ATMs, within dedicated accounts, or in-transit to ATMs.
Settlement Assetsassets 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.
(in thousands) | As of December 31, 2019 | As of December 31, 2018 | ||||
Settlement assets: | ||||||
Settlement cash and cash equivalents | $ | 282,188 | $ | 273,948 | ||
Settlement restricted cash | 49,168 | 45,358 | ||||
Account receivables | 574,410 | 491,102 | ||||
Prepaid expenses and other current assets | 107,301 | 105,052 | ||||
Total settlement assets | $ | 1,013,067 | $ | 915,460 | ||
Settlement obligations: | ||||||
Trade account payables | $ | 504,667 | $ | 456,005 | ||
Accrued expenses and other current liabilities | 508,400 | 459,455 | ||||
Total settlement obligations | $ | 1,013,067 | $ | 915,460 |
Property and equipment
Property and equipment are stated at cost, less accumulated depreciation. Property and equipment acquired in acquisitions have been recorded at estimated fair values as of the acquisition date.
Depreciation is generally calculated using the straight-line method over the estimated useful lives of the respective assets.
Depreciation and amortization rates are generally as follows:
ATMs or ATM upgrades | 5 - |
Computers and software | 3 - 5 years |
POS terminals | 3 - 5 years |
Vehicles and office equipment | 3 - 10 years |
Leasehold improvements | Over the lesser of the lease term or estimated useful life |
Other assets
Other assets include investments in unconsolidated affiliates, capitalized software development costs and capitalized payments for new or renewed contracts, contract renewals and customer conversion costs.contracts. Euronet capitalizes initial payments for new or renewed contracts to the extent recoverable through future operations, contractual minimums and/or penalties in the case of early termination. The Company's accounting policy is to limit the amount of capitalized costs for a given contract to the lesser of the estimated ongoing net future cash flows related to the contract or the termination fees the Company would receive in the event of early termination of the contract by the customer.
ASC Topic 340,Other Assets and Deferred Costs(“"ASC 340”340") requires the deferral of incremental costs to obtainfulfill customer contracts, known as contract assets, which are then amortized to expense as part of selling, general and administrative expensedirect operating costs over the respective periods of expected benefit. DeferredDeferred contract costs are reported on our balance sheet within current or non-current other assets based on the expected life of the related contract. At December 31, 20192022 and 2018,2021, we had $43.7 $78.9 million and $32.1$96.4 million, respectively, of deferred contract costs related to the fulfillment of future contract obligations.costs. For the years ended December 31, 2019, 20182022, 2021 and 2017,2020, we had $6.9$22.1 million, , $6.3 $33.3 million and $7.2$17.2 million of amortization related to these costs, respectively. On a quarterly basis we evaluate the carrying amount of contract assets recognized to determine if there are contracts that may have a carrying amount in excess of the remaining future consideration to be received from the contract. During the fourth quarter of 2021, we identified certain contract assets that had carrying balances greater than the estimated remaining cash flows in the contracts and recorded a corresponding $38.6 million non-cash impairment. The impairment charge is the result of lower-than-expected customer transaction volume related to these specific contracts, stemming primarily from COVID-19 related disruptions. This non-cash impairment charge is included in the Money Transfer Segment.
67 |
Convertible notes
In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-06, "Accounting for investmentsConvertible Instruments and Contracts in affiliatesan 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. We adopted this standard on January 1, 2022 using the equity method of accounting when it has the ability to exercise significant influence over the affiliate, but does not have a controlling interest. Equity lossesmodified retrospective approach, which resulted in affiliates are generallyour Convertible Senior Notes due 2049 being recognized until the Company's investment is zero. As of December 31, 2019 and 2018, the Company had no material investments in unconsolidated affiliates.
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company presents taxes collected and remitted to governmental authorities on a net basis in the accompanying Consolidated Statements of Income.Operations.
Fair value measurements
The Company applies the provisions of ASC Topic 820,Fair Value Measurementsand Disclosures (“"ASC 820”820"), regarding fair value measurements for assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value and requires certain disclosures about fair value measurements. The provisions apply whenever other accounting pronouncements require or permit fair value measurements. See Note 17,18, Financial Instruments and Fair Value Measurements, to the Consolidated Financial Statements for the required fair value disclosures.
Accounting for derivative instruments and hedging activities
The Company accounts for derivative instruments and hedging activities in accordance with ASC Topic 815,Derivatives and Hedging (“"ASC 815”815"), which requires that all derivative instruments be recognized as either assets or liabilities on the balance sheet at fair value. Primarily in the Money Transfer Segment, the Company enters into foreign currency derivative contracts, mainly forward contracts, to offset foreign currency exposure related to money transfer settlement assets and liabilities in currencies other than the U.S. dollar, derivative contracts written to its customers arising from its cross-currency money transfer services and certain assets and liability positions denominated in currencies other than the U.S. dollar. These contracts are considered derivative instruments under the provisions of ASC 815; however, the Company does not designate such instruments as hedges for accounting purposes. Accordingly, changes in the value of these contracts are recognized immediately as a component of foreign currency exchange gain (loss), net in the Consolidated Statements of Income.Operations.
Cash flows resulting from derivative instruments are included in operating activities in the Company's Consolidated Statements of Cash Flows. The Company enters into derivative instruments with highly credit-worthy financial institutions and does not use derivative instruments for trading or speculative purposes. See Note 11,12, Derivative Instruments and Hedging Activities, to the Consolidated Financial Statements for further discussion of derivative instruments.
68 |
Share-based compensation
The Company follows the provisions of ASC Topic 718,Compensation - StockCompensation (“"ASC 718”718"), for equity classified awards, which requires the determination of the fair value of the share-based compensation at the grant date and subsequent recognition of the related expense over the period in which the share-based compensation is earned (“("requisite service period”period").
The amount of future compensation expense related to awards of nonvested shares or nonvested share units (“("restricted stock”stock") is based on the market price for Euronet Common Stock at the grant date. The grant date is the date at which all key terms and conditions of the grant have been determined and the Company becomes contingently obligated to transfer equity to the employee who renders the requisite service, generally the date at which grants are approved by the Company's Board of Directors or Compensation Committee thereof. Share-based compensation expense for awards with only service conditions is generally recognized as expense on a “straight-line”"straight-line" basis over the requisite service period. For awards that vest based on achieving periodic performance conditions, expense is recognized on a “graded"graded attribution method.”" The graded attribution method results in expense recognition on a straight-line basis over the requisite service period for each separately vesting portion of an award. The Company has elected to use the “with"with and without method”method" when calculating the income tax benefit associated with its share-based payment arrangements. See Note 15,16, Stock Plans, for further disclosure.
Revenue recognition
The Company recognizes revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services. Sales and usage-based taxes are excluded from revenues. A description of the major components of revenue by business segment is as follows:
EFT Processing -Revenues in the EFT Processing Segment are primarily derived from transaction and management fees and foreign currency exchange margin from owned and outsourced ATM, POS and card processing networks and from the sale of EFT software solutions for electronic payment and transaction delivery systems, and fees or margin earned from value added services, including dynamic currency conversion and domestic and international surcharge.
Certainof the Company's non-cancelable customer contracts provide for the receipt of up-front fees from the customer and/or decreasing or increasing fee schedules over the agreement term for substantially the same level of services to be provided by the Company. The Company recognizes revenue under these contracts based on proportional performance of services over the term of the contract. This generally results in “straight-line”"straight-line" (i.e., consistent value per period) revenue recognition of the contracts' total cash flows, including any up-front payment received from the customer.
epay-- Revenue generated in the epay Segment is primarily derived from commissionscommissions or processing fees associated with distribution and/or processing of prepaid mobile airtime and digital media products. These fees and commissions are received from mobile operators, content vendors or distributors or from retailers. In accordance with ASC 606, commissionsCommissions are recognized as revenue during the period in which the Company provides the service. The portion of the commission that is paid to retailers is generally recorded as a direct operating cost. However, in circumstances where the Company is not the principle obligor in the distribution of the electronic payment products, those commissions are recorded as a reduction of revenue. In selling certain products, the Company is the principleprinciple obligor in thethe arrangements; accordingly, the gross sales value of the products areis recorded as revenue and the purchase cost as direct operating cost. Transactions are processed through a network of POS terminals and direct connections to the electronic payment systems of retailers. Transaction processing fees are recognized at the time the transactions are processed.
Money Transfer- RIn accordance with ASC 606, revenuesevenues for money transfer and other services represent a transaction fee in addition to a margin earned from purchasing currency at wholesale exchange rates and selling the currency to customers at retail exchange rates. Revenues and the associated direct operating cost are recognized at the time the transaction is processed. The Company has origination and distribution agents in place, which eacheach earn a fee for the respective service. These fees are reflected as direct operating costs.
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Revenues
Deferred Revenues - The Company records deferred revenues when cash payments are received or due in advance of its performance. The decrease in the deferred revenue balance for the year ended December 31, 2019 is2022 was primarily driven by $41.4$44.3 million of revenues recognized that were included in the deferred revenue balance as of December 31, 2018, largely offset by $40.7 million of cash payments received in the current year for which the Company has not yet satisfied the performance obligations.obligations, partially offset by$55.5
Disaggregation of Revenues - The following table presents the Company's revenues disaggregated by segment and region. The Company believes disaggregation by segment and region best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The disaggregation of revenues by segment and region is based on management's assessment of segment performance together with allocation of financial resources, both capital and operating support costs, on a segment and regional level. Both segments and regions benefit from synergies achieved through concentration of operations and are influenced by macro-economic, regulatory and political factors in the respective segment
| For the Year Ended December 31, 2022 | ||||||||||||||
(in thousands) | EFT Processing |
| epay |
| Money Transfer |
| Total | ||||||||
Europe | $ | 716,348 |
|
| $ | 658,292 |
|
| $ | 581,851 |
|
| $ | 1,956,491 |
|
North America | 69,276 |
|
| 133,356 |
|
| 700,113 |
|
| 902,745 |
| ||||
Asia Pacific | 133,908 |
|
| 154,993 |
|
| 107,511 |
|
| 396,412 |
| ||||
Other | 4,676 |
|
| 51,368 |
|
| 54,829 |
|
| 110,873 |
| ||||
Eliminations | — |
|
| — |
|
| — |
|
| (7,780 | ) | ||||
Total | $ | 924,208 |
|
| $ | 998,009 |
|
| $ | 1,444,304 |
|
| $ | 3,358,741 |
|
| For the Year Ended December 31, 2021 | ||||||||||||||
(in thousands) | EFT Processing |
| epay |
| Money Transfer |
| Total | ||||||||
Europe | $ | 420,181 |
|
| $ | 669,297 |
|
| $ | 576,640 |
| $ | 1,666,118 |
| |
North America | 63,368 |
|
| 139,759 |
|
| 667,738 |
|
| 870,865 |
| ||||
Asia Pacific | 107,020 |
|
| 158,122 |
|
| 105,086 |
|
| 370,228 |
| ||||
Other | 569 |
|
| 44,304 |
|
| 51,493 |
|
| 96,366 |
| ||||
Eliminations | — |
|
| — |
|
| — |
|
| (8,134 | ) | ||||
Total | $ | 591,138 |
|
| $ | 1,011,482 |
|
| $ | 1,400,957 |
|
| $ | 2,995,443 |
|
| For the Year Ended December 31, 2020 | ||||||||||||||
(in thousands) | EFT Processing |
| epay |
| Money Transfer |
| Total | ||||||||
Europe | $ | 313,953 |
|
| $ | 561,514 |
|
| $ | 449,299 |
|
| $ | 1,324,766 |
|
North America | 56,447 |
|
| 144,613 |
|
| 577,845 |
|
| 778,905 |
| ||||
Asia Pacific | 98,313 |
|
| 100,917 |
|
| 124,413 |
|
| 323,643 |
| ||||
Other | 13 |
|
| 28,473 |
|
| 32,292 |
|
| 60,778 |
| ||||
Eliminations | — |
|
| — |
|
| — |
|
| (5,392 | ) | ||||
Total | $ | 468,726 |
|
| $ | 835,517 |
|
| $ | 1,183,849 |
|
| $ | 2,482,700 |
|
70 |
For the Year Ended December 31, 2019 | |||||||||||||||
(in thousands) | EFT Processing | epay | Money Transfer | Total | |||||||||||
Europe | $ | 724,163 | $ | 524,907 | $ | 373,302 | $ | 1,622,372 | |||||||
North America | 35,461 | 151,016 | 573,016 | 759,493 | |||||||||||
Asia Pacific | 129,060 | 76,491 | 124,934 | 330,485 | |||||||||||
Other | 28 | 16,915 | 24,974 | 41,917 | |||||||||||
Eliminations | — | — | — | (4,158 | ) | ||||||||||
Total | $ | 888,712 | $ | 769,329 | $ | 1,096,226 | $ | 2,750,109 |
For the Year Ended December 31, 2018 | |||||||||||||||
(in thousands) | EFT Processing | epay | Money Transfer | Total | |||||||||||
Europe | $ | 608,993 | $ | 491,282 | $ | 328,592 | $ | 1,428,867 | |||||||
North America | 32,306 | 165,930 | 569,005 | 767,241 | |||||||||||
Asia Pacific | 112,294 | 71,242 | 127,057 | 310,593 | |||||||||||
Other | 58 | 15,330 | 18,308 | 33,696 | |||||||||||
Eliminations | — | — | — | (3,768 | ) | ||||||||||
Total | $ | 753,651 | $ | 743,784 | $ | 1,042,962 | $ | 2,536,629 | |||||||
(1) As noted above, prior period amounts have not been adjusted under the modified retrospective method. |
For the Year Ended December 31, 2017 | |||||||||||||||
(in thousands) | EFT Processing | epay | Money Transfer | Total | |||||||||||
Europe | $ | 501,161 | $ | 561,232 | $ | 262,280 | $ | 1,324,673 | |||||||
North America | 31,469 | 63,148 | 513,868 | 608,485 | |||||||||||
Asia Pacific | 101,787 | 91,516 | 101,005 | 294,308 | |||||||||||
Other | 142 | 18,102 | 9,705 | 27,949 | |||||||||||
Eliminations | — | — | — | (2,993 | ) | ||||||||||
Total | $ | 634,559 | $ | 733,998 | $ | 886,858 | $ | 2,252,422 | |||||||
(1) As noted above, prior period amounts have not been adjusted under the modified retrospective method. |
(in thousands) | As of December 31, 2022 | As of December 31, 2021 | ||||||
Settlement assets: |
|
| ||||||
Settlement cash and cash equivalents | $ | 242,621 |
| $ | 203,624 |
| ||
Settlement restricted cash | 94,015 |
| 74,897 |
| ||||
Account receivables, net of credit loss allowance of $32,989 and $27,341 | 887,616 |
| 619,738 |
| ||||
Prepaid expenses and other current assets | 218,440 |
| 204,130 |
| ||||
Total settlement assets | $ | 1,442,692 |
| $ | 1,102,389 |
| ||
Settlement obligations: |
|
| ||||||
Trade account payables | $ | 655,124 |
| $ | 461,135 |
| ||
Accrued expenses and other current liabilities | 787,568 |
| 641,254 |
| ||||
Total settlement obligations | $ | 1,442,692 |
| $ | 1,102,389 |
|
71 |
As of | ||||||||||||
(in thousands) | December 31, 2022 | December 31, 2021 | December 31, 2020 | |||||||||
Cash and cash equivalents | $ | 1,131,207 | $ | 1,260,466 | $ | 1,420,255 | ||||||
Restricted cash | 7,374 | 3,693 | 3,334 | |||||||||
ATM cash | 515,643 | 543,422 | 411,054 | |||||||||
Settlement cash and cash equivalents | 242,621 | 203,624 | 188,191 | |||||||||
Settlement restricted cash | 94,015 | 74,897 | 76,674 | |||||||||
Cash and cash equivalents and restricted cash at end of period | $ | 1,990,860 | $ | 2,086,102 | $ | 2,099,508 |
Earnings Per Share
Basic earnings per share has been computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the respective period. Diluted earnings per share has been computed by dividing diluted earnings available to common stockholders by the weighted average shares outstanding during the respective period, after adjusting for the potential dilution of options to purchase the Company's Common Stock, assumed vesting of restricted stock and the assumed conversion of the Company's convertible debt.
The following table provides the computation of diluted weighted average number of common shares outstanding:
|
| Year Ended December 31, | |||||||||||||
| 2022 |
| 2021 |
| 2020 | ||||||||||
Computation of diluted earnings: | |||||||||||||||
Net income (loss) | $ | 230,994 | $ | 70,727 | $ | (3,399 | ) | ||||||||
Add: Interest expense from assumed conversion of convertible notes, net of tax | 4,704 | — | — | ||||||||||||
Net income (loss) for diluted earnings per share calculation | $ | 235,698 | $ | 70,727 | $ | (3,399 | ) | ||||||||
Computation of diluted weighted average shares outstanding: |
|
|
|
|
|
| |||||||||
Basic weighted average shares outstanding |
| 50,175,614 |
| 52,585,674 |
| 52,659,551 | |||||||||
Incremental shares from assumed exercise of stock options and vesting of restricted stock |
| 505,876 |
| 943,902 |
| — | |||||||||
Incremental shares from assumed conversion of convertible debt | 2,781,818 | — | — | ||||||||||||
Diluted weighted average shares outstanding |
| 53,463,308 |
| 53,529,576 |
| 52,659,551 |
Year Ended December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
Computation of diluted weighted average shares outstanding: | |||||||||
Basic weighted average shares outstanding | 53,449,834 | 51,487,557 | 52,523,272 | ||||||
Incremental shares from assumed exercise of stock options and vesting of restricted stock | 1,464,053 | 1,499,713 | 1,793,375 | ||||||
Incremental shares from assumed conversion of convertible debentures | — | 1,640,477 | 799,680 | ||||||
Diluted weighted average shares outstanding | 54,913,887 | 54,627,747 | 55,116,327 |
The table includes all stock options and restricted stock that are dilutive to the Company's weighted average common shares outstanding during the period. The calculation of diluted earnings per share excludes stock options or shares of restricted stock that are anti-dilutive to the Company'sCompany's weighted average common shares outstanding for the yearsyears ended December 31, 20192022, 2021 and 2020 of approximately 1,975,000, 20181,668,000 and 2017 of approximately 380,000, 458,000 and 798,0002,073,000, respectively.
The Company
We issued new Convertible Senior Notes ("Convertible Notes") due March 2049 on March 18, 2019 and retired the existing convertible notes ("Retired Convertible Notes") that would have matured in 2044 on May 28, 2019. The Company'sOur Convertible Notes currently have and the Retired Convertible Notes had, a settlement feature requiring the Companyus 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'sour common stock or a combination thereof, at the Company'sour option. The Company hasWe have stated itsour intent to settle any conversion of these notes by paying cash for the principal value and issuing common stock for any conversion premium. Accordingly,premium; however, after adopting ASU 2020-06, 2.8 million incremental shares assumed for conversion of convertible notes shall be included in the Convertible Notes anddilutive earnings per share calculation, if dilutive, regardless of whether the Retiredmarket price trigger has been met. Therefore, our Convertible Notes were included in the calculation of diluted earnings (loss) per share if their inclusion was dilutive. The dilutive effect increases the more the market price exceeds the conversion price. The Retired Convertible Notes had a dilutive effect for the years ended December 31, 2018 and 2017 as the $102.38 and $84.27 market price per share of Common Stock as of December 31, 2018 and 2017 exceeded the $72.18 conversion price of $188.73 per share. The Convertible Notes would only have a dilutive effect if the market price per share of common stock exceeds the conversion price of $188.73 per share. Therefore, according to ASC Topic 260, Earnings per Share (“ASC 260”), there was no dilutive effect of the assumed conversion of the debentures as of December 31, 2019, whereas the dilutive effect was 1,640,477 and 799,680 shares for the years ended December 31, 2018 and 2017, respectively. See Note 10,9, Debt Obligations, to the Consolidated Financial Statementsconsolidated financial statements for more information about the convertible notes.
72 |
Share repurchases
On February 26, 2020,December 8, 2021, the Company put a repurchase program in place to repurchase up to $250$300 million in value, but not more than five5.0 million shares of common stock through February 28, 2022.December 8, 2023. For the year ended December 31, 2022, the Company repurchased 1.6 million shares under the repurchase program at a weighted average purchase price of $106.71 for a total value of $175.0 million. Repurchases under eitherthe program may take place in the open market or in privately negotiated transactions, including derivative transactions, and may be made under a Rule 10b5-1 plan. For the year ended December 31, 2019,
On September 13, 2022, the Company repurchased $70.9put a repurchase program in place to repurchase up to $350 million in value, but not more than 7.0 million shares of Euronet Common Stockcommon stock through September 13, 2024. Repurchases under the Repurchase Program. Forprogram may take place in the year ended December 31, 2018, the company repurchased $175 millionopen market or in value of Euronet common stockprivately negotiated transactions, including derivative transactions, and may be made under the Repurchase Program. No repurchases were made during 2017.
Preferred Stock
The Company has the authority to issueto issue up to 10 million shares of preferred stock, of whichwhich no sharesshares are currently issued or outstanding.
Accumulated other comprehensive loss
As of December 31, 20192022 and 20212018, accumulated other comprehensive loss consists entirely of foreign currency translation adjustments. The Company recorded a foreign currency translation loss of $13.9$78.4 million, a loss of $56.7$78.5 million and a gain of $116.4$70.8 million for the years ended December 31, 2019, 2018,2022, 2021, and 2017,2020, respectively. There were no reclassifications of foreign currency translation into the Consolidated Statements of IncomeOperations for the years ended December 31, 2019, 2018,2022, 2021, and 2017.
Dividends
No dividends waswere paid on any class of the Company's stock during 2019, 2018,2022, 2021, and 2017.2020.
In accordance with ASC 805, the Company allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired based on fair values. Any excess purchase price over those fair values is recorded as goodwill. The fair value assigned to intangible assets acquired is supported by valuations using estimates and assumptions provided by management. For certain large acquisitions, management engages an appraiser to assist in the valuation process.
On November 30, 2019, the CompanyMarch 15, 2022 we completed the acquisition of the Merchant Acquiring Business of Piraeus Bank ("PBMA"). The acquisition includes 205,000 POS terminals at 170,000 merchants throughout Greece, as well as Piraeus Bank’s online merchant acquiring business and expands our omnichannel payments strategy where we use our proprietary technology to provide cash, card-based acquiring solutions, alternative payment acquiring, online acquiring, tokenized payment services and other payment products. Additionally, the acquisition includes a North American based ATM operator with approximately 1,800 ATMs.long-term commercial framework agreement between Piraeus Bank and Euronet which includes collaborative product distribution, processing and customer referrals.
The purchase price was $92.5€317.8 million, in cash. Approximately $10.1or approximately $350.6 million, which includes $331 million cash paid at closing, $4.4 million cash paid for surplus working capital and $15.2 million of estimated contingent consideration for a ten-year earn out contingent on performance targets outlined in the cashcommercial framework agreement. The contingent consideration was placed in escrow accountsis related to satisfy indemnification and working capital obligationsa percentage of the seller, pursuant tonet fee income received during the termsten-year period of the purchasecommercial framework agreement and there is no contractual maximum amount of consideration under this agreement.
The acquisition has been accounted for as a business combinationscombination in accordance with U.S. GAAP and the results of operations have been included from the date of acquisition in the EFT Processing Segment. The historical revenue and earnings were not significant for the purpose of presenting pro forma information for the current or prior-year periods.
73 |
The following table summarizespresents the preliminaryfinal fair value that was allocated to PBMA's Euronet Merchant Services' (EMS) assets and liabilities based upon fair values ofas determined by the assets acquiredCompany. The valuation process to determine the fair values is complete. For the year ended December 31, 2022, the Company made measurement period adjustments to reflect facts and liabilities assumedcircumstances in existence as of the acquisition date.effective time of the acquisition. These adjustments primarily included an adjustment to the accrued expenses and other current liabilities related to the surplus working capital of $4.4 million and some other immaterial adjustments.
(in thousands) |
| As of March 15, 2022 | ||
Other current assets |
| $ | 1,754 |
|
Settlement assets |
| 77,643 |
| |
Property and equipment |
| 5,735 |
| |
Intangible assets |
| 122,455 |
| |
Total assets acquired |
| $ | 207,587 |
|
|
|
| ||
Trade accounts payable |
| $ | (2,155 | ) |
Settlement liabilities | (65,851 | ) | ||
Accrued expenses and other current liabilities | (1,313 | ) | ||
Deferred revenue | (332 | ) | ||
Other long-term liabilities |
| (100 | ) | |
Total liabilities assumed |
| $ | (69,751 | ) |
|
|
| ||
Goodwill |
| 212,736 |
| |
|
|
| ||
Net assets acquired |
| $ | 350,572 |
|
(in thousands) | As of November 30, 2019 | |||
Cash and cash equivalents | $ | 5,325 | ||
Trade accounts receivable | 2,167 | |||
Other current assets | 798 | |||
Property and equipment | 16,542 | |||
Intangible assets | 39,000 | |||
Total assets acquired | $ | 63,832 | ||
Trade accounts payable | $ | (6,790 | ) | |
Accrued expenses and other current liabilities | (80 | ) | ||
Total liabilities assumed | $ | (6,870 | ) | |
Goodwill | 35,540 | |||
Net assets acquired | $ | 92,502 |
We acquired a customer relationship intangible assetsasset with a preliminary fair value of $39.0$112.2 million which arethat is being amortized on a straight-line basis over 2015 years and a contract related intangible asset of $10.3 million that is being amortized on a straight-line basis over 10 years.
Goodwill, with a preliminary value of $35.5$212.7 million, arising from the acquisition was included in the EFT Processing SegmentSegment. The factors that make up goodwill include synergies from combining PBMA operations and was attributable to expected growth opportunities in the United States.intangible assets that do not qualify for separate recognition. Goodwill and intangible assets associated with this acquisition are deductible for tax purposes.
The results of PBMA operations are included in our consolidated results of operation, as part of our EFT Processing business segment, beginning on March 16, 2022. For the period beginning on the acquisition date through December 31, 2022, PBMA had $88.8million in revenue. The PBMA business is impacted by higher transaction volumes during the tourism season in the second and third quarters.
Other
The Company completed three acquisitionsone additional acquisition in 2022 for immaterial amounts.
74 |
The restricted cash balances as of December 31, 20192022 and 20212018 were as follows:
|
| As of December 31, | ||||||
(in thousands) |
| 2022 |
| 2021 | ||||
Cash held in trust and/or cash held on behalf of others |
| $ | 7,374 |
| $ | 3,693 |
| |
Restricted cash |
| $ | 7,374 |
|
| $ | 3,693 |
|
|
|
|
|
| ||||
Cash held in trust and/or cash held on behalf of others |
| $ | 80,563 |
|
| $ | 62,077 |
|
Collateral on bank credit arrangements and other |
| 13,452 |
|
| 12,820 |
| ||
Restricted cash included within settlement assets |
| $ | 94,015 |
|
| $ | 74,897 |
|
|
|
|
|
| ||||
Total Restricted Cash |
| $ | 101,389 |
|
| $ | 78,590 |
|
As of December 31, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Cash held in trust and/or cash held on behalf of others | $ | 34,301 | $ | 31,237 | ||||
Restricted cash | $ | 34,301 | $ | 31,237 | ||||
Cash held in trust and/or cash held on behalf of others | $ | 44,366 | $ | 35,926 | ||||
Collateral on bank credit arrangements and other | 4,802 | 9,432 | ||||||
Restricted cash included within settlement assets | $ | 49,168 | $ | 45,358 | ||||
Total Restricted Cash | $ | 83,469 | $ | 76,595 |
The components of property and equipment, net of accumulated depreciation and amortization as of December 31, 20192022 and 20212018 are as follows:
| As of December 31, | |||||||
(in thousands) |
| 2022 |
| 2021 | ||||
ATMs |
| $ | 578,130 |
|
| $ | 560,310 |
|
POS terminals |
| 41,486 |
|
| 31,321 |
| ||
Vehicles and office equipment |
| 76,317 |
|
| 75,331 |
| ||
Computers and software |
| 216,450 |
|
| 210,363 |
| ||
Land and buildings |
| 651 |
|
| 687 |
| ||
|
| 913,034 |
|
| 878,012 |
| ||
Less accumulated depreciation |
| (576,433 | ) |
| (532,631 | ) | ||
Total |
| $ | 336,601 |
|
| $ | 345,381 |
|
As of December 31, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
ATMs | $ | 474,611 | $ | 378,009 | ||||
POS terminals | 38,235 | 36,521 | ||||||
Vehicles and office equipment | 64,970 | 66,117 | ||||||
Computers and software | 191,172 | 183,150 | ||||||
Land and buildings | 1,235 | 1,252 | ||||||
770,223 | 665,049 | |||||||
Less accumulated depreciation | (410,243 | ) | (373,180 | ) | ||||
Total | $ | 359,980 | $ | 291,869 |
Depreciation and amortization expense related to property and equipment, including property and equipment recorded under finance leases, for the years ended December 31, 20192022, 2021, 2018 and 20172020 was $83.5$101.5 million, $$75.1104.7 million and $96.1$63.4 million,, respectively.
75 |
The following table summarizes intangible assets as of December 31, 20192022 and 2018:
|
| As of December 31, 2022 |
| As of December 31, 2021 | ||||||||||||
(in thousands) |
| Gross Carrying Amount |
| Accumulated Amortization |
| Gross Carrying Amount |
| Accumulated Amortization | ||||||||
Customer relationships |
| $ | 279,055 |
|
| $ | (116,986 | ) |
| $ | 176,024 |
|
| $ | (103,713 | ) |
Trademarks and trade names |
| 43,942 |
|
| (33,733 | ) |
| 45,445 |
|
| (32,596 | ) | ||||
Software |
| 54,584 |
|
| (48,394 | ) |
| 60,118 |
|
| (47,485 | ) | ||||
Non-compete agreements |
| 9,931 |
|
| (124 | ) |
| 1,260 |
|
| (1,260 | ) | ||||
Total |
| $ | 387,512 |
|
| $ | (199,237 | ) |
| $ | 282,847 |
|
| $ | (185,054 | ) |
As of December 31, 2019 | As of December 31, 2018 | |||||||||||||||
(in thousands) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||
Customer relationships | $ | 240,027 | $ | (139,319 | ) | $ | 199,581 | $ | (133,863 | ) | ||||||
Trademarks and trade names | 45,347 | (28,123 | ) | 45,233 | (25,837 | ) | ||||||||||
Software | 59,244 | (35,362 | ) | 58,515 | (29,420 | ) | ||||||||||
Non-compete agreements | 2,082 | (2,049 | ) | 2,076 | (1,800 | ) | ||||||||||
Total | $ | 346,700 | $ | (204,853 | ) | $ | 305,405 | $ | (190,920 | ) |
(in thousands) |
| Acquired Intangible Assets |
| Goodwill |
| Total Intangible Assets | ||||||
Balance as of January 1, 2021 |
| $ | 121,883 |
|
| $ | 665,821 |
|
| $ | 787,704 |
|
Increases (decreases): |
|
|
|
|
|
|
|
|
| |||
Amortization |
| (23,059 | ) |
| — |
|
| (23,059 | ) | |||
Other (primarily changes in foreign currency exchange rates) |
| (1,031 | ) |
| (24,216 | ) |
| (25,247 | ) | |||
Balance as of December 31, 2021 |
| 97,793 |
|
| 641,605 |
|
| 739,398 |
| |||
Increases (decreases): |
|
|
|
|
|
| ||||||
Acquisitions (see footnote 6) | 124,755 | 224,296 | 349,051 | |||||||||
Amortization |
| (26,990 | ) |
| — |
|
| (26,990 | ) | |||
Other (primarily changes in foreign currency exchange rates) |
| (7,283 | ) |
| (37,557 | ) |
| (44,840 | ) | |||
Balance as of December 31, 2022 |
| $ | 188,275 |
|
| $ | 828,344 |
|
| $ | 1,016,619 |
|
(in thousands) | Acquired Intangible Assets | Goodwill | Total Intangible Assets | |||||||||
Balance as of January 1, 2018 | $ | 150,543 | $ | 717,386 | $ | 867,929 | ||||||
Increases (decreases): | ||||||||||||
Acquisitions | — | 20,742 | 20,742 | |||||||||
Impairment | (7,049 | ) | — | (7,049 | ) | |||||||
Amortization | (22,562 | ) | — | (22,562 | ) | |||||||
Other (primarily changes in foreign currency exchange rates) | (6,447 | ) | (33,931 | ) | (40,378 | ) | ||||||
Balance as of December 31, 2018 | 114,485 | �� | 704,197 | 818,682 | ||||||||
Increases (decreases): | ||||||||||||
Acquisitions | 46,246 | 35,305 | 81,551 | |||||||||
Impairment | — | — | — | |||||||||
Amortization | (20,374 | ) | — | (20,374 | ) | |||||||
Other (primarily changes in foreign currency exchange rates) | 1,490 | 4,321 | 5,811 | |||||||||
Balance as of December 31, 2019 | $ | 141,847 | $ | 743,823 | $ | 885,670 |
76 |
The balances as ofDecember 31, 20192022 and 20212018 were as follows:
As of December 31, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Accrued expenses | $ | 246,699 | $ | 210,997 | ||||
Derivative liabilities | 41,935 | 36,102 | ||||||
Current portion of finance lease obligations | 5,919 | 5,458 | ||||||
Deferred income taxes | 4 | — | ||||||
Total | $ | 294,557 | $ | 252,557 |
|
| As of December 31, | ||||||
(in thousands) |
| 2022 |
| 2021 | ||||
Accrued expenses |
| $ | 311,807 |
|
| $ | 267,638 |
|
Other tax payables | 80,580 | 17,460 | ||||||
Derivative liabilities |
| 42,320 |
|
| 23,285 |
| ||
Accrued payroll expenses | 67,982 | 55,162 | ||||||
Current portion of finance lease obligations |
| 2,996 |
|
| 4,147 |
| ||
Total |
| $ | 505,685 |
|
| $ | 367,692 |
|
Debt obligations consist of the following as of December 31, 20192022 and 20212018:
|
| As of December 31, | ||||||
(in thousands) |
| 2022 |
| 2021 | ||||
Credit Facility: |
|
|
|
| ||||
Revolving credit agreement |
| $ | 454,800 |
|
| $ | 283,400 |
|
Convertible Debt: |
|
|
|
| ||||
0.75% convertible notes, unsecured, due 2049 |
| 525,000 |
|
| 468,235 |
| ||
|
|
|
|
| ||||
1.375% Senior Notes, due 2026 |
| 642,120 |
|
| 682,080 |
| ||
|
|
|
|
| ||||
Other obligations |
| 207 |
|
| 920 |
| ||
|
|
|
|
| ||||
Total debt obligations |
| $ | 1,622,127 |
|
| $ | 1,434,635 |
|
Unamortized debt issuance costs |
| (12,880 | ) |
| (13,729 | ) | ||
Carrying value of debt |
| $ | 1,609,247 |
|
| $ | 1,420,906 |
|
Short-term debt obligations and current maturities of long-term debt obligations |
| (149 | ) |
| (821 | ) | ||
Long-term debt obligations |
| $ | 1,609,098 |
|
| $ | 1,420,085 |
|
As of December 31, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Credit Facility: | ||||||||
Revolving credit agreements | $ | — | $ | 215,725 | ||||
Convertible Debt: | ||||||||
0.75% convertible notes, unsecured, due 2049 | 436,965 | — | ||||||
1.50% convertible notes, unsecured, due 2044 | — | 379,859 | ||||||
1.375% Senior Notes, due 2026 | 673,440 | — | ||||||
Other obligations | 6,215 | 38,513 | ||||||
Total debt obligations | $ | 1,116,620 | $ | 634,097 | ||||
Unamortized debt issuance costs | (19,592 | ) | (6,298 | ) | ||||
Carrying value of debt | $ | 1,097,028 | $ | 627,799 | ||||
Short-term debt obligations and current maturities of long-term debt obligations | (6,089 | ) | (38,017 | ) | ||||
Long-term debt obligations | $ | 1,090,939 | $ | 589,782 |
77 |
As of December 31, 2019,2022, aggregate annual maturities of long-term debt are $6.1 $0.1 million in 2020, $0.12023, no maturities in 2024, $525 million due in 2025, $642.1 million due in 2021, no maturities between 2022 2026, and 2024, and $1.2 billion $454.8 million thereafter. This maturity schedule reflects the revolving credit facility maturing in 20232024 and the Convertible Notes maturing in 2025, coinciding with the terms of the initial put option by holders of the Convertible Notes. It also reflects the maturing of the 1.375% Senior NoteNotes of €600€600 million ($673.4 642.1million) due in 2026.
Credit Facility
The interest rate isof the highestCompany's borrowings under the Credit Facility was 5.5% as of (i) the Bank of America prime rate, (ii) the Federal Funds rate plus 0.50% or (iii) the Fixed LIBOR rate plus 1.00%.December 31, 2022.
The term loan was subject to scheduled quarterly amortization payments, as set forth in the amended and restated credit agreement.
78 |
Uncommitted Line of Credit
On May 25, 2022, the Company entered into an Uncommitted Credit Agreement for $300 million, for the sole purpose of providing vault cash for ATMs, that expired on November 30, 2022. The loan was fully repaid and there was no balance at December 31, 2022. The loan bears interest at the rate per annum equal to the secured overnight financing rate (“SOFR”) plus 1.00%. The weighted-average interest rate from the loan inception date to December 31, 2022 was 3.14%.
On June 24, 2022, the Company entered into an Uncommitted Loan Agreement withfor $150 million, for the sole purpose of providing vault cash for ATMs, that expires no later than June 23, 2023. The loan was fully repaid and there was no balance at December 31, 2022. The loan was either a Prime rate loan, a Bloomberg Short-term Bank of America which may provide Euronet upYield rate loan or bears interest at the rate agreed to $100.0 million under an uncommitted line of credit. Interest on borrowings is equal to LIBOR plus 0.65%by the bank and the agreement expires September 4, 2020. As ofCompany at the time such loan is made. The weighted average interest rate from the loan inception date to December 31, 2019, no amounts were outstanding under the line of credit.
Convertible Debt
On March 18, 2019, the Company completed the sale of $525.0$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$188.73 per share if certain conditions are met (relating to the closing price of Euronet Common Stock exceeding certain thresholds for specified periods). Holders of the Convertible Notes have the option to require the Company to purchase their notes on each of March 15, 2025, March 15, 2029, March 15, 2034, March 15, 2039 and March 15, 2044 at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date. In connection with the issuance of the Convertible Notes, the Company recorded $12.8 $12.8 million in debt issuance costs, which are being amortized through March 1, 2025.
The Company may redeem for cash all or any portion of the Convertible Notes, at its option, (i) on or after September 20, 2022 if the closing sale price of the Company's Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption and (ii) on or after March 20, 2025 and prior to the maturity date, regardless of the foregoing sale price condition, in each case at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Convertible Notes. In addition, if a fundamental change, as defined in the Indenture, occurs prior to the maturity date, holders may require the Company to repurchase for cash all or part of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.As of December 31, 20192022 the conversion threshold was not metmet. On January 1, 2022, the Company adopted ASU 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" which simplifies the Convertible Notes wereaccounting 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. ASU 2020-06 amended the accounting for convertible during the first quarter of 2020.
79 |
Prior to the Redemption Date, approximately $352.4 million principal amount of the Retired Convertible Notes were submitted for conversion. The Company elected to settle the conversion of such Retired Convertible Notes through a combination of cash and stock. The Company paid cash equal to $1,000 for each $1,000 principal amount of Retired Convertible Notes submitted for conversion and satisfied the remainder of the conversion obligation by issuing shares of the Company's Common Stock valued at $147.24 per share. As a result, the Company paid cash of $352.4 million and issued approximately 2.5 million shares of its Common Stock. In accordance with ASC 470, the Company recognized a loss of $9.8 million on the conversion and redemption for the year ended December 31, 2019, representing the difference between the fair value of the Retired Convertible Notes converted and the carrying value of the bonds at the time of conversion. The Company is using the remainder of the net proceeds from the issuance of the Convertible Notes to finance the further growth of the business.
1.375%Senior Notes due 2026
On May 22, 2019, the Company completed the sale of €600€600 million ($669.9 million) aggregate principal amount of Senior Notes that expiremature on May 2026 (the “Senior Notes”"Senior Notes"). The Senior Notes accrue interest at a rate of 1.375%1.375% per year, payable annually in arrears commencing May 22, 2020, until maturity or earlier redemption. As of December 31, 2019,2022, the Company has outstanding €600 million€600 million ($673.4642.1 million) principal amount of the Senior Notes. In addition, the Company may redeem some or all of these notes on or after February 22, 2026 at their principal amount plus any accrued and unpaid interest.
Other obligations
Certain of the Company's subsidiaries have available lines of credit and overdraft credit facilities that generally provide for short-term borrowings that are used from time to time for working capital purposes. As of December 31, 20192022 and 2018,2021, borrowings under these arrangements were $6.2 $0.2 million and $38.5$0.9 million, respectively. As of December 31, 2019,2022, there was $6.2 $0.1 million due in 20202023 under these other obligation arrangements.
The Company is exposed to foreign currency exchange risk resulting from (i) the collection of funds or the settlement of money transfer transactions in currencies other than the U.S. dollar, (ii) derivative contracts written to its customers in connection with providing cross-currency money transfer services and (iii) certain foreign currency denominated other asset and liability positions. The Company enters into foreign currency derivative contracts, primarily foreign currency forwards and cross-currency swaps, to minimize its exposure related to fluctuations in foreign currency exchange rates. As a matter of Company policy, the derivative instruments used in these activities are economic hedges and are not designated as hedges under ASC 815,primarilydue to either the relatively short duration of the contract term or the effects of fluctuations in currency exchange rates arebeing 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’sCompany's credit profile, the Company is generally not required to post collateral with respect to these foreign currency forward contracts. Most derivative contracts
80 |
In addition, the Company uses forward contracts, typically with maturities from a few days to less than one year, to offset
Foreign currency exchange contracts - xe Operations
xe, writes derivative instruments, primarily foreign currency forward contracts and cross-currency swaps, mostly with counterparties comprised of individuals and small-to-medium size businesses and derives a currency margin from this activity as part of its operations. xe aggregates its foreign currency exposures arising from customer contracts and hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties. Foreign exchange revenues from xe's total portfolio of positions were $18.9 $86.6million, $69.2$79.5 million and $72.5$68.2 million for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, respectively. All of the derivative contracts used in the Company' s xe operations are economic hedges and are not designated as hedges under ASC 815. 815.The duration of these derivative contracts is generally less than one year.year
The fair value of xe's total portfolio of positions can change significantly from period to period based on, among other factors, market movements and changes in customer contract positions. xe manages counterparty credit risk (the risk that counterparties will default and not make payments according to the terms of the agreements) on an individual counterparty basis. It mitigates this risk by entering into contracts with collateral posting requirements and/or by performing financial assessments prior to contract execution, conducting periodic evaluations of counterparty performance and maintaining a diverse portfolio of qualified counterparties. xe does not expect any significant losses from counterparty defaults.
The aggregate equivalent U.S. dollar notional amounts of foreign currency derivative customer contracts held by the Company in its xe operations as of December 31, 20192022 and 2018,2021, was approximately $1.2 billion and $1.8 billion, respectively. $1.0 billion. The significant majority of customer contracts are written in major currencies such as the euro, U.S. dollar, British pound, Australian dollar and New Zealand dollar.
|
| Asset Derivatives |
| Liability Derivatives | ||||||||||||||||
|
|
|
| Fair Value |
|
|
| Fair Value | ||||||||||||
(in thousands) |
| Balance Sheet Location |
| December 31, 2022 |
| December 31, 2021 |
| Balance Sheet Location |
| December 31, 2022 |
| December 31, 2021 | ||||||||
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Foreign currency exchange contracts |
| Other current assets |
| $ | 50,248 |
|
| $ | 27,582 |
|
| Other current liabilities |
| $ | (42,320) |
| $ | (23,285 | ) |
81 |
Asset Derivatives | Liability Derivatives | |||||||||||||||||||
Fair Value | Fair Value | |||||||||||||||||||
(in thousands) | Balance Sheet Location | December 31, 2019 | December 31, 2018 | Balance Sheet Location | December 31, 2019 | December 31, 2018 | ||||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||||||
Foreign currency exchange contracts | Other current assets | $ | 54,765 | $ | 44,637 | Other current liabilities | $ | (41,935 | ) | $ | (36,102 | ) |
Balance Sheet Presentation
The following tables summarize the gross and net fair value of derivative assets and liabilities as of December 31, 20192022 and 20212018 (in thousands):
Offsetting of Derivative Assets
|
|
|
|
|
|
| Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
| |||||||||||||||
As of December 31, 2022 |
| 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 |
| $ | 50,248 |
|
| $ | — |
|
| $ | 50,248 |
|
| $ | (27,851 | ) |
| $ | (4,056 | ) |
| $ | 18,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Derivatives subject to a master netting arrangement or similar agreement |
| $ | 27,582 |
|
| $ | — |
|
| $ | 27,582 |
|
| $ | (14,875 | ) |
| $ | (2,284 | ) |
| $ | 10,423 |
|
Gross Amounts Not Offset in the Consolidated Balance Sheet | ||||||||||||||||||||||||
As of December 31, 2019 | 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 | $ | 54,765 | $ | — | $ | 54,765 | $ | (34,935 | ) | $ | (7,362 | ) | $ | 12,468 | ||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 44,637 | $ | — | $ | 44,637 | $ | (25,187 | ) | $ | (9,918 | ) | $ | 9,532 |
Offsetting of Derivative Liabilities
|
|
|
|
|
|
|
| Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
| ||||||||||||||
As of December 31, 2022 |
| 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 |
| $ | (42,320 | ) |
| $ | — |
|
| $ | (42,320 | ) |
| $ | 27,851 |
|
| $ | 4,257 |
|
| $ | (10,212 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Derivatives subject to a master netting arrangement or similar agreement |
| $ | (23,285 | ) |
| $ | — |
|
| $ | (23,285 | ) |
| $ | 14,875 |
|
| $ | 640 |
|
| $ | (7,770 | ) |
Gross Amounts Not Offset in the Consolidated Balance Sheet | ||||||||||||||||||||||||
As of December 31, 2019 | 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 | $ | (41,935 | ) | $ | — | $ | (41,935 | ) | $ | 34,935 | $ | 827 | $ | (6,173 | ) | |||||||||
As of December 31, 2018 | ||||||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | (36,102 | ) | $ | — | $ | (36,102 | ) | $ | 25,187 | $ | 2,048 | $ | (8,867 | ) |
82 |
The following tables summarize the location and amount of gains on derivatives in the Consolidated Statements of IncomeOperations for the years ended December 31, 2019, 20222018, 2021 and 2017:2020:
|
|
|
| Amount of Gain (Loss) Recognized in Income on Derivative Contracts (a) | ||||||||||
|
| Location of Gain (Loss) Recognized in Income on Derivative Contracts |
| Year Ended December 31, | ||||||||||
(in thousands) |
|
| 2022 |
| 2021 |
| 2020 | |||||||
Foreign currency exchange contracts - Ria Operations |
| Foreign currency exchange gain (loss), net |
| $ | 2,083 |
|
| $ | 1,618 |
| $ | (1,499 | ) |
Amount of Gain Recognized in Income on Derivative Contracts (a) | ||||||||||||||
Location of Gain (Loss) Recognized in Income on Derivative Contracts | Year Ended December 31, | |||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||||
Foreign currency exchange contracts - Ria Operations | Foreign currency exchange gain, net | $ | 62 | $ | 173 | $ | 175 |
(a) The Company enters into derivative contracts such as foreign currency exchange forwards and cross-currency swaps as part of its xe operations. These derivative contracts are excluded from this table as they are part of the broader disclosure of foreign currency exchange revenues for this business discussed above.
See Note 17,18, Financial Instruments and Fair Value Measurements, for the determination of the fair values of derivatives.
The Company enters into operating leases for ATM sites, office spaces, retail stores and equipment. The Company's finance leases are immaterial. Right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease terms.
The present value of lease payments is determined using the incremental borrowing rate based on information available at the lease commencement date. All leases with fixed payments, including leases with an initial term of 12 months or less are recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
83 |
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. SinceThe Company evaluated the Company islikelihood of exercising the renewal and termination options beginning with the adoption of the new accounting lease standard on January 1, 2019, concluding: the options were not reasonably certain to exercise the renewal or termination options, the options arebe exercised and thus were not considered in determining the lease terms, and associated payment impacts arewere excluded from lease payments.
During the second quarter of 2020, the impact of the COVID-19 pandemic was a significant event that caused a significant change in circumstances and business plans to manage our portfolio of ATM leases. Specifically, the Company downsized, through the exercise of termination clauses and the reduction of monthly costs by renegotiating payment terms of its ATM leases. The Company's execution of the business plan to renegotiate terms and downsize the portfolio of ATM leases constituted a reassessment event during the second quarter of 2020. The reassessment event required the Company to reevaluate the accounting for the portfolio of ATM leases, including lease terms. Due to the recent increased frequency of ATM site lease terminations, modifications, and greater unpredictability whether or not future lease terminations will be exercised, the Company was no longer able to conclude that termination options are reasonably certain not to be exercised. This reassessment conclusion impacted the lease term evaluation, instead of determining the lease term based on the stated lease payment schedule of the lease, the lease term was evaluated when the Company has the contractual ability to terminate the lease (most leases allow for a termination upon advance notice of between 30 and 90 days), which impacted the amounts recorded as right of use assets and lease liability balances. New, amended, and modified ATM site leases with termination options exercisable within 12 months will be excluded from the right of use lease asset and lease liability balances under the short-term lease exemption.
Payments for ATM site leases with termination options subject to the short-term lease exemption are expensed in the period incurred. The short-term lease expense for 2022 reasonably reflects the Company’s short-term lease commitments. Certain of the Company's lease agreements include variable rental payments based on revenues generated from the use of the leased location and certain leases include rental payments adjusted periodically for inflation. Variable lease payments are recognized when the event, activity or circumstance in the lease agreement on which those payments are assessed occurs and are excluded from the right of use assets and lease liabilities balances. The lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Future minimum lease payments
Future minimum lease payments under the operating leases as of December 31, 2019 are:
As of December 31, 2019 | |||
Maturity of Lease Liabilities (in thousands) | Operating Leases | ||
2020 | $ | 125,231 | |
2021 | 90,330 | ||
2022 | 64,279 | ||
2023 | 44,113 | ||
2024 | 25,467 | ||
Thereafter | 43,105 | ||
Total lease payments | $ | 392,525 | |
Less: imputed interest | (23,195 | ) | |
Present value of lease liabilities | $ | 369,330 |
(in thousands) | Operating Leases | |||
Year ending December 31, | ||||
2019 | $ | 80,803 | ||
2020 | 65,590 | |||
2021 | 49,052 | |||
2022 | 37,823 | |||
2023 | 30,192 | |||
Thereafter | 48,191 | |||
Total minimum lease payments | $ | 311,651 |
| As of December 31, 2022 | ||
Maturity of Lease Liabilities (in thousands) | Operating Leases (1) | ||
2023 | $ | 47,004 |
|
2024 | 36,508 |
| |
2025 | 26,519 |
| |
2026 | 18,331 |
| |
2027 | 11,510 |
| |
Thereafter | 17,015 |
| |
Total lease payments | 156,887 |
| |
Less: imputed interest | (4,055 | ) | |
Present value of lease liabilities | $ | 152,832 |
|
(1) Operating lease payments reflect the Company's current fixed obligations under the operating lease agreements.
84 |
Lease Expense (in thousands) | Income Statement Classification | Year ended December 31, 2019 | Income Statement Classification | Year ended December 31,2022 |
| Year ended December 31,2021 | Year ended December 31,2020 | |||||||||
Operating lease expense | Selling, general and administrative and Direct operating costs | $ | 130,487 | Selling, general and administrative and Direct operating costs | $ | 51,031 |
| $ | 55,613 | $ | 83,102 | |||||
Variable lease expense | Selling, general and administrative and Direct operating costs | 43,907 | ||||||||||||||
Short-term and variable lease expense | Selling, general and administrative and Direct operating costs | 142,613 |
| 115,963 | 69,711 | |||||||||||
Total lease expense | $ | 174,394 |
| $ | 193,644 |
| $ | 171,576 | $ | 152,813 |
| |||||||||||||||||||||
Other Information (in thousands) | Year ended December 31, 2019 | Year ended December 31, 2022 |
| Year ended December 31, 2021 | Year ended December 31, 2020 | |||||||||
Cash paid for amounts included in the measurement of lease liabilities (a) | $ | 129,609 | $ | 49,739 |
| $ | 51,464 | $ | 79,447 | |||||
Supplemental non-cash information on lease liabilities arising from obtaining ROU assets: |
|
| ||||||||||||
ROU assets obtained in exchange for new operating lease liabilities | $ | 229,107 | $ | 50,032 |
| $ | 69,073 |
| $ | 77,728 |
(a) Included in Net cash provided by operating activities on the Company's Consolidated Statements of Cash Flows.
The sources of income before income taxes for the years ended December 31, 20192022, 2021, 2018 and 20202017 are presented as follows:
|
| Year Ended December 31, | ||||||||||
(in thousands) |
| 2022 |
| 2021 |
| 2020 | ||||||
Income before taxes: |
|
|
|
|
|
| ||||||
United States |
| $ | (12,526 | ) |
| $ | (4,775 | ) |
| $ | 40,323 |
|
Foreign |
| 335,121 |
| 140,450 |
| (32,152 | ) | |||||
Total income before income taxes |
| $ | 322,595 |
|
| $ | 135,675 |
|
| $ | 8,171 |
|
85 |
Year Ended December 31, | ||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||
Income before taxes: | ||||||||||||
United States | $ | 44,290 | $ | 35,467 | $ | 55,117 | ||||||
Foreign | 389,517 | 259,449 | 201,218 | |||||||||
Total income before income taxes | $ | 433,807 | $ | 294,916 | $ | 256,335 |
The Company's income tax expense for the years ended December 31, 20192022, 2021, 2018 and 20202017 consisted of the following:
Year Ended December 31, | ||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||
Current tax expense (benefit): | ||||||||||||
U.S. | $ | (4,885 | ) | $ | (8,711 | ) | $ | 29,620 | ||||
Foreign | 83,792 | 70,244 | 79,475 | |||||||||
Total current | 78,907 | 61,533 | 109,095 | |||||||||
Deferred tax expense (benefit): | ||||||||||||
U.S. | (8,424 | ) | 6,871 | 14,056 | ||||||||
Foreign | 16,629 | (5,619 | ) | (23,756 | ) | |||||||
Total deferred | 8,205 | 1,252 | (9,700 | ) | ||||||||
Total tax expense | $ | 87,112 | $ | 62,785 | $ | 99,395 |
|
| Year Ended December 31, | ||||||||||
(in thousands) |
| 2022 |
| 2021 |
| 2020 | ||||||
Current tax expense (benefit): |
|
|
|
|
|
| ||||||
U.S. |
| $ | 3,878 |
| $ | 2,810 |
| $ | 2,605 | |||
Foreign |
| 80,296 |
|
| 59,874 |
|
| 39,270 |
| |||
Total current |
| 84,174 |
|
| 62,684 |
|
| 41,875 |
| |||
Deferred tax expense (benefit): |
|
|
|
|
|
|
|
|
| |||
U.S. |
| (7,270 | ) |
| 12,269 |
| (16,100 | ) | ||||
Foreign |
| 14,949 |
| (9,865 | ) |
| (14,300 | ) | ||||
Total deferred |
| 7,679 |
|
| 2,404 |
| (30,400 | ) | ||||
Total tax expense |
| $ | 91,853 |
|
| $ | 65,088 |
|
| $ | 11,475 |
|
The following is a reconciliation of the federal statutory income tax rates of 21% for the years ended December 31, 2019 and 2018 and 35% for the year ended December 31, 201721% to the effective income tax rate for the same years:
Year Ended December 31, | ||||||||||||
(dollar amounts in thousands) | 2019 | 2018 | 2017 | |||||||||
U.S. federal income tax expense at applicable statutory rate | $ | 91,099 | $ | 61,932 | $ | 89,684 | ||||||
Tax effect of: | ||||||||||||
State income tax expense (benefit) at statutory rates | 5,101 | 1,680 | 968 | |||||||||
Non-deductible expenses | 2,896 | 3,457 | 5,648 | |||||||||
Share-based compensation | (2,875 | ) | (13,750 | ) | (4,845 | ) | ||||||
Other permanent differences | (864 | ) | (6,141 | ) | 8,458 | |||||||
Difference between U.S. federal and foreign tax rates | 12,281 | 9,843 | (24,270 | ) | ||||||||
Provision in excess of statutory rates | 3,565 | 3,737 | 8,426 | |||||||||
Change in federal and foreign valuation allowance | 2,144 | 3,075 | (30,224 | ) | ||||||||
Impairment of goodwill and acquired intangibles assets | — | 83 | 8,248 | |||||||||
GILTI, net of tax credits | 6,471 | 14,111 | — | |||||||||
U.S. Tax Reform - transition tax and rate change | (25,728 | ) | (12,262 | ) | 41,597 | |||||||
Tax credits | (4,500 | ) | — | — | ||||||||
Other | (2,478 | ) | (2,980 | ) | (4,295 | ) | ||||||
Total income tax expense | $ | 87,112 | $ | 62,785 | $ | 99,395 | ||||||
Effective tax rate | 20.1 | % | 21.3 | % | 38.8 | % |
|
| Year Ended December 31, | ||||||||||
(dollar amounts in thousands) |
| 2022 |
| 2021 |
| 2020 | ||||||
U.S. federal income tax expense at applicable statutory rate |
| $ | 67,745 |
| $ | 28,492 |
|
| $ | 1,716 |
| |
Tax effect of: |
|
|
|
|
|
|
|
| ||||
State income tax expense at statutory rates, net of U.S. federal income tax |
| 3,666 |
| 1,516 |
|
| 347 |
| ||||
Non-deductible expenses |
| 1,698 |
| 538 |
|
| 1,887 |
| ||||
Share-based compensation |
| 1,930 |
| (3,524 | ) |
| (6,446 | ) | ||||
Other permanent differences |
| (219 | ) |
| (2,047 | ) |
| 3,828 | ||||
Difference between U.S. federal and foreign tax rates |
| 13,859 |
| 7,438 |
|
| 7,002 | |||||
Provision in excess of statutory rates |
| 3,592 |
| 2,879 |
|
| (6,491 | ) | ||||
Change in federal and foreign valuation allowance |
| (7,704 | ) |
| 26,673 |
|
| (4,238 | ) | |||
Impairment of goodwill and acquired intangibles assets |
| — |
| — |
|
| 22,053 |
| ||||
GILTI, net of tax credits |
| 9,807 |
| 3,900 |
|
| — |
| ||||
Tax credits |
| (697 | ) |
| (1,122 | ) |
| (3,518 | ) | |||
Other |
| (1,824 | ) |
| 345 |
| (4,665 | ) | ||||
Total income tax expense |
| $ | 91,853 |
| $ | 65,088 |
|
| $ | 11,475 |
| |
Effective tax rate |
| 28.47 | % |
| 48.0 | % |
| 140.4 | % |
We calculate our provision for federal, state and internationalforeign income taxes based on current tax law. On December 22, 2017, the U.S. enacted into law what is informally called the Tax Cuts and Jobs Act of 2017 ("U.S. Tax Reform"). The most significant provisions of U.S. Tax Reform are the transition tax on previously undistributed foreign earnings of foreign subsidiaries, the reduction of the U.S. corporate statutory income tax rate from 35% to 21% beginning on January 1, 2018, and new taxes on certain foreign sourced earnings.
The tax effect of temporary differences and carryforwards that give rise to deferred tax assets and liabilities from continuing operations are as follows:
|
| As of December 31, | ||||||
(in thousands) |
| 2022 |
| 2021 | ||||
Deferred tax assets: |
|
|
|
| ||||
Tax loss carryforwards |
| $ | 64,889 |
|
| $ | 65,862 |
|
Share-based compensation |
| 12,620 |
|
| 9,743 |
| ||
Accrued expenses |
| 23,192 |
|
| 19,907 |
| ||
Property and equipment |
| 10,787 |
|
| 11,949 |
| ||
Goodwill and intangible amortization |
| 8,999 |
|
| 9,353 |
| ||
Contract costs | 7,034 | 9,921 | ||||||
Intercompany notes |
| 17,352 |
|
| 6,077 |
| ||
Accrued revenue |
| 5,073 |
|
| 7,541 |
| ||
Tax credits |
| 64,384 |
|
| 65,267 |
| ||
Lease accounting |
| 40,194 |
|
| 42,381 |
| ||
Foreign exchange | 2,704 | 8,283 | ||||||
Other |
| 7,755 |
|
| 14,616 |
| ||
Total deferred tax assets |
| 264,983 |
|
| 270,900 |
| ||
Valuation allowance |
| (90,369 | ) |
| (100,489 | ) | ||
Total deferred tax assets, net of valuation allowance |
| 174,614 |
|
| 170,411 |
| ||
Deferred tax liabilities: |
|
|
|
|
|
| ||
Intangible assets related to purchase accounting |
| (12,067 | ) |
| (11,763 | ) | ||
Goodwill and intangible amortization |
| (31,716 | ) |
| (30,339 | ) | ||
Accrued expenses |
| (22,661 | ) |
| (21,495 | ) | ||
Intercompany notes |
| (14,544 | ) |
| (10,388 | ) | ||
Accrued interest |
| (26,583 | ) |
| (34,175 | ) | ||
Capitalized research and development |
| (1,229 | ) |
| (6,376 | ) | ||
Property and equipment |
| (14,630 | ) |
| (15,597 | ) | ||
Accrued revenue |
| (2,074 | ) |
| (2,073 | ) | ||
Lease accounting |
| (40,194 | ) |
| (42,381 | ) | ||
Foreign exchange | (9,773 | ) | (1,211 | ) | ||||
Other |
| (3,533 | ) |
| (3,971 | ) | ||
Total deferred tax liabilities |
| (179,004 | ) |
| (179,769 | ) | ||
Net deferred tax liabilities |
| $ | (4,390 | ) |
| $ | (9,358 | ) |
Net deferred tax assets of $24.0 million and $36.8 million as of December 31, 2022 and 2021, respectively, are recorded within "Other assets" on the Consolidated Balance Sheet.
87 |
As of December 31, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Deferred tax assets: | ||||||||
Tax loss carryforwards | $ | 34,357 | $ | 30,689 | ||||
Share-based compensation | 7,366 | 7,395 | ||||||
Accrued expenses | 19,048 | 17,242 | ||||||
Property and equipment | 8,602 | 16,377 | ||||||
Goodwill and intangible amortization | 8,143 | 10,619 | ||||||
Intercompany notes | 5,977 | 6,913 | ||||||
Accrued revenue | 24,721 | 36,273 | ||||||
Tax credits | 65,063 | — | ||||||
Lease accounting | 89,965 | — | ||||||
Other | 15,379 | 11,876 | ||||||
Gross deferred tax assets | 278,621 | 137,384 | ||||||
Valuation allowance | (83,184 | ) | (21,857 | ) | ||||
Net deferred tax assets | 195,437 | 115,527 | ||||||
Deferred tax liabilities: | ||||||||
Intangible assets related to purchase accounting | (16,379 | ) | (22,877 | ) | ||||
Goodwill and intangible amortization | (20,806 | ) | (16,115 | ) | ||||
Accrued expenses | (29,084 | ) | (28,274 | ) | ||||
Intercompany notes | (10,498 | ) | (14,034 | ) | ||||
Accrued interest | (27,902 | ) | (32,372 | ) | ||||
Capitalized research and development | (6,048 | ) | (8,299 | ) | ||||
Property and equipment | (15,467 | ) | (8,408 | ) | ||||
Accrued revenue | (4,727 | ) | (4,388 | ) | ||||
Lease accounting | (89,965 | ) | — | |||||
Other | (8,997 | ) | (5,841 | ) | ||||
Total deferred tax liabilities | (229,873 | ) | (140,608 | ) | ||||
Net deferred tax liabilities | $ | (34,436 | ) | $ | (25,081 | ) |
Subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 20192022 are expected to be allocated to income taxes in the Consolidated Statements of Income.
$91.8 million, respectively. In 2019,As of December 31, 2022, the Company has recognized $59.1 million inhad U.S. foreign tax creditscredit carryforwards of $59.8 million which are largely not expected to be utilized in future periods. As of December 31, 2021, the Company had 100 U.S. foreign tax credit carryforwards of $61.6 million which are largely not expected to be utilized in future periods.
In assessing the Company's ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will only realize the benefits of these deductible differences, net of the existing valuation allowances, as of December 31, 20192022..
As of December 31, 2019,2022, the Company had foreign tax net operating loss carryforwards of $119.1$260.6 million, which will expire as follows:
(in thousands) | Gross | Tax Effected | ||||||
Year ending December 31, | ||||||||
2020 | $ | 1,274 | $ | 315 | ||||
2021 | 3,790 | 934 | ||||||
2022 | 2,800 | 720 | ||||||
2023 | 2,577 | 605 | ||||||
2024 | 8,713 | 2,152 | ||||||
Thereafter | 39,040 | 9,851 | ||||||
Unlimited | 60,935 | 14,427 | ||||||
Total | $ | 119,129 | $ | 29,004 |
(in thousands) |
| Gross |
| Tax Effected | ||||
Year ending December 31, |
|
|
|
| ||||
2023 |
| $ | 2,244 |
|
| $ | 516 |
|
2024 |
| 2,247 |
|
| 503 |
| ||
2025 |
| 16,533 |
|
| 3,872 |
| ||
2026 |
| 17,655 |
|
| 4,106 |
| ||
2027 |
| 4,781 |
|
| 1,151 |
| ||
Thereafter |
| 18,904 |
|
| 4,941 |
| ||
Unlimited |
| 198,253 |
|
| 46,293 |
| ||
Total |
| $ | 260,617 |
|
| $ | 61,382 |
|
In addition, the Company's state tax net operating loss carryforwards of $97.6$97.7 million will expire periodically from 2023 2020through 20422039, U.S. foreign tax credit carryforwards of $59.1$59.8 million that will expire periodically from 20212023 through 2027,2032 and U.S. federal research and expenditure credit carryforwards of $3.2 $3.8 million that will expire over an indefinite number of years, and foreign tax credits of $2.8 million that will expire over an indefinite number of years.periodically from 2034 through 2041.
The Company has not provided additional deferred taxes with respect to items such as certain foreign exchange gains or losses, foreign withholding taxes or additional state taxes, if any, on undistributed earnings attributable to foreign subsidiaries and it is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely. Gross undistributed earnings reinvested indefinitely in foreign subsidiaries aggregated approximately $1,810$2,063.1 million as of December 31, 2019.2022.
88 |
Accounting for uncertainty in income taxes
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 20192022 and 20212018 is as follows:
Year Ended December 31, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Beginning balance | $ | 30,915 | $ | 28,537 | ||||
Additions based on tax positions related to the current year | 15,569 | 4,787 | ||||||
Additions for tax positions of prior years | 6 | 966 | ||||||
Reductions for tax positions of prior years | (1,703 | ) | (1,705 | ) | ||||
Settlements | — | (807 | ) | |||||
Statute of limitations expiration | (252 | ) | (863 | ) | ||||
Ending balance | $ | 44,535 | $ | 30,915 |
|
| Year Ended December 31, | ||||||
(in thousands) |
| 2022 |
| 2021 | ||||
Beginning balance |
| $ | 40,990 |
|
| $ | 39,785 |
|
Additions based on tax positions related to the current year |
| 6,125 |
|
| 3,815 |
| ||
Additions for tax positions of prior years |
| 258 |
|
| — |
| ||
Reductions for tax positions of prior years |
| (3,971 | ) |
| (1,998 | ) | ||
Settlements |
| (586 | ) |
| — | |||
Statute of limitations expiration |
| — |
| (612 | ) | |||
Ending balance |
| $ | 42,816 |
|
| $ | 40,990 |
|
As of December 31, 20192022 and 20212018, approximately $42.730.8 million and $29.1$28.0 million,, respectively, of the unrecognized tax benefits would impact the Company's provision for income taxes and effective income tax rate, if recognized. Total estimated accrued interest and penalties related to the underpayment of income taxes was $5.28.3 million and $7.2$4.4 million as of December 31, 20192022 and 20212018, respectively. The following income tax years remain open in the Company's major jurisdictions as of December 31, 20192022: :
Jurisdictions | Periods |
U.S. (Federal) | 2014 through 2022 |
Germany | 2016 through 2022 |
Greece | 2013 through |
Spain | 2015 through |
U.K. | 2018 through |
It is reasonably possible that the balance of gross unrecognized tax benefits could significantly change within the next twelve months as a result of the resolution of audit examinations and expirations of certain statutes of limitations and, accordingly, materially affect the Company's operating results. At this time, it is not possible to estimate the range of change due to the uncertainty of potential outcomes.
Trade accounts receivable balances and accounts receivable balances included within the settlement assets are stated net of allowance for doubtful accounts.credit losses. Historically, the Company has not experienced significant write-offs. The Company records allowances for doubtful accountscredit losses when it is probable that the accounts receivable balance will not be collected.
89 |
The following table provides a summary of the allowance for doubtful accountscredit loss balances and activity for the years endedDecember 31, 2019, 20182022, 2021 and 2020: 2017:
|
| Year Ended December 31, | ||||||||||
(in thousands) |
| 2022 |
| 2021 |
| 2020 | ||||||
Beginning balance-credit losses |
| $ | 31,810 |
|
| $ | 41,727 |
|
| $ | 27,938 |
|
Additions-charged to expense |
| 16,276 |
|
| 9,721 |
|
| 19,469 |
| |||
Amounts written off |
| (12,865 | ) |
| (21,662 | ) |
| (7,842 | ) | |||
Other (primarily changes in foreign currency exchange rates) |
| 1,789 |
| 2,024 |
| 2,162 | ||||||
Ending balance-credit losses |
| $ | 37,010 |
|
| $ | 31,810 |
|
| $ | 41,727 |
|
Year Ended December 31, | ||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||
Beginning balance-allowance for doubtful accounts | $ | 24,287 | $ | 20,958 | $ | 18,369 | ||||||
Additions-charged to expense | 10,095 | 8,653 | 6,631 | |||||||||
Amounts written off | (6,179 | ) | (4,079 | ) | (5,944 | ) | ||||||
Other (primarily changes in foreign currency exchange rates) | (265 | ) | (1,245 | ) | 1,902 | |||||||
Ending balance-allowance for doubtful accounts | $ | 27,938 | $ | 24,287 | $ | 20,958 |
The Company has share-based compensation plans (“SCP”("SCP") that allow it to grant restricted shares, or options to purchase shares, of Common Stockcommon stock to certain current and prospective key employees, directors and consultants of the Company. These awards generallygenerally vest over periods ranging from three to five years from the date of grant,grant. Stock options are generally exercisable during the shorter of a ten-yearten-year term or the term of employment with the Company. With the exception of certain awards made to the Company's employees in Germany, Singapore and Malaysia, awards under the SCP are settled through the issuance of new shares under the provisions of the SCP. For Company employees in Germany, Singapore and Malaysia, certain awards are settled through the issuance of treasury shares, which also reduces the number of shares available for future issuance under the SCP. As ofDecember 31, 2019,2022, the Company has approximately 2.14.9 million in total shares remaining available for issuance under the SCP.
Share-based compensation expense was $44.1 million, $$21.4 million36.5, $16.8 million and $22.0$15.6 million for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, respectively, and was recorded in salaries and benefits expense in the accompanying Consolidated Statements of Income.Operations. The Company recorded a tax benefit of $4.93.4 million, $, $2.74.1 million and $2.3 $2.1million during the years ended December 31, 2019, 20182022, 2021 and 2017,2020, respectively, for the portion of this expense that relates to foreign tax jurisdictions in which an income tax benefit is expected to be derived.
Summary stock options activity is presented in the table below:
|
| Number of Shares |
| Weighted Average Exercise Price |
| Weighted Average Remaining Contractual Term (years) |
| Aggregate Intrinsic Value (thousands) | |||||
Balance at December 31, 2021 (1,466,983 shares exercisable) |
| 4,309,201 |
|
| $ | 102.19 |
|
|
|
|
| ||
Granted |
| 622,722 |
|
| $ | 90.31 |
|
|
|
|
| ||
Exercised |
| (197,184 | ) |
| $ | 30.11 |
|
|
|
|
| ||
Forfeited/Canceled |
| (30,316 | ) |
| $ | 125.52 |
|
|
|
|
| ||
Expired |
| (1,018 | ) |
| $ | 23.63 |
|
|
|
| |||
Balance at December 31, 2022 |
| 4,703,405 |
|
| $ | 103.51 |
|
| 6.9 |
| $ | 26,045 |
|
Exercisable at December 31, 2022 |
| 1,514,504 |
|
| $ | 91.88 |
|
| 4.4 |
| $ | 23,497 |
|
Vested and expected to vest at December 31, 2022 |
| 4,207,661 |
|
| $ | 95.72 |
|
| 6.0 |
| $ | 25,584 |
|
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (thousands) | ||||||||||
Balance at December 31, 2018 (1,637,801 shares exercisable) | 2,562,570 | $ | 57.10 | ||||||||||
Granted | 795,274 | $ | 145.92 | ||||||||||
Exercised | (295,420 | ) | $ | 44.22 | |||||||||
Forfeited/Canceled | (46,287 | ) | $ | 89.67 | |||||||||
Expired | (362 | ) | |||||||||||
Balance at December 31, 2019 | 3,015,775 | $ | 81.29 | 6.2 | $ | 230,052 | |||||||
Exercisable at December 31, 2019 | 1,653,340 | $ | 46.36 | 4.1 | $ | 183,846 | |||||||
Vested and expected to vest at December 31, 2019 | 2,383,821 | $ | 66.65 | 5.4 | $ | 216,739 |
90 |
Options outstanding that are expected to vest are net of estimated future forfeitures. The Company received cash of $5.9 million, $$13.1 million7.8, $17.1 million and $9.5 $15.8 million in connection with stock options exercised in the years ended December 31, 20192022, 20182021 and 2017,2020, respectively. The intrinsic value of these options exercised was $12.8 million, $30.6 million27.7, $73.0 million and $23.2 $41.1 million in the years ended December 31, 20192022, 20182021 and 2017,2020, respectively. As of December 31, 20192022, unrecognized compensation expense related to nonvested stock options that are expected to vest totaled $68.1$23.9 million and willwill be recognized over the next 4 5years, with an overall weighted-average period of 3.43.2 years. The following table provides the fair value of options granted under the SCP during 2019, 20182022, 2021 and 2017,2020, together with a description of the assumptions used to calculate the fair value using the Black-Scholes-Merton option-pricing model:
Year ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Volatility | 29.3 | % | 29.8 | % | 28.8 | % | ||||||
Risk-free interest rate - weighted average | 2.1 | % | 2.8 | % | 2.2 | % | ||||||
Risk-free interest rate - range | (a) | (a) | .022 | |||||||||
Dividend yield | — | % | — | % | — | % | ||||||
Assumed forfeitures | 8.0 | % | 8.0 | % | 8.0 | % | ||||||
Expected lives | 5.2 years | 5.6 years | 5.5 years | |||||||||
Weighted-average fair value (per share) | $ | 43.96 | $ | 37.16 | $ | 28.59 |
|
| Year ended December 31, | ||||||||||
|
| 2022 |
| 2021 |
| 2020 | ||||||
Volatility |
| 42.4 | % |
| 39.3 | % |
| 35.6 | % | |||
Risk-free interest rate - weighted average |
| 3.97 | % |
| 1.2 | % |
| 0.6 | % | |||
Risk-free interest rate - range |
| 3.45% to 3.97 | % |
| 0.50% to 1.21 | % |
| 0.31% to 1.17 | % | |||
Dividend yield |
| — | % |
| — | % |
| — | % | |||
Assumed forfeitures |
| 8.0 | % |
| 8.0 | % |
| 8.0 | % | |||
Expected lives |
| 4.6 years |
|
| 4.6 years |
|
| 7.1 years |
| |||
Weighted-average fair value (per option) |
| $ | 37.15 |
|
| $ | 39.99 |
|
| $ | 48.21 |
|
During 2022, the Company granted approximately 411,648 options,
During 2021, the Company granted approximately 331,000 options, which vest evenly over a four year term upon the achievement of a 10% increase over the share price on the date of grant for stock30 consecutive days. Optionswere valued using a Monte Carlo simulation (not included in the table above). The Monte Carlo simulation calculated a fair value per option of $40.30 using the following assumptions: volatility of 40.0%, risk-free interest rate of 1.19%, and a term of 4.5 years.
During 2020, the Company granted 1,350,000 options, awardedwhich vests each year starting in 2019February 2023 upon the achievement of a 15% increase in the share price on the date of the grant for 30 consecutive days and 2018 was 1.7%a 10% increase in adjusted earnings per share Options were valued using a Monte Carlo simulation (not included in the table above). The Monte Carlo simulation calculated a fair value per option of $26.90 using the following assumptions: volatility of 37.0%, risk-free interest rate of 0.33%, and 2.8%, respectively.a term of 5.0 years.
91 |
Restricted stock
Restricted stock awards vest based on the achievement of time-based service conditions and/or performance-based conditions. For certain awards, vesting is based on the achievement of more than one condition of an award with multiple time-based
|
| Number of Shares |
| Weighted Average Grant Date Fair Value Per Share | |||
Nonvested at December 31, 2021 |
| 535,104 |
|
| $ | 127.96 |
|
Granted |
| 270,124 |
|
| $ | 91.47 |
|
Vested |
| (90,986 | ) |
| $ | 39.99 |
|
Forfeited |
| (37,807 | ) |
| $ | 117.01 |
|
Nonvested at December 31, 2022 |
| 676,435 |
|
| $ | 115.36 |
|
Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||
Nonvested at December 31, 2018 | 371,841 | $ | 85.78 | ||||
Granted | 254,631 | $ | 145.93 | ||||
Vested | (115,740 | ) | $ | 78.77 | |||
Forfeited | (16,784 | ) | $ | 92.44 | |||
Nonvested at December 31, 2019 | 493,948 | $ | 118.20 |
92 |
and 2017, the Company issued 16,713, 21,872 and 21,547 rights, respectively, to purchase shares of Common Stock at a weighted average price per share of $110.37, $71.08 and $69.06, respectively. The grant date fair value of the option to purchase shares at the lower of the closing price at the beginning or end of the quarterly period, plus the actual total discount provided, are recorded as compensation expense. Total compensation expense recorded was $0.4 million, $0.4 million, and $0.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. The following table provides the weighted-average fair value of the ESPP stock purchase rights during the years ended December 31, 2019, 2018 and 2017 and the assumptions used to calculate the fair value using the Black-Scholes-Merton option-pricing model:
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Volatility - weighted average | 24.3 | % | 30.1 | % | 18.4 | % | ||||||
Volatility - range | 20.3% to 28.1% | 23.5% to 36.7% | 14.6% to 27.2% | |||||||||
Risk-free interest rate - weighted average | 2.07 | % | 2.01 | % | 0.89 | % | ||||||
Risk-free interest rate - range | 1.55% to 2.44% | 1.73% to 2.45% | 0.51% to 1.39% | |||||||||
Dividend yield | — | % | — | % | — | % | ||||||
Expected lives | 3 months | 3 months | 3 months | |||||||||
Weighted-average fair value (per share) | $ | 25.87 | $ | 17.22 | $ | 15.81 |
Euronet’s
Euronet's reportable operating segments have been determined in accordance with ASC Topic 280, Segment Reporting(“"ASC 280”280").The Company currently operates in the following three reportable operating segments:
1) Through the EFT Processing Segment, the Company processes transactions for a network ofATMsand POS terminals across Europe, the Middle East, Africa, Asia Pacific and the United States. The Company provides comprehensive electronic payment solutions consisting of ATM cash withdrawal services, ATM network participation, outsourced ATM and POS management solutions, credit, debit and prepaid card outsourcing, dynamic currency conversion, domestic and international surcharges and other value added services. Through this segment, the Company also offers a suite of |
2) Through theepaySegment, the Company provides distribution, processing and collection services for prepaid mobile airtime and other electronic payment products in Europe, the Middle East, Asia Pacific, the U.S. and South America.
3) Through the Money Transfer Segment, the Company provides global money transfer services under the brand names Ria, AFEX, IME, and xe. Ria, AFEX, and IME provide global consumer-to-consumer money transfer services through a network of sending agents, Company-owned stores and Company-owned websites, disbursing money transfers through a worldwide correspondent network. xe offers account-to-account international payment services to high-income individuals and small-to-medium sized businesses. xe is also a provider of foreign currency exchange information. The Company also offers customers bill payment services, payment alternatives such as money orders and prepaid debit cards, comprehensive check cashing services, foreign currency exchange services and mobile top-up. Furthermore, xe provides cash management solutions and foreign currency risk management services to small-to-medium sized businesses.
In addition, the Company accounts for non-operating activity, share-based compensation expense, certain intersegment eliminations and the costs of providing corporate and other administrative services in its administrative division, “Corporate"Corporate Services, Eliminations and Other.”" These services are not directly identifiable with the Company’sCompany's reportable operating segments.
93 |
The following tables present the Company’s reportable segmentCompany's results for the years ended December 31, 2019, 2022, 2021 and 2020:2018
|
| For the Year Ended December 31, 2022 | ||||||||||||||||||
(in thousands) |
| EFT Processing |
| epay |
| Money Transfer |
| Corporate Services, Eliminations and Other |
| Consolidated | ||||||||||
Total revenues |
| $ | 924,208 |
|
| $ | 998,009 |
|
| $ | 1,444,304 |
|
| $ | (7,780 | ) |
| $ | 3,358,741 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
| ||||||||||
Direct operating costs |
| 475,785 |
|
| 753,149 |
|
| 796,951 |
|
| (7,758 | ) |
| 2,018,127 |
| |||||
Salaries and benefits |
| 111,997 |
|
| 81,680 |
|
| 277,012 |
|
| 63,549 |
|
| 534,238 |
| |||||
Selling, general and administrative |
| 57,049 |
|
| 36,006 |
|
| 182,360 |
|
| 9,758 |
|
| 285,173 |
| |||||
Depreciation and amortization |
| 95,486 |
|
| 6,224 |
|
| 33,727 |
|
| 427 |
|
| 135,864 |
| |||||
Total operating expenses |
| 740,317 |
|
| 877,059 |
|
| 1,290,050 |
|
| 65,976 |
|
| 2,973,402 |
| |||||
Operating income (expense) |
| $ | 183,891 |
| $ | 120,950 |
|
| $ | 154,254 |
|
| $ | (73,756 | ) |
| $ | 385,339 |
| |
Other income (expense) |
|
|
|
|
|
|
|
|
|
| ||||||||||
Interest income |
|
|
|
|
|
|
|
|
| 2,066 |
| |||||||||
Interest expense |
|
|
|
|
|
|
|
|
| (37,585 | ) | |||||||||
Foreign currency exchange loss, net |
|
|
|
|
|
|
|
|
| (28,175 | ) | |||||||||
Other gains, net |
|
|
|
|
|
|
|
|
| 950 | ||||||||||
Total other expense, net |
|
|
|
|
|
|
|
|
| (62,744 | ) | |||||||||
Income before income taxes |
|
|
|
|
|
|
|
|
| $ | 322,595 |
| ||||||||
Segment assets as of December 31, 2022 |
| $ | 2,150,685 |
|
| $ | 1,173,330 |
|
| $ | 1,795,799 |
|
| $ | 283,819 |
|
| $ | 5,403,633 |
|
and 2017:
For the Year Ended December 31, 2019 | ||||||||||||||||||||
(in thousands) | EFT Processing | epay | Money Transfer | Corporate Services, Eliminations and Other | Consolidated | |||||||||||||||
Total revenues | $ | 888,712 | $ | 769,329 | $ | 1,096,226 | $ | (4,158 | ) | $ | 2,750,109 | |||||||||
Operating expenses: | ||||||||||||||||||||
Direct operating costs | 397,132 | 576,757 | 586,730 | (4,136 | ) | 1,556,483 | ||||||||||||||
Salaries and benefits | 87,603 | 61,540 | 208,792 | 36,809 | 394,744 | |||||||||||||||
Selling, general and administrative | 35,518 | 35,054 | 133,068 | 8,304 | 211,944 | |||||||||||||||
Acquired intangible assets impairment | — | — | — | — | — | |||||||||||||||
Depreciation and amortization | 71,819 | 6,774 | 32,846 | 305 | 111,744 | |||||||||||||||
Total operating expenses | 592,072 | 680,125 | 961,436 | 41,282 | 2,274,915 | |||||||||||||||
Operating income (expense) | $ | 296,640 | $ | 89,204 | $ | 134,790 | $ | (45,440 | ) | $ | 475,194 | |||||||||
Other income (expense) | ||||||||||||||||||||
Interest income | 1,969 | |||||||||||||||||||
Interest expense | (36,237 | ) | ||||||||||||||||||
Loss from unconsolidated affiliates | — | |||||||||||||||||||
Loss on early retirement of debt | — | |||||||||||||||||||
Foreign currency exchange loss, net | 2,701 | |||||||||||||||||||
Other gains, net | (9,820 | ) | ||||||||||||||||||
Total other expense, net | (41,387 | ) | ||||||||||||||||||
Income before income taxes | $ | 433,807 | ||||||||||||||||||
Segment assets as of December 31, 2019 | $ | 1,914,144 | $ | 962,671 | $ | 1,560,136 | $ | 220,715 | $ | 4,657,666 | ||||||||||
Property and equipment, net as of December 31, 2019 | $ | 266,872 | $ | 41,539 | $ | 51,519 | $ | 50 | $ | 359,980 |
94 |
|
| For the Year Ended December 31, 2021 | ||||||||||||||||||
(in thousands) |
| EFT Processing |
| epay |
| Money Transfer |
| Corporate Services, Eliminations and Other |
| Consolidated | ||||||||||
Total revenues |
| $ | 591,138 |
|
| $ | 1,011,482 |
|
| $ | 1,400,957 |
|
| $ | (8,134 | ) |
| $ | 2,995,443 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
| ||||||||||
Direct operating costs |
| 354,254 |
|
| 760,891 |
|
| 793,218 |
|
| (8,096 | ) |
| 1,900,267 |
| |||||
Acquired contract cost impairment | — | — | 38,634 | — | 38,634 | |||||||||||||||
Salaries and benefits |
| 98,584 |
|
| 79,451 |
|
| 255,816 |
|
| 50,988 |
|
| 484,839 |
| |||||
Selling, general and administrative |
| 47,832 |
|
| 39,602 |
|
| 157,955 |
|
| 6,544 |
|
| 251,933 |
| |||||
Depreciation and amortization |
| 90,969 |
|
| 8,501 |
|
| 35,739 |
|
| 545 |
|
| 135,754 |
| |||||
Total operating expenses |
| 591,639 |
|
| 888,445 |
|
| 1,281,362 |
|
| 49,981 |
|
| 2,811,427 |
| |||||
Operating income (expense) |
| $ | (501 | ) |
| $ | 123,037 |
|
| $ | 119,595 |
|
| $ | (58,115 | ) |
| $ | 184,016 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
| ||||||||||
Interest income |
|
|
|
|
|
|
|
|
| 664 |
| |||||||||
Interest expense |
|
|
|
|
|
|
|
|
| (38,198 | ) | |||||||||
Foreign currency exchange gain, net |
|
|
|
|
|
|
|
|
| (10,866 | ) | |||||||||
Other gains, net |
|
|
|
|
|
|
|
|
| 59 | ||||||||||
Total other expense, net |
|
|
|
|
|
|
|
|
| (48,341 | ) | |||||||||
Income before income taxes |
|
|
|
|
|
|
|
|
| $ | 135,675 |
| ||||||||
Segment assets as of December 31, 2021 |
| $ | 1,682,680 |
|
| $ | 1,234,074 |
|
| $ | 1,621,726 |
|
| $ | 205,796 |
|
| $ | 4,744,276 |
|
For the Year Ended December 31, 2018 | ||||||||||||||||||||
(in thousands) | EFT Processing | epay | Money Transfer | Corporate Services, Eliminations and Other | Consolidated | |||||||||||||||
Total revenues | $ | 753,651 | $ | 743,784 | $ | 1,042,962 | $ | (3,768 | ) | $ | 2,536,629 | |||||||||
Operating expenses: | ||||||||||||||||||||
Direct operating costs | 366,977 | 564,252 | 560,930 | (3,753 | ) | 1,488,406 | ||||||||||||||
Salaries and benefits | 75,791 | 57,748 | 194,808 | 32,085 | 360,432 | |||||||||||||||
Selling, general and administrative | 46,925 | 35,749 | 125,647 | 8,486 | 216,807 | |||||||||||||||
Goodwill and acquired intangible assets impairment | — | — | 7,049 | — | 7,049 | |||||||||||||||
Depreciation and amortization | 66,713 | 7,038 | 32,002 | 268 | 106,021 | |||||||||||||||
Total operating expenses | 556,406 | 664,787 | 920,436 | 37,086 | 2,178,715 | |||||||||||||||
Operating income (expense) | $ | 197,245 | $ | 78,997 | $ | 122,526 | $ | (40,854 | ) | $ | 357,914 | |||||||||
Other income (expense) | ||||||||||||||||||||
Interest income | 1,320 | |||||||||||||||||||
Interest expense | (37,573 | ) | ||||||||||||||||||
Income from unconsolidated affiliates | (117 | ) | ||||||||||||||||||
Foreign currency exchange gain, net | (26,655 | ) | ||||||||||||||||||
Other gains, net | 27 | |||||||||||||||||||
Total other expense, net | (62,998 | ) | ||||||||||||||||||
Income before income taxes | $ | 294,916 | ||||||||||||||||||
Segment assets as of December 31, 2018 | $ | 1,220,141 | $ | 780,220 | $ | 1,310,775 | $ | 10,019 | $ | 3,321,155 | ||||||||||
Property and equipment, net as of December 31, 2018 | $ | 215,106 | $ | 31,172 | $ | 45,517 | $ | 74 | $ | 291,869 |
95 |
|
| For the Year Ended December 31, 2020 | ||||||||||||||||||
(in thousands) |
| EFT Processing |
| epay |
| Money Transfer |
| Corporate Services, Eliminations and Other |
| Consolidated | ||||||||||
Total revenues |
| $ | 468,726 |
|
| $ | 835,517 |
|
| $ | 1,183,849 |
|
| $ | (5,392 | ) |
| $ | 2,482,700 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
| ||||||||||
Direct operating costs |
| 302,637 |
|
| 630,391 |
|
| 649,033 |
|
| (5,362 | ) |
| 1,576,699 |
| |||||
Salaries and benefits |
| 91,526 |
|
| 64,769 |
|
| 213,511 |
|
| 34,336 |
|
| 404,142 |
| |||||
Selling, general and administrative |
| 35,388 |
|
| 35,789 |
|
| 142,161 |
|
| 8,276 |
|
| 221,614 |
| |||||
Goodwill and acquired intangible assets impairment | 21,861 | — | 84,741 | — | 106,602 | |||||||||||||||
Depreciation and amortization |
| 84,025 |
|
| 7,890 |
|
| 34,694 |
|
| 412 |
|
| 127,021 |
| |||||
Total operating expenses |
| 535,437 |
|
| 738,839 |
|
| 1,124,140 |
|
| 37,662 |
|
| 2,436,078 |
| |||||
Operating income (expense) |
| $ | (66,711 | ) |
| $ | 96,678 |
|
| $ | 59,709 |
|
| $ | (43,054 | ) |
| $ | 46,622 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
| ||||||||||
Interest income |
|
|
|
|
|
|
|
|
| 1,040 |
| |||||||||
Interest expense |
|
|
|
|
|
|
|
|
| (36,604 | ) | |||||||||
Foreign currency exchange loss, net |
|
|
|
|
|
|
|
|
| (3,756 | ) | |||||||||
Other gains, net |
|
|
|
|
|
|
|
|
| 869 |
| |||||||||
Total other expense, net |
|
|
|
|
|
|
|
|
| (38,451 | ) | |||||||||
Income before income taxes |
|
|
|
|
|
|
|
|
| $ | 8,171 |
| ||||||||
Segment assets as of December 31, 2020 |
| $ | 1,541,610 |
|
| $ | 1,135,204 |
|
| $ | 1,755,651 |
|
| $ | 494,246 |
|
| $ | 4,926,711 |
|
For the Year Ended December 31, 2017 | ||||||||||||||||||||
(in thousands) | EFT Processing | epay | Money Transfer | Corporate Services, Eliminations and Other | Consolidated | |||||||||||||||
Total revenues | $ | 634,559 | $ | 733,998 | $ | 886,858 | $ | (2,993 | ) | $ | 2,252,422 | |||||||||
Operating expenses: | ||||||||||||||||||||
Direct operating costs | 318,875 | 564,032 | 476,322 | (2,979 | ) | 1,356,250 | ||||||||||||||
Salaries and benefits | 61,683 | 54,459 | 168,371 | 26,274 | 310,787 | |||||||||||||||
Selling, general and administrative | 33,158 | 36,014 | 108,022 | 13,108 | 190,302 | |||||||||||||||
Goodwill impairment | 2,286 | 31,770 | — | — | 34,056 | |||||||||||||||
Depreciation and amortization | 55,660 | 9,622 | 29,598 | 150 | 95,030 | |||||||||||||||
Total operating expenses | 471,662 | 695,897 | 782,313 | 36,553 | 1,986,425 | |||||||||||||||
Operating income (expense) | $ | 162,897 | $ | 38,101 | $ | 104,545 | $ | (39,546 | ) | $ | 265,997 | |||||||||
Other income (expense) | ||||||||||||||||||||
Interest income | 2,443 | |||||||||||||||||||
Interest expense | (32,571 | ) | ||||||||||||||||||
Income from unconsolidated affiliates | 48 | |||||||||||||||||||
Foreign currency exchange loss, net | 20,300 | |||||||||||||||||||
Other gains, net | 118 | |||||||||||||||||||
Total other expense, net | (9,662 | ) | ||||||||||||||||||
Income before income taxes | $ | 256,335 | ||||||||||||||||||
Segment assets as of December 31, 2017 | $ | 1,040,135 | $ | 695,990 | $ | 1,255,765 | $ | 148,139 | $ | 3,140,029 | ||||||||||
Property and equipment, net as of December 31, 2017 | $ | 196,451 | $ | 28,135 | $ | 43,564 | $ | 153 | $ | 268,303 |
96 |
Total revenues for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, and property and equipment and total assets as of December 31, 20192022 and 2018,2021, summarized by geographic location, were as follows:
Revenues | Property and Equipment, net | Total Assets | ||||||||||||||||||||||||||
For the year ended December 31, | as of December 31, | as of December 31, | ||||||||||||||||||||||||||
(in thousands) | 2019 | 2018 | 2017 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||
United States | $ | 716,576 | $ | 721,977 | $ | 572,383 | $ | 49,904 | $ | 29,499 | $ | 717,894 | $ | 493,428 | ||||||||||||||
Germany | 518,146 | 476,122 | 495,778 | 35,824 | 25,302 | 660,730 | 508,062 | |||||||||||||||||||||
Spain | 189,104 | 155,619 | 115,473 | 55,240 | 39,238 | 371,882 | 198,082 | |||||||||||||||||||||
United Kingdom | 135,006 | 133,132 | 136,977 | 22,420 | 20,525 | 520,549 | 519,918 | |||||||||||||||||||||
Italy | 130,929 | 103,691 | 89,276 | 20,663 | 15,238 | 210,910 | 157,314 | |||||||||||||||||||||
Poland | 130,104 | 126,513 | 128,672 | 42,916 | 50,359 | 222,582 | 155,821 | |||||||||||||||||||||
India | 113,146 | 92,468 | 82,389 | 27,281 | 19,554 | 163,125 | 89,923 | |||||||||||||||||||||
France | 94,352 | 75,466 | 56,027 | 1,508 | 1,037 | 96,636 | 76,687 | |||||||||||||||||||||
Greece | 79,716 | 71,007 | 71,197 | 11,753 | 11,267 | 111,339 | 58,419 | |||||||||||||||||||||
Malaysia | 74,948 | 76,380 | 56,287 | 2,629 | 2,802 | 114,796 | 103,043 | |||||||||||||||||||||
Australia | 51,686 | 58,039 | 77,777 | 1,992 | 2,051 | 62,844 | 61,215 | |||||||||||||||||||||
New Zealand | 47,611 | 48,881 | 47,091 | 3,137 | 2,718 | 237,076 | 196,869 | |||||||||||||||||||||
Other | 468,785 | 397,334 | 323,095 | 84,713 | 72,279 | 1,167,303 | 702,374 | |||||||||||||||||||||
Total foreign | 2,033,533 | 1,814,652 | 1,680,039 | 310,076 | 262,370 | 3,939,772 | 2,827,727 | |||||||||||||||||||||
Total | $ | 2,750,109 | $ | 2,536,629 | $ | 2,252,422 | $ | 359,980 | $ | 291,869 | $ | 4,657,666 | $ | 3,321,155 |
|
| Revenues |
|
|
| Total Assets | ||||||||||||||||||||||
|
| For the year ended December 31, |
| as of December 31, |
| as of December 31, | ||||||||||||||||||||||
(in thousands) |
| 2022 |
| 2021 |
| 2020 |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||||||||||
United States |
| $ | 830,846 |
|
| $ | 805,028 |
|
| $ | 725,135 |
|
| $ | 59,925 |
|
| $ | 59,469 |
|
| $ | 1,051,433 |
|
| $ | 1,040,190 |
|
Germany |
| 644,488 |
|
| 631,550 |
|
| 533,999 |
|
| 30,222 |
|
| 32,126 |
|
| 772,575 |
|
| 901,724 |
| |||||||
Spain |
| 211,658 |
|
| 157,766 |
|
| 118,934 |
|
| 46,392 |
|
| 50,321 |
|
| 322,652 |
|
| 317,199 |
| |||||||
United Kingdom |
| 144,737 |
|
| 143,914 |
|
| 118,024 |
|
| 10,453 |
|
| 13,783 |
|
| 403,874 |
|
| 371,090 |
| |||||||
Italy |
| 160,676 |
|
| 130,095 |
|
| 92,006 |
|
| 16,670 |
|
| 18,279 |
|
| 207,744 |
|
| 207,347 |
| |||||||
Poland |
| 98,069 |
|
| 93,654 |
|
| 89,688 |
|
| 23,013 |
|
| 24,091 |
|
| 220,686 |
|
| 201,506 |
| |||||||
India |
| 188,539 |
|
| 173,154 |
|
| 123,343 |
|
| 30,476 |
|
| 32,705 |
|
| 241,630 |
|
| 206,378 |
| |||||||
France |
| 173,825 |
|
| 166,655 |
|
| 119,265 |
|
| 8,514 |
|
| 7,038 |
|
| 140,396 |
|
| 134,981 |
| |||||||
Greece |
| 160,971 |
|
| 61,627 |
|
| 39,705 |
|
| 18,032 |
|
| 10,815 |
|
| 597,206 |
|
| 80,778 |
| |||||||
Malaysia |
| 47,597 |
|
| 50,039 |
|
| 73,541 |
|
| 2,167 |
|
| 1,998 |
|
| 77,569 |
|
| 91,813 |
| |||||||
Australia |
| 42,424 |
|
| 46,851 |
|
| 46,062 |
|
| 2,880 |
|
| 2,791 |
|
| 58,400 |
|
| 56,275 |
| |||||||
New Zealand |
| 61,550 |
|
| 56,480 |
|
| 47,368 |
|
| 3,537 |
|
| 3,949 |
|
| 234,836 |
|
| 231,468 |
| |||||||
Netherlands | 54,634 | 49,442 | 39,630 | 5,302 | 6,280 | 196,667 | 217,521 | |||||||||||||||||||||
Canada | 66,439 | 46,851 | 49,487 | 744 | 847 | 106,419 | 103,056 | |||||||||||||||||||||
Brazil | 51,367 | 44,304 | 28,473 | 258 | 268 | 46,695 | 34,115 | |||||||||||||||||||||
Other |
| 420,921 |
|
| 338,033 |
|
| 238,040 |
|
| 78,016 |
|
| 80,621 |
|
| 724,851 |
|
| 548,835 |
| |||||||
Total foreign |
| 2,527,895 |
|
| 2,190,415 |
|
| 1,757,565 |
|
| 276,676 |
|
| 285,912 |
|
| 4,352,200 |
|
| 3,704,086 |
| |||||||
Total |
| $ | 3,358,741 |
|
| $ | 2,995,443 |
|
| $ | 2,482,700 |
|
| $ | 336,601 |
|
| $ | 345,381 |
|
| $ | 5,403,633 |
|
| $ | 4,744,276 |
|
Revenues are attributed to countries based on location of the customer, with the exception of software sales made by the Company's software subsidiary, which are attributed to the U.S.
Concentrations of credit risk
The Company's credit risk primarily relates to trade accounts receivable and cash and cash equivalents. The EFT Processing Segment's customer base includes the most significant international card organizations and certain banks in its markets. The epay Segment's customer base is diverse and includes several major retailers and/or distributors in markets that they operate. The Money Transfer Segment trade accounts receivable are primarily due from independent agents that collect cash from customers on the Company's behalf and generally remit the cash within one week. The Company performs ongoing evaluations of its customers' financial condition and limits the amount of credit extended, or purchases credit enhancement protection, when deemed necessary, but generally requires no collateral. See Note 14,15, Valuation and Qualifying Accounts, for further disclosure.
The Company invests excess cash not required for use in operations primarily in high credit quality, short-term duration securities that the Company believes bear minimal risk.
97 |
Fair value measurements used in the consolidated financial statements are based upon the price that would be received to sell an asset or paid to transfer a liability in an orderly transactiontransaction 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’sentity'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:
The following table details financial assets measured and recorded at fair value on a recurring basis:
|
|
| As of December 31, 2022 | |||||||||||||||
(in thousands) | Balance Sheet Classification |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||||||
Assets |
|
|
|
|
|
|
|
|
| |||||||||
Foreign currency exchange contracts | Other current assets |
| $ | — |
|
| $ | 50,248 |
|
| $ | — |
|
| $ | 50,248 |
| |
Liabilities |
|
|
|
|
|
|
|
|
| |||||||||
Foreign currency exchange contracts | Other current liabilities |
| $ | — |
| $ | (42,320 | ) |
| $ | — |
| $ | (42,320 | ) | |||
| ||||||||||||||||||
|
|
| As of December 31, 2021 | |||||||||||||||
(in thousands) | Balance Sheet Classification |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||||||
Assets |
|
|
|
|
|
|
|
|
| |||||||||
Foreign currency exchange contracts | Other current assets |
| $ | — |
|
| $ | 27,582 |
|
| $ | — |
|
| $ | 27,582 |
| |
Liabilities |
|
|
|
|
|
|
|
|
| |||||||||
Foreign currency exchange contracts | Other current liabilities |
| $ | — |
| $ | (23,285 | ) |
| $ | — |
| $ | (23,285 | ) |
As of December 31, 2019 | |||||||||||||||||
(in thousands) | Balance Sheet Classification | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | |||||||||||||||||
Foreign currency exchange contracts | Other current assets | $ | — | $ | 54,765 | $ | — | $ | 54,765 | ||||||||
Liabilities | |||||||||||||||||
Foreign currency exchange contracts | Other current liabilities | $ | — | (41,935 | ) | $ | — | $ | (41,935 | ) |
As of December 31, 2018 | |||||||||||||||||
(in thousands) | Balance Sheet Classification | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | |||||||||||||||||
Foreign currency exchange contracts | Other current assets | $ | — | $ | 44,637 | $ | — | $ | 44,637 | ||||||||
Liabilities | |||||||||||||||||
Foreign currency exchange contracts | Other current liabilities | $ | — | $ | (36,102 | ) | $ | — | $ | (36,102 | ) |
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’sCompany's revolving credit agreements approximate fair values because interest is based on LIBORSOFR that resets at various intervals of less than one year. The Company estimates the fair value of the Convertible Notes and Senior Notes using quoted prices in inactive markets for identical liabilities (Level 2). As of December 31, 2019 2022, the fair values of the Convertible Notes and Senior Notes were $569.4$520.8 million and $668.2$568.9 million, respectively, with carrying values of $437$525.0 million and $673.4$642.1 million, respectively.
From time to time, the Company is a party to legal and regulatory proceedings arising in the ordinary course of its business. Currently, there are no legal proceedings or regulatory findings that management believes, either individually or in the aggregate, would have a material adverse effect upon the consolidated financial statementsConsolidated Financial Statements of the Company. In accordance with U.S. GAAP, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case.
Under certain circumstances, the Company grants guarantees in support of obligations of subsidiaries. As of December 31, 2019,2022, the Company granted off balance sheet guarantees for cash in various ATM networks amounting to $12.5 $11.1 million over the terms of the cash supply agreements and performance guarantees amounting to approximately $49.6$51.9 million over the terms of the agreements with the customers.
From time to time, the Company enters into agreements with commercial counterparties that contain indemnification provisions, the terms of which may vary depending on the negotiated terms of each respective agreement. The amount of such potential obligations is generally not stated in the agreements. Euronet's liability under such indemnification provisions may be mitigated by relevant insurance coverage and may be subject to time and materiality limitations, monetary caps and other conditions and defenses. Such indemnification obligations include the following:
• | In connection with contracts with financial institutions in the EFT Processing Segment, the Company is responsible for damage to ATMs and theft of ATM network cash that, generally, is not recorded on the Company's Consolidated Balance Sheets. As of December 31, 2022, the balance of such cash used in the Company's ATM networks for which the Company was responsible was approximately $319.8 million. The Company maintains insurance policies to mitigate this exposure; |
• | In connection with contracts with financial institutions in the EFT Processing Segment, the Company is responsible for losses suffered by its customers and other parties as a result of the breach of its computer systems, including in particular, losses arising from fraudulent transactions made using information stolen through its processing systems. The Company maintains insurance policies to mitigate this exposure; |
• | In connection with the license of proprietary systems to customers, the Company provides certain warranties and infringement indemnities to the licensee, which generally warrant that such systems do not infringe on intellectual property owned by third parties and that the systems will perform in accordance with their specifications; |
• | Euronet has entered into purchase and service agreements with vendors and consulting agreements with providers of consulting services, pursuant to which the Company has agreed to indemnify certain of such vendors and consultants, respectively, against third-party claims arising from the Company's use of the vendor's product or the services of the vendor or consultant; |
• | In connection with acquisitions and dispositions of subsidiaries, operating units and business assets, the Company has entered into agreements containing indemnification provisions, which can be generally described as follows: (i) in connection with acquisitions of operating units or assets made by Euronet, the Company has agreed to indemnify the seller against third party claims made against the seller relating to the operating unit or asset and arising after the closing of the transaction, and (ii) in connection with dispositions made by Euronet, Euronet has agreed to indemnify the buyer against damages incurred by the buyer due to the buyer's reliance on representations and warranties relating to the subject subsidiary, operating unit or business assets in the disposition agreement if such representations or warranties were untrue when made; and |
• | Euronet has entered into agreements with certain third parties, including banks that provide fiduciary and other services to Euronet or to the Company's benefit plans. Under such agreements, the Company has agreed to indemnify such service providers for third-party claims relating to carrying out their respective duties under such agreements. |
The Company is also required to meet minimum capitalization and cash requirements of various regulatory authorities in the jurisdictions in which the Company has money transfer operations. The Company has obtained surety bonds in compliance with money transfer licensing requirements of the applicable governmental authorities.
To date, the Company is not aware of any significant claims made by the indemnified parties or third parties to guarantee agreements with the Company and, accordingly, no liabilities were recorded as of December 31, 20192022 or 2018.2021.
99 |
The Company leases an airplane from a company owned by Mr. Michael J. Brown, Euronet's Chief Executive Officer, President and Chairman of the Board of Directors. The airplane is leased for business use on a per flight hour basis at competitive commercial rates with no minimum usage requirement. Euronet incurred expenses of $0.3$0.2 million, $0.3 $0.1 million and $0.4$0.1 million during the years ended December 31, 2019,2022, 20182021 and 2017,2020, respectively, for the use of this airplane.
100 |
(in thousands, except per share data) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||
For the Year Ended December 31, 2018 | ||||||||||||||||
Revenues | $ | 550,515 | $ | 622,224 | $ | 714,505 | $ | 649,385 | ||||||||
Operating income | $ | 45,472 | $ | 90,369 | $ | 150,913 | $ | 71,160 | ||||||||
Net income (loss) | $ | 26,344 | $ | 43,636 | $ | 102,257 | $ | 59,894 | ||||||||
Net income (loss) attributable to Euronet Worldwide, Inc. | $ | 26,413 | $ | 43,724 | $ | 102,723 | $ | 59,991 | ||||||||
Earnings (loss) per common share: | ||||||||||||||||
Basic | $ | 0.51 | $ | 0.85 | $ | 2.01 | $ | 1.16 | ||||||||
Diluted | $ | 0.49 | $ | 0.82 | $ | 1.89 | $ | 1.10 | ||||||||
For the Year Ended December 31, 2019 | ||||||||||||||||
Revenues | $ | 577,509 | $ | 691,867 | $ | 786,986 | $ | 693,747 | ||||||||
Operating income | $ | 56,094 | $ | 117,897 | $ | 193,990 | $ | 107,213 | ||||||||
Net income | $ | 34,579 | $ | 68,005 | $ | 137,541 | $ | 106,570 | ||||||||
Net income attributable to Euronet Worldwide, Inc. | $ | 34,543 | $ | 68,153 | $ | 137,607 | $ | 106,446 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.67 | $ | 1.28 | $ | 2.53 | $ | 1.96 | ||||||||
Diluted | $ | 0.62 | $ | 1.25 | $ | 2.46 | $ | 1.91 |
/s/ Michael J. Brown | |
Michael J. Brown | |
Chief Executive Officer | |
/s/ Rick L. Weller | |
Rick L. Weller | |
Chief Financial Officer and Chief Accounting Officer | |
101 |
We intend to satisfy the requirement under Item 5.05 of Form 8-K to disclose any amendments to our Code of Business Conduct and Ethics and any waiver from a provision of our Code of Ethics by disclosing such information on a Form 8-K or on our Website at www.euronetworldwide.com under For Investors/Corporate Governance.
102 |
(a) | List of Documents Filed as Part of this Report. |
Exhibit | Description | |
3.1 | ||
3.2 | ||
3.3 | ||
3.4 | ||
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | ||
103 |
4.5 | ||
4.6 | ||
10.1 | ||
10.2 | ||
10.3 | ||
10.4 | ||
10.5 | ||
10.6 | ||
10.7 | ||
10.8 | ||
10.9 | ||
10.10 | ||
10.11.1 | ||
10.11.2 | ||
10.12 |
104 |
10.13 | ||
10.14 | ||
10.15 | ||
10.16 | ||
10.17 | ||
21.1 | ||
23.1 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101 | The following materials from Euronet Worldwide, Inc.’s Annual Report on Form 10-K for the year ended December 31, | |
104 | Cover Page Interactive Data File (contained in Exhibit 101) | |
(1) | Filed herewith. |
105 | |
106 |
/s/ Michael J. Brown | ||||
Michael J. Brown | ||||
Signature | Title |
/s/ Michael J. Brown Michael J. Brown February | Chairman of the Board of Directors, Chief Executive Officer, President and Director (principal executive officer) |
/s/ Rick L. Weller Rick L. Weller February | Chief Financial Officer and Chief Accounting Officer (principal financial officer and principal accounting officer) |
/s/ Paul S. Althasen Paul S. Althasen February | Director |
/s/ Andrzej Olechowski Andrzej Olechowski February | Director |
/s/ February | Director |
/s/ Thomas A. McDonnell Thomas A. McDonnell February | Director |
/s/ Andrew B. Schmitt Andrew B. Schmitt February | Director |
/s/ M. Jeannine Strandjord M. Jeannine Strandjord February | Director |
/s/ Mark R. Callegari Mark R. Callegari February | Director |
/s/ Ligia Torres Fentanes Ligia Torres Fentanes February 22, 2023 | Director |
107 |