What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-02-22 compared with 2020-03-02 · 260 added, 229 removed, 406 unchanged (55% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K.

The following discussion and analysis s hould be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K.

This section of this Form 10-K generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019.

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We also provide vouchers and physical gift fulfillment services in Europe.

The Money Transfer Segment, which provides global consumer-to-consumer money transfer services, primarily under the brand names Ria, IME and xe and global account-to-account money transfer services under the brand name xe.

The Money Transfer Segment, which provides global consumer-to-consumer money transfer services, primarily under the brand names Ria, IME, AFEX, and xe and global account-to-account money transfer services under the brand name xe.

We offer services under the brand names Ria and IME through a network of sending agents, Company-owned stores (primarily in North America, Europe and Malaysia) and our websites (riamoneytransfer.com and online.imeremit.com), disbursing money transfers through a worldwide correspondent network that includes approximately 464,000 locations.

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Each operating segment's sources of revenues are described below.

EFT Processing Segment — Revenues in the EFT Processing Segment, which represented approximately 32% of total consolidated revenues for the year ended December 31, 2019 , are derived from fees charged for transactions made by cardholders on our proprietary network of ATMs, fixed management fees and transaction fees we charge to customers for operating ATMs and processing debit and credit cards under outsourcing and cross-border acquiring agreements, foreign currency exchange margin on DCC transactions, domestic and international surcharge, foreign currency dispensing and other value added services such as advertising, prepaid telecommunication recharges, bill payment, and money transfers provided

Revenues in this segment are also derived from cardless payment, banknote recycling, tax refund services, license fees, professional services and maintenance fees for proprietary application software and sales of related hardware.

epay Segment — Revenues in the epay Segment, which represented approximately 28% of total consolidated revenues for the year ended December 31, 2019 , are primarily derived from commissions or processing fees received from mobile phone operators for the processing and distribution of prepaid mobile airtime and commissions earned from the distribution of other electronic content, vouchers, and physical gifts.

EFT Processing Segment — Revenues in the EFT Pro cessing Segment, which represented approximately 19 % of total consolidated revenues for the year ended December 31 , 2020 , are derived from fees charged for transactions made by cardholders on our proprietary network of ATMs, fixed management fees and transaction fees we charge to customers for operating ATMs and processing debit and credit cards under outsourcing and cross-border acquiring agreements, foreign currency exchange margin on DCC transactions, domestic and international surcharge, foreign currency dispensing and other value added services such as advertising, prepaid telecommunication recharges, bill payment, and money transfers provided over ATMs.

epay Segment — Revenues in the epay Segment, which represented approximately 33 % of total consolidated revenues for the year ended December 31, 2020 , are primarily derived from commissions or processing fees rec eived from mobile phone operators for the processing and distribution of prepaid mobile airtime and commissions earned from the distribution of other electronic content, vouchers, and physical gifts.

The proportion of epay Segment revenues earned from the distribution of prepaid mobile phone time as compared with other electronic products has decreased over time, and digital media content now produces approximately 65 % of epay Segment revenues.

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developing our credit and debit card outsourcing business.

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

the impact of competition by banks and other ATM operators and service providers in our current target markets;

the demand for our ATM outsourcing services in our current target markets;

our ability to develop products or services, including value added services, to drive increases in transactions and revenues;

the expansion of our various business lines in markets where we operate and in new markets;

our entry into additional card acceptance and ATM management agreements with banks;

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

t he impact of competition by banks and other ATM operators and service providers in our current target markets;

t he demand for our ATM outsourcing services in our current target markets;

o ur ability to develop products or services, including value added services, to drive increases in transactions and revenues;

t he expansion of our various business lines in markets where we operate and in new markets;

o ur entry into additional card acceptance and ATM management agreements with financial institutions;

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

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the availability of financing for expansion;

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

our ability to renew existing contracts at profitable rates;

o ur ability to efficiently install ATMs contracted under newly awarded outsourcing agreements;

our ability to renew existing co ntracts at profitable rates;

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

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the continued development and implementation of our software products and their ability to interact with other leading products;

the impact of government imposed restrictions on travel into countries where we operate ATMs.

We consistently evaluate and add prospects to our list of potential ATM outsource customers.

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Therefore, the timing of both current and new contract revenues is uncertain and unpredictable.

Software products are an integral part of our product lines, and our investment in research, development, delivery and customer support reflects our ongoing commitment to an expanded customer base.

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

Software products are an integral part of our product lines, and our investment in research, development, delivery and customer suppor t reflects our ongoing commitment to an expanded customer base.

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

our ability to maintain and renew existing agreements, and to negotiate new agreements in additional markets with mobile operators, digital content providers, agent financial institutions and retailers;

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the availability of financing for further expansion;

the impact of government imposed restrictions on retailers with whom we partner.

In all of the markets in which we operate, we are experiencing significant competition which will impact the rate at which we may be able to grow organically.

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In certain markets in which we operate, many of the factors that may contribute to rapid growth (growth in electronic content, expansion of our network of retailers and access to products of mobile operators and other content providers) remain present.

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

the continued growth in worker migration and employment opportunities;

the mitigation of economic and political factors that have had an adverse impact on money transfer volumes, such as changes in the economic sectors in which immigrants work and the developments in immigration policies in the countries in which we operate;

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

t he continued growth in worker migration and employment opportunities;

t he mitigation of economic and political factors that have had an adverse impact on money transfer volumes, such as changes in the economic sectors in which immigrants work and the developments in immigration policies in the countries in which we operate;

the continuation of the trend of increased use of electronic money transfer and bill payment services among high-income individuals, immigrant workers and the unbanked population in our markets;

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our ability to provide additional value-added products under the xe brand;

The accounting policies of each segment are the same as those referenced in the summary of significant accounting policies (see Note 3, Summary of Significant Accounting Policies and Practices, to the Consolidated Financial Statements).

the impact of government imposed restrictions on our network of agents and correspondents.

The accounting policies of each segment are the same as those referenced in the summary of significant accou nting policies (see Note 3 , Summary of Significant Accounting Policies and Practices, to the Consolidated Financial Statements).

For all segments, our continued expansion may involve additional acquisitions that could divert our resources and management time and require integration of new assets with our existing networks and services.

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Inadequate technology and resources would impair our ability to maintain current processing technology and efficiencies, as well as deliver new and innovative services to compete in the marketplace.

Segment Revenues and Operating Income For The Years Ended December 31, 2019 and 2018

The outbreak of the COVID-19 (coronavirus) pandemic has resulted in varying degrees of travel restrictions and shelter-in-place and other social distancing orders in most of the countries where the Company operates during the year ended December 31, 2020.

Although the majority of these orders went into effect in late February 2020 or early March 2020, new orders continue to be implemented, or reinstated, as the pandemic spreads around the globe and there is a resurgence of infections.

The EFT Segment has experienced declines in certain transaction volumes due to these restrictions, especially high-margin cross-border transactions.

The epay Segment has experienced the impacts of consumer movement restrictions in certain markets, while other markets have been positively impacted where the Company has a higher mix of digital distribution or a higher concentration of retailers that are deemed essential and have remained open during the pandemic.

In response to the COVID-19 pandemic driven impacts, the Company implemented several key measures to offset the impact across the business, including renegotiating certain third party contracts, reducing travel, decreasing capital expenditures, and expanding ATM seasonal deactivations (placing them in dormancy status, terminating, or re-negotiating) in more sites and more markets.

Segment Revenues and Operating Income For The Years Ended December 31, 2020 a nd 2019

Operating Income (Expense)

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Corporate services, eliminations and other

Our annual consolidated revenues increased by 8% for 2019 compared to 2018 .

The increase in revenues for 2019 was primarily due to an increase in the number of ATMs under management, along with an increase in demand for DCC, domestic and international surcharge and other value added services in our EFT Processing Segment, growth in the number of money transfers processed by the core Ria business, and an increase in the number of transactions processed by our epay subsidiaries.

The increases in operating income for 2019 was primarily due to the increase in ATMs under management, along with the increase in demand for DCC, domestic and international surcharge and other value added services, the increase in the number of money transfer transactions processed, and the increase in the number of transactions processed for epay.

Net income attributable to Euronet for 2019 and 2018 was $346.7 million , or $6.31 per diluted share and $232.9 million , or $4.26 per diluted share, respectively.

Our annual consolidated revenues decreased by 1 0 % for 2020 compared to 2019 .

The decrease in revenues for 2020 was primarily due to a decrease in the number of ATMs under management, along with a decrease in demand for DCC, domestic and international surcharge and other value added services in our EFT Processing Segment, partially offset by growth in the number of money transfers processed by the core Ria business and the number of transactions processed by our epay subsidiaries.

The decrease in operating income for 2020 was primarily due to the decrease in ATMs under management, along with the decrease in demand for DCC, domestic and international surcharge, other value added services and the $106.6 million non-cash impairment of goodwill and acquired intangible assets, partially offset by the increase in the number of money transfer transactions processed, and the increase in the number of transactions processed for epay.

Net loss attributable to Euronet for 2020 was $3.4 million , or $ 0.06 per diluted share and net income attributable to Euronet for 2019 was $ 346.7 million, or $ 6.31 per diluted share.

Impact of changes in foreign currency exchange rates

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dollar and positively impacted by a weaker U.S.

Considering the results by country and the associated functional currency, our 2019 consolidated operating income was approximately 5% less due to changes in foreign currency exchange rates when compared to 2018 .

Considering the results by country and the associated functional currency, our 2020 consolidated operating income was approximately 7 % higher due to changes in foreign currency exchange rates when compared to 2019 .

If significant, in our discussion we will refer to the impact of fluctuations in foreign currency exchange rates in our comparison of operating segment results.

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dollar during 2020 and 2019 , of the currencies of the countries in which we have our most significant operations:

Average Translation Rate

Year Ended December 31,

Average Translation Rate Year Ended December 31,

2020 Increase (Decrease) Percent

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Increase (Decrease) Amount

Increase Percent

Increase (Decrease) Percent

Total revenues

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Selling, general and administrative

Goodwill and acquired intangible assets impairment

Depreciation and amortization

Total operating expenses

Operating income

Operating (loss) income

Transactions processed (millions)

ATMs as of December 31

EFT Processing Segment total revenues for 2019 were $888.7 million , an increase of $135.1 million or 18% as compared to 2018 .

The increase in total revenues is primarily due to an increase in the number of ATMs under management and additional DCC and surcharge revenues.

Foreign currency movements decreased total revenues for 2019 by approximately 45.4 million as compared to 2018.

Average monthly revenues per ATM were $1,655 for 2019 compared to $1,566 for 2018 .

Revenues per transaction were $0.29 for 2019 and $0.28 for 2018 .

The increases in average monthly revenues per ATM and revenues per transaction were attributable to the revenue growth from DCC, which earns higher revenues per transaction than other ATM or card based services, surcharges partially offset by the U.S.

dollar strengthening against key foreign currencies.

ATMs in service as of December 31

Average ATMs in service during the year

____________________

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EFT Processing Segment total revenues were $468.7 million for 2020, a decrease of $ 420.0 million or 47 % compared to 2019 .

Total revenues for 2020 decreased due to the impact of fewer active ATMs and fewer high-margin cross-border transactions (DCC), related to COVID-19 pandemic-driven government-imposed border and business closures and shelter-in-place orders.

The government imposed border and business closures and shelter-in-place orders were in effect for the majority of 2020.

These closures resulted in a decrease in revenues for 2020 compared to 2019.

Foreign currency movements decreased total revenues by approximately $1.0 million for 2020 compared to 2019 .

Average monthly revenues per ATM decreased to $927 for 2020 compared to $ 1,655 for 2019 .

Revenues per transaction decreased to $ 0.14 for 2020 compared to $ 0.29 for 2019 .

The decreases in average monthly revenues per ATM and revenue per transaction were attributable to the decreases in D CC and surcharge transactions, which earn higher revenues per transaction than other ATM or card-based services.

The decrease in DCC transactions was due to the decline in tourism throughout Europe driven by the border and business closures during 2020 .

Direct operating costs

EFT Processing Segment direct operating costs were $397.1 million for 2019 , an increase of $30.2 million or 8% as compared to 2018 .

Direct operating costs in the EFT Processing Segment consist primarily of site rental fees, cash delivery costs, cash supply costs, maintenance, insurance, telecommunications, data center operations-related personnel, as well as the processing centers’ facility-related costs and other processing center-related expenses and commissions paid to retail merchants, banks and card processors involved with POS DCC transactions.

The increase in direct operating costs was primarily due to the increase in the number of ATMs under management.

Foreign currency movements decreased direct operating costs for 2019 by approximately $22.0 million as compared to 2018.

Gross profit, which is calculated as revenues less direct operating costs, was $491.6 million for 2019 compared to $386.7 million for 2018 .

The increase in gross profit was primarily due to the growth in revenues from the increases in ATMs under management, DCC transactions and domestic and international surcharge.

Gross profit as a percentage of revenues (“gross margin”) was 55.3% and 51.3% for 2019 and 2018 , respectively.

The increase in gross margin was attributable to the increases in DCC transactions and domestic and international surcharge.

EFT Processing Segment direct operating costs were $302.6 million for 2020 , a decrease of $ 94.5 million or 24 % compared to 2019 .

Direct operating costs in the EFT Processing Segment consist primarily of site rental fees, cash delivery costs, cash supply costs, maintenance, insurance, telecommunications, payment scheme processing fees, data center operations-related personnel, as well as the processing centers' facility-related costs and other pr ocessing center-related expenses and commissions paid to retail merchants, banks and card processors involved with POS DCC transactions.

The decrease in direct operating costs was primarily due to the decrease in the number of ATMs under management, renegotiated and reduced site rental fees, and reduced operating costs for ATM's seasonally deactivated during COVID-19 pandemic imposed restrictions.

Foreign currency movements decreased direct operating costs by approximately $ 1.0 million for 2020 compared to 2019 .

Gross profit, which is calculated as revenues less direct operating costs, was $ 166.1 million for 2020, a decrease of $325.5 million or 66% compared to $ 491.6 millio n for 2019 .

Gross profit as a percentage of revenues ("gross margin") decreased to 35.4 % for 2020 compared to 55.3 % for 2019 .

The decrease in gross profit and gross margin was attributable to decreases in DCC and domestic and international surcharge transactions.

Salaries and benefits

Salaries and benefits increased $11.8 million or 16% for 2019 compared to 2018 .

The increase in salaries and benefits was primarily attributable to additional headcount to support an increase in the number of ATMs and POS devices under management.

As a percentage of revenues, these costs decreased to 9.9% for 2019 from 10.1% for 2018 .

Salaries and benefits expenses were $91.5 million for 2020, an increase $ 3.9 million or 4 % compared to 2019 .

The increase in salaries and benefits was primarily attributable to additional headcount to support expansion in the United States and long-term growth strategy, partially offset by a decrease in bonus expense.

The border and business closures and shelter-in-place orders that took effect in late February 2020 and March 2020 in response to the COVID-19 pandemic reduced transaction volumes and revenues through the end of 2020.

H igh-margin cross-border transactions and revenues for 2020 decreased compared to 2019 as a result.

However, human resources to support actual and planned growth were added throughout 2019 as well as the early part of 2020 before the COVID-19 pandemic took effect.

As a percentage of revenues, these expenses increased to 19.5% for 2020 compared to 9.9% for 2019 .

The Company made a decision to retain its employees during the pandemic.

Selling, general and administrative

Selling, general and administrative expenses for 2019 were $35.5 million , a decrease of $11.4 million or 24% as compared to 2018 .

As a percentage of revenues, these expenses decreased to 4.0% for 2019 from 6.2% for 2018 .

The decrease was primarily due to non-recurring VAT benefits.

Selling, general and administrative expenses were $ 35.4 million for 2020, a decrease of $ 0.1 million or flat compared to 2019 .

As a percentage of revenues these expenses increased to 7.5 % for 2020 compared to 4.0 % for 2019 .

The increase was primarily due to an increase in bad debt expense, partially offset by a decrease in travel related expenses.

Goodwill and acquired intangible assets impairment

Due to the economic impacts of the COVID-19 pandemic, the Company recorded a $21.9 million non-cash goodwill impairment charge related to two reporting units during the second quarter of 2020.

A $14.0 million non-cash goodwill impairment charge was recorded for Innova as a result of the decline in VAT refund activity directly related to the decline in international tourism within the European Union, and a $7.9 million non-cash goodwill impairment charge was recorded for Pure Commerce related to the decline in international tourism in Asia Pacific.

Depreciation and amortization

Depreciation and amortization expense increased $5.1 million for 2019 compared to 2018 .

The increase was primarily attributable to the deployment of additional ATMs and software assets.

As a percentage of revenues, depreciation and amortization expense decreased to 8.1% for 2019 from 8.9% for 2018 .

The decrease is primarily due to certain intangible assets becoming fully depreciated in 2019.

Operating income

EFT Processing Segment operating income for 2019 was $296.6 million , an increase of $99.4 million or 50% as compared to 2018 .

Operating income for 2019 increased primarily due to higher revenues from the additional number of ATMs under management, growth in revenues earned from DCC, surcharges and other value-added service transactions.

Operating income as a percentage of revenues (“operating margin”) was 33.4% for 2019 compared to 26.2% for 2018 .

The increase in operating margin was primarily due to higher operating revenues partially offset by expenses incurred to support the increased revenues and additional ATMs under management.

Operating income per transaction increased to $0.10 for 2019 from $0.07 for 2018 .

Depreciation and amortization expenses were $84.0 million for 2020, an increase of $12.2 million or 17% compared to 2019 .

The increase was primarily attributable to the deployment of additional ATMs (and subsequent seasonal deactivation) and software assets.

As a percentage of revenues these expenses increased to 17.9 % for 2020 compared to 8.1 % for 2019 .

Operating (loss) income

EFT Processing Segment operating loss was $66.7 million for 2020, a decrease of $ 363.4 million or 122 % compared to 2019 operating income .

Operating loss as a percentage of revenues ("operating margin") was (14.2 %) for 2020 compared to operating income as a percentage of revenues of 33.4 % for 2019 and o perating loss per transaction was ( $ 0.02) for 2020 compared to operating income per transaction of $ 0.10 for 2019 .

The decreases in operating income, operating margin, and operating income per transaction were primarily due to the decrease in revenues for 2020 compared to 2019 and the non-cash goodwill impairment charges.

Beginning in late February 2020 and throughout December 2020, high margin cross-border transactions (DCC) decreased throughout Europe due to the COVID-19 pandemic driven government imposed border and business closures and shelter-in-place orders.

The following table summarizes the results of operations for our epay Segment for the years ended December 31, 2020 and 2019:

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Year-over-Year Change

(Decrease) Amount

(Decrease) Percent

Increase (Decrease) Amount

Increase (Decrease) Percent

(dollar amounts in thousands)

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Transactions processed (billions)

epay Segment total revenues for 2019 were $769.3 million , an increase of $25.5 million or 3% as compared to 2018 .

The increase in total revenues was primarily due to an increase in the number of transactions processed.

Foreign currency movements decreased total revenues by approximately $35.0 million as compared to 2018 .

Revenues per transaction decreased to $0.50 for 2019 from $0.65 for 2018 .

epay Segment total revenues were $ 835.5 million for 2020, an increase of $ 66.2 million or 9 % compared to 2019 .

Revenue was higher by approximately $10 million related to a temporary increase in available margin provided by a mobile operator which was entirely passed on to the retailer.

The remaining increase in total revenues was primarily due to an increase in the number of transactions processed driven by continued digital media growth .

Foreign currency movements increased total revenues by approximately $0.5 million for 2020 compared to 2019 .

The epay segment was impacted by COVID-19 pandemic-driven government-imposed shelter-in-place orders and business closures, primarily at retail outlets, which were partially offset by increases in digital media offerings in Asia.

Revenues per transaction decreased to $ 0.35 for 2020 compared to $ 0.50 for 2019 .

The decrease in revenues per transaction was primarily driven by the increase in the number of mobile transactions processed in a region where we generally earn lower revenues per transaction.

Direct operating costs

epay Segment direct operating costs were $576.8 million for 2019 , an increase of $12.5 million or 2% as compared to 2018 .

epay Segment direct operating costs were $ 630.4 million for 2020 , an increase of $53.6 million or 9% compared to 2019 .

Direct operating costs in our epay Segment include the commissions we pay to retail merchants for the distribution and sale of prepaid mobile airtime and other prepaid products, expenses incurred to operate POS terminals and the cost of vouchers sold and physical gifts fulfilled.

The increase in direct operating costs was primarily due to the increase in the number of transactions processed.

Gross profit was $192.6 million for 2019 compared to $179.5 million for 2018 .

The increase in gross profit was primarily due to growth in transactions processed.

Gross margin increased to 25% for 2019 from 24.1% for 2018 , due to overall growth of the business.

The increase in direct operating costs was primarily due to the increase in transaction volumes for the large volume of low-value mobile top-up and digital transactions.

Foreign currency movements decreased direct operating costs by approximately $0.3 million for 2020 compared to 2019 .

Gross profit was $ 205.1 million for 2020, an increase of $12.5 million or 6% compared to $192.6 million for 2019 .

Gross margin decreased to 24.6 % for 2020 compared to 25.0 % for 2019 .

The increase in gross profit and the decrease in gross margin is driven by the increase in transaction volumes processed in regions where we generally earn lower revenues per transaction.

Salaries and benefits

Salaries and benefits increased $3.8 million or 7% for 2019 as compared to 2018 .

The increase was primarily due to higher headcount in an effort to grow the segment.

As a percentage of revenues, salaries and benefits remained relatively flat at 8.0% for 2019 compared to 7.8% for 2018 .

Salaries and benefits expenses were $ 64.8 million for 2020, an increase of $3.2 million or 5 % compared to 2019 .

The increase in salaries and benefits was driven by an increase in headcount to support the growth of the business.

As a percentage of revenues, these expenses decreased to 7.8% for 2020 compared to 8.0 % for 2019 .

Selling, general and administrative

Selling, general and administrative expenses for 2019 were $35.1 million , a decrease of $0.7 million or 2% as compared to 2018 .

Selling, general and administrative expenses for 2019 decreased mainly due to cost control efforts.

As a percentage of revenues, these expenses remained relatively flat at 4.6% for 2019 compared to 4.8% for 2018 .

Selling, general and administrative expenses were $ 35.8 million for 2020, an increase of $ 0.7 million or 2 % compared to 2019 .

The increase in selling, general and administrative expenses was driven by maintenance costs in hardware and software to operate the business, partially offset by a decrease in travel related expenses.

As a percentage of revenues, these expenses decreased to 4.3 % for 2020 compared to 4.6 % for 2019 .

Depreciation and amortization

Depreciation and amortization expense primarily represents depreciation of POS terminals we install in retail stores and amortization of acquired intangible assets.

Depreciation and amortization expense decreased $0.3 million or 4% in 2019 as compared to 2018 .

The decrease is primarily due to certain fixed assets becoming fully depreciated in 2019.

As a percentage of revenues, these expenses remained flat at 0.9% for both 2019 and 2018 .

Depreciation and amortization expenses were $7.9 million for 2020, an increase of $ 1.1 million or 16 % compared to 2019 .

Depreciation and amortization expenses primarily represent depreciation of POS terminals we install in retail stores and amortization of acquired intangible assets.

The increase is primarily due to the addition of POS terminals and software assets.

As a percentage of revenues, these expenses were flat at 0.9 % for both 2020 and 2019 .

Operating income

epay Segment operating income for 2019 was $89.2 million , an increase of $10.2 million or 13% as compared to 2018 .

Operating margin increased to 11.6% for 2019 from 10.6% for 2018 .

Operating income per transaction decreased to $0.06 for 2019 from $0.07 for 2018 .

The increases of operating income and margin were mainly due to an increase in the portion of lower-margin mobile transactions.

epay Segment operating income was $ 96.7 million for 2020, an increase of $ 7.5 million or 8 % compared to 2019 .

Operating margin was 11.6% for both 2020 and 2019 and operating income per transaction was $ 0.04 for 2020 compared to $ 0.06 for 2019 .

The increase in operating income and consistent operating margin was primarily due to an increase in the number of higher-margin digital media transactions and the decrease in operating income per transaction was driven by transactions processed in a region where we generally earn lower revenues per transaction.

Money Transfer Segment

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(dollar amounts in thousands)

Increase Amount

Increase Percent

Increase (Decrease) Amount

Increase (Decrease) Percent

Total revenues

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n/m — Not meaningful.

Money Transfer Segment total revenues were $1,096.2 million for 2019 , an increase of $53.3 million or 5% as compared to 2018 .

The increase in revenues was primarily due to increases in the number of money transfers processed, driven by growth in our U.S.

and foreign agent and correspondent payout networks.

Revenues per transaction was essentially flat at $9.57 for 2019 as compared to $9.69 for 2018 .

Foreign currency movements decreased total revenues for 2019 by approximately $26.7 million as compared to 2018 .

Money Transfer Segment total revenues were $ 1,183.8 mill ion for 2020 , an increase of $87.6 million or 8 % compared to 2019 .

The increase in revenue was primarily due to increases in U.S.

outbound and international-originated money transfers, partially offset by a decrease in the U.S.

domestic business.

Foreign currency movements increased total revenues by approximately $7.2 million for 2020 compared to 2019 .

Revenues per transaction increased to $ 10.16 for 2020 compared to $9.57 for 2019 .

The increase in revenues per transaction was primarily driven by the shift in the proportion of domestic to international transfers.

We earn higher revenue per transaction on international remittances.

Direct operating costs

Money Transfer Segment direct operating costs were $586.7 million for 2019 , an increase of $25.8 million or 5% as compared to 2018 .

Money Transfer Segment direct operating costs were $ 649.0 million for 2020 , an increase of $ 62.3 million or 11 % compared to 2019 .

Direct operating costs in the Money Transfer Segment primarily consist of commissions paid to agents who originate money transfers on our behalf and correspondent agents who disburse funds to the customers' destination beneficiaries, together with less significant costs, such as bank depository fees.

The increase in direct operating costs in 2019 was primarily due to growth in the number of money transfer transactions processed in both the U.S.

and foreign markets, partially offset by the impact of the U.S.

The increase in direct operating costs was primarily due the increase in the number of U.S.

outbound and international-originated money transfer transactions, partially offset by the impact of the U.S.

dollar strengthening against key foreign currencies.

Gross profit was $509.5 million for 2019 compared to $482.0 million for 2018 .

The increase in gross profit was primarily due to growth in the number of money transfer transactions processed in both the U.S.

and foreign markets.

Gross margins remained flat at 46.5% for 2019 compared to 46.2% for 2018 .

Foreign currency movements increased direct operating costs by approximately $4.3 million for 2020 compared to 2019 .

Gross profit was $534.8 million for 2020, an increase of $ 25.3 million or 5% compared to $ 509.5 million for 2019 .

Gross margin decreased to 45.2 % for 2020 compared to 46.5 % for 2019 .

The increase in gross profit was primarily due t o increases in U.S.

outbound and international-originated money transfers .

Salaries and benefits

Salaries and benefits increased $14.0 million or 7% for 2019 compared to 2018 .

The increase in salaries and benefits was primarily due to the expansion of our operations.

As a percentage of revenues, salaries and benefits increased slightly to 19.0% for 2019 from 18.7% for 2018 .

Salaries and benefits expenses were $ 213.5 million for 2020, an increase of $4.7 million or 2 % compared to 2019 .

The increase in salaries and benefits was primarily driven by an increase in headcount to support the growth of the business, partially offset by a decrease in bonus expense.

As a percentage of revenues, these expenses de creased to 18.0 % for 2020 compared to 19.0% for 2019 .

Selling, general and administrative

Selling, general and administrative expenses for 2019 were $133.1 million , an increase of $7.4 million or 6% as compared to 2018 .

The increase was primarily due to expenses incurred to support the growth of our money transfer services and the expansion of new products in both the U.S.

and foreign markets.

As a percentage of revenues, selling, general and administrative expenses remained flat at 12.1% for 2019 compared to 12.0% for 2018 .

Acquired intangible assets impairment

Acquired intangible assets impairment charge for 2018 was $7.0 million due to the Company's decision to re-brand the HiFX trade name to xe.

There was no impairment recorded in 2019.

Goodwill is not amortized but instead is at least annually tested for impairment as of October 1, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired.

The Company first performed a qualitative review of all reporting units to determine that it was more likely than not that the fair value of each of the reporting units exceeded the carrying value.

The Company determined that it was more likely than not that the fair value of the reporting units exceeded the carrying value except for one reporting unit.

A quantitative impairment test was performed for the one reporting unit.

When performing the quantitative impairment test, the fair value is estimated with the income method by using the discounted cash flows and use of the guideline public company method using market multiple valuation techniques.

As of October 1, 2019, the fair value of the reporting unit exceeded the carrying value indicating no impairment.

The estimates of fair value require significant judgment.

We based our fair value estimates on assumptions that we believe to be reasonable but that are inherently uncertain, including estimates of future growth rates and operating margins and assumptions about the overall economic climate and the competitive environment for our business units.

There can be no assurance that our estimates and assumptions made for purposes of our goodwill impairment testing as of the time of testing will prove to be accurate predictions of the future.

Selling, general and administrative expenses were $142.2 million for 2020, an increase of $9.1 million or 7 % compared to 2019 .

The increase was primarily due to expenses incurred to support the growth of our money transfer services, the expansion of new products and services in both the U.S.

and foreign markets, and an increase in bad debt expense, partially offset by a decrease in travel related expenses.

As a percentage of revenues, these expenses de creased to 12.0% for 2020 compared to 12.1 % for 2019 .

Goodwill and acquired intangible assets impairment

Due to the economic impacts of the COVID-19 pandemic, the Company recorded an $82.7 million non-cash goodwill impairment charge related to the xe reporting unit during the second quarter of 2020.

The non-cash goodwill impairment charge was recorded for xe as a result of declines in the international payments business stemming from economic uncertainty.

During the second half of 2020, a $2.0 million non-cash acquired intangible asset impairment charge was recorded for xe on previously acquired customer relationship intangible assets due to the discontinuation of trading with certain customers during 2020.

Depreciation and amortization

Depreciation and amortization expense increased $0.8 million for 2019 compared to 2018 .

Depreciation and amortization primarily represent amortization of acquired intangible assets and depreciation of money transfer terminals, computers and software, leasehold improvements and office equipment.

For 2019 , depreciation and amortization expense increased compared to 2018 primarily due to investments made to support the growth in the business.

As a percentage of revenues, depreciation and amortization expense decreased to 3.0% for 2019 from 3.1% for 2018 , primarily due to certain intangible assets becoming fully amortized in 2018.

Depreciation and amortization expenses were $34.7 million for 2020, an increase of $ 1.8 million or 6% compared to 2019 .

Depreciation and amortization expenses primarily represent amortization of acquired intangible assets and depreciation of money transfer terminals, computers and software, leasehold improvements and office equipment.

The increase is primarily due to investments made to support the growth in the business.

As a percentage of revenues, these expenses de creased to 2.9% for 2020 compared to 3.0 % for 2019.

Operating income

Money Transfer Segment operating income was $134.8 million for 2019 , an increase of $12.3 million or 10% as compared to 2018 .

Operating income increased primarily due to the growth in the number of money transfers processed.

Operating margin increased to 12.3% for 2019 from 11.7% .

Operating income per transaction increased to $1.18 for 2019 from $1.14 for 2018 .

The increase was primarily due to the growth in the number of money transfers processed which did not require similar increases in support costs.

Money Transfer Segment operating income was $59.7 million for 2020 , a decrease of $ 75.1 million or 56 % compared to 2019 .

Operating margin decreased to 5.

0 % for 2020 compared to 12.3 % for 2019 and operating income per transaction decreased to $ 0.51 for 2020 compared to $ 1.18 for 2019 .

The decreases in operating income and operating margin were primarily driven by the non-cash goodwill impairment charge and the increase in selling, general and administrative expenses incurred to support the expansion of new products and markets, partially offset by increases in higher margin transactions for U.S.

outbound and international-originated money transfers during the third and fourth quarter of 2020.

Corporate Services

The components of Corporate Services' operating expenses for 2019 , and 2018 were as follows:

The following table summarizes the results of operations for Corporate Services for the years ended December 31, 2020 and 2019 :

Year Ended December 31,

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(dollar amounts in thousands)

Increase (Decrease) Amount

Increase (Decrease) Percent

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Corporate operating expenses

Overall, operating expenses for Corporate Services increased 11% for 2019 as compared to 2018 .

The increase is primarily attributable to the increase in salaries and benefits expenses mainly attributable to an increase in incentive compensation related to the Company's performance relative to its targets, partly offset by a decrease in selling, general and administrative expense primarily due to a decrease in professional services.

Total Corporate operating expenses were $43.1 million for 2020, a decrease of $2.4 million or 5% compared to 2019 .

The decrease is attributable to a decrease in bonus expense.

Other Expense, Net

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(dollar amounts in thousands)

Increase (Decrease) Amount

Increase (Decrease) Percent

Interest income

Interest expense

(Loss) Income from unconsolidated affiliates

Other gains, net

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Other expense, net

____________________

n/m — Not meaningful.

Interest income

The Company received interest on cash balances held with banks.

The increase is interest income in 2019 is primarily due to an increase in those balances.

Other gains, net

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Prior to the redemption date, approximately $ 352.4 million principal amount of the Retired Convertible Notes was submitted for conversion for the remainder.

The Company settled the principal amount with cash and issuing shares of Common Stock valued at $147.24 per

In accordance with ASC 470, the Company recognized a loss of $9.8 million on the conversion and redemption of the debt, representing the difference between the fair value of the Retired Convertible Notes and the carrying value of the Retired Convertible Notes at the time of conversion.

The Company settled the principal amount with cash and issuing shares of common stock valued at $ 147.24 per share.

In accordance with ASC 470 , the Company recognized a loss of $ 9.8 million on the conversion of those Restricted Convertible Notes and the redemption of the remaining Retired Convertible Notes, representing the difference between the fair value of the Retired Convertible Notes and the carrying value of the Retired Convertible Notes at the time of conversion and redemption.

Foreign currency exchange (loss) gain, net

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dollar weakens, our corporate entities will record foreign currency exchange gains.

We recorded a net foreign currency exchange gain of $2.7 million in 2019 and a loss of $26.7 million in 2018 .

These realized and unrealized foreign currency exchange gains and losses primarily reflect the respective weakening and strengthening of the U.S.

dollar against the currencies of the countries in which we operate.

We recorded a net foreign currency exchange loss of $ 3.8 million for 2020 and a net foreign currency exchange gain of $ 2.7 million in 2019 .

These realized and unrealized foreign currency exchange losses and gains reflect the fluctuation in the value of the U.S.

dollar against the currencies of the countries in which we operated during the respective periods.

Income Tax Expense

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Income tax benefit (expense) attributable to 2017 U.S.

Income tax benefit attributable to acquired intangible assets impairment

Income tax benefit (expense) attributable to foreign currency exchange (loss) gain, net

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Tax Reform").

In 2017 we had a net provisional tax expense of $41.6 million resulting from U.S.

In the fourth quarter of 2018, we adjusted our accounting for the tax effects of U.S.

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 .

foreign tax credits, which reduced the net tax expense by $ 25.7 million .

See Note 14 , Income Taxes, to the Consolidated Financial Statements for further information.

The effective income tax rates were also significantly influenced by the impact of foreign currency exchange gains (losses).

Excluding these items from pre-tax income, as well as the related tax effects for these items, our adjusted effective income tax rates were 28.1% and 26.0% for the years ended December 31, 2019 and 2018, respectively.

The effective income tax rate, as adjusted, for 2019 and 2018 was higher than the applicable statutory income tax rate of 21% primarily because of higher income tax rates in foreign countries where we have significant operations and the tax effects of the global intangible low-taxed income ("GILTI") provision of U.S.

The effective income tax rate, as adjusted, for 2019 is higher than 2018 as a result of substantially more foreign earnings of the Company being subject to higher foreign statutory income tax rates.

The effective income tax rates were also significantly influenced by the impact of the goodwill and acquired intangible asset impairment and foreign currency exchange gains (losses).

Excluding foreign currency exchange gains (losses) and goodwill and acquired intangible asset impairment items from pre-tax income, as well as the related tax effects for these items, our adjusted effective income tax rates were 13.2 % and 28.1 % for the years ended December 31, 2020 and 2019 , respectively.

The effective income tax rate, as adjusted, for 2020 was lower than the applicable statutory income tax rate of 21 % primarily because of the release of unrecognized tax benefits for the completion of foreign country tax audits.

The effective income tax rate, as adjusted, for 2019 was higher than the applicable statutory income tax rate of 21 % primarily because of higher income tax rates in foreign countries where we have significant operations.

and the tax effects of the global intangible low-taxed income ("GILTI") provision of U.S.

We determine income tax expense based upon enacted tax laws applicable in each of the taxing jurisdictions where we conduct business.

Based on our interpretation of such laws, and considering the evidence of available facts and circumstances and baseline operating forecasts, we have accrued the estimated income tax effects of certain transactions, business ventures, contractual and organizational structures, and the estimated future reversal of timing differences.

Based on our interpretation of such laws, and considering the evidence of available facts and circumstances and baseline operating forecasts, we have accrued the estimated income tax effects of certain transactions, business ventures, contract and organizational structures, and the estimated future reversal of timing differences.

Should a taxing jurisdiction change its laws or dispute our conclusions, or should management become aware of new facts or other evidence that could alter our conclusions, the resulting impact to our estimates could have a material adverse effect on our results of operations and financial condition.

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GAAP measures are used by management to conduct and evaluate its business during its regular review of operating results for the periods presented.

Our total liability for uncertain tax positions under Accounting Standards Codification ("ASC") 740-10-25 and - 30 was $ 39.8 million as of December 31, 2020 .

The application of ASC 740-10-25 and -30 requires significant judgment in assessing the outcome of future income tax examinations and their potential impact on the Company's estimated effective income tax rate and the value of deferred tax assets, such as those related to the Company's net operating loss carryforwards.

It is reasonably possible that the balance of gross unrecognized tax benefits could significantly change within the next twelve months, as a result of the resolution of audit examinations and expirations of certain statutes of limitations and, accordingly, materially affect our Consolidated Financial Statements.

At this time, it is not possible to estimate the range of change due to the uncertainty of potential outcomes.

Net (Income) Loss Attributable To Noncontrolling Interest

Net loss attributable to noncontrolling interests was $0.1 million for 2019 and $0.7 million for 2018 .

Net income attributable to noncontrolling interests was $ 0.1 million for 2020 and net loss attributable to noncontrolling interests was $ 0.1 million for 2019 .

Noncontrolling interests represent the elimination of net income or loss attributable to the minority shareholders' portion of the following consolidated subsidiaries that are not wholly owned:

Percent Owned

Segment - Country

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Euronet Infinitium Solutions

Net Income Attributable to Euronet

Net income attributable to Euronet was $346.7 million and $232.9 million for 2019 and 2018 , respectively.

Net income attributable to Euronet increased $113.9 million in 2019 compared to 2018.

The increase in net income for 2019 was primarily due to an increase in operating income of $117.3 million , an increase of $29.4 million in net foreign currency exchange gain, a decrease in interest expense of $1.3 million , an increase in interest income of $0.6 million, and an increase in income from unconsolidated affiliates of $0.1 million.

The increases were partly offset by an increase in income tax expense of $24.3 million , an increase in net loss attributable to early retirement of debt of $9.8 million, and a decrease of net loss attributable to noncontrolling interests of $0.7 million.

Net (Loss) Income Attributable to Euronet

Net loss attributable to Euronet was $ 3.4 million for 2020 compared to the net income attributable to Euronet for 2019, a decrease of $ 350.1 million or 101 % .

The decrease in net income was primarily attributable to the $267.4 million decrease in revenues, the $161.2 million increase in operating expenses (including the $106.6 million non-cash goodwill and acquired intangible asset impairment charges), and $6.5 million increase in net foreign currency exchange losses, partially offset by a $9.8 million decrease in loss on early retirement of debt and a decrease in income tax expense of $75.6 million.

Translation Adjustment

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dollars, differences between current and historical exchange rates generate this translation adjustment.

We recorded a net loss on translation adjustments of $13.9 million in 2019 and a loss of $56.7 million in 2018 .

During 2019 and 2018, the U.S.

We recorded a net gain on translation adjustments of $ 70.8 million for 2020 and a net loss of $ 13.9 million for 2019 .

During 2020, the U.S.

dollar weakened compared to key foreign currencies, resulting in translation gains which were recorded in comprehensive income.

I n 2019 , the U.S.

dollar strengthened compared to most currencies, resulting in translation losses which were recorded in comprehensive income.

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As of December 31, 2020 , we had working capital of $ 1,510.5 million, which is calculated as the difference between total current assets and total current liabilities, compared to working capital of $ 1,284.8 million as of December 31, 2019 .

The increase in working capital is primarily due to the issuance Convertible Notes and Senior Notes in 2019.

The increase in working capital is primarily driven by an increase in borrowings on our revolving credit facility of $270.4 million and operating results for 2020, partially offset by $239.8 million of share repurchases during the first quarter of 2020.

This $270.4 million was utilized to facilitate effective cash management for year-end payment and settlement requirements across many countries and was repaid in January 2021.

Our ratio of current assets to current liabilities was 1.81 and 1.79 as of December 31, 2020 and December 31, 2019 , respectively.

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As of December 31, 2020 , we had approximately $ 411.1 million of our own cash in use or designated for use in our ATM network, which is recorded in ATM cash on Euronet's Consolidated Balance Sheet.

We had cash and cash equivalents of $1,817 million as of December 31, 2019 , of which $1,504 million was held outside of the U.S.

ATM cash decreased $254.5 million from $665.6 million as of December 31, 2019 to $411.1 million as of December 31, 2020 as a result of the reduction in number of active ATMs as of December 31, 2020 compared to December 31, 2019.

The Company has $1,420.3 million of unrestricted cash as of December 31, 2020 compared to $786.1 million as of December 31, 2019.

The increase in cash is primarily due to the transfer of ATM cash to unrestricted cash, cash generated from operations, and additional borrowings on the Credit Facility of $270.4 million, partially offset by $239.8 million in share repurchases during the first quarter of 2020.

Including the $411.1 million of cash in ATMs at December 31, 2020, the Company has access to $1,831.4 million in available cash, and $668.8 million available under the credit facility with no significant long-term debt principal payments until October 2023.

We had cash, cash equivalents and restricted cash of $2,099.5 million as of December 31, 2020 , of which $ 1,394.8 million was held outside of the U.S.

and is expected to be indefinitely reinvested for continued use in foreign operations.

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Cash flows provided by operating activities were $253.5 million for 2020 compared to $504.5 million for 2019.

The increase in operating cash flows was primarily due to improved operating results, partly offset by fluctuations in working capital mainly associated with the timing of the settlement processes with content providers in the epay Segment, with correspondents in the Money Transfer Segment, and with card organizations and banks in the EFT Processing Segment.

The decrease in operating cash flows was primarily due to the decrease in net income, partially offset by fluctuations in working capital mainly associated with the timing of the settlement processes with content providers in the epay Segment, with correspondents in the Money Transfer Segment, and with card organizations and banks in the EFT Processing Segment.

Investing activity cash flow

Cash flows used in investing activities were $105.5 million for 2020 compared to $229.0 million for 2019.

The increase was primarily due to acquisitions and increased capital expenditures mainly related to our ATM network expansion.

During 2019, we used $94.2 million for acquisitions.

The Company completed four investments in 2019 and two investments in 2018.

The acquisitions have been accounted for in accordance with U.S.

GAAP and the results of operations have been included from the respective dates of acquisition.

Purchases of property and equipment were $131.3 million and $112.5 million for 2019 and 2018 , respectively.

Cash used for software development and long-term assets totaled $7.3 million for 2019 and $8.5 million for 2018 .

Other investing activities consist mainly of proceeds from the sale of property and equipment of $3.7 million for 2019 and $1.6 million in 2018 .

The decrease is primarily the result of a $93.1 million decrease in acquisitions during 2020 compared to 2019.

We used $97.6 million for purchases of property and equipment in 2020 compared to $131.3 million in 2019 .

The decrease in purchases of property and equipment is primarily driven by the COVID-19 pandemic related impacts to the EFT segment.

Cash used for software development and other investing activities totaled $7.8 million in 2020 compared to $7.3 million in 2019 .

Other investing activities consists mainly of proceeds from the sale of property and equipment of $1.0 million for 2020 and $3.7 million for 2019.

Financing activity cash flow

Cash flows provided by financing activities were $416.3 million for 2019 compared to $2.0 million for 2018 .

We generally borrow amounts under our revolving credit facility seasonally to fund our independent ATM network as well as several times each month to support the short-term cash needs of our Money Transfer segment in order to fund the correspondent network in advance of collecting remittance amounts from the agency network.

These borrowings related to the Money Transfer Segment are repaid over a very short period of time, generally within a few days.

Net borrowings on debt obligations were $500.2 million in 2019 compared to net repayments of $170.5 million for 2018 .

The increase in net borrowings as compared to 2018 was primarily the result of borrowing additional amounts under the revolving credit facility for ATM cash needs.

Additionally, for 2019 and 2018 , we paid $6.5 million and $6.1 million , respectively, for finance lease obligations.

We used $74.5 million and $177.9 million for the repurchase of shares during 2019 and 2018 , respectively.

Of the $74.5 million repurchased shares, $70.9 million in value of Euronet Common Stock were under the Repurchase Program.

Further, we received proceeds of $15.0 million and $18.6 million during 2019 and 2018 , respectively, for the issuance of stock in connection with our Stock Incentive Plan.

Cash flows provided financing activities were $35.4 million for 2020 compared to $416.3 million for 2019 .

The net borrowings on debt obligations were $265.2 million for 2020 compared to $500.2 million in 2019 .

The decrease in net borrowings was the result of the issuance of $1,194.9 million of Convertible Notes and Senior Notes during 2019 which were used to fund the operating cash of our IAD networks, repay revolving credit facility borrowings and repurchase a portion of existing convertible notes, partially offset by $270.4 million outstanding on the Credit Facility as of December 31, 2020.

We repurchased $241.5 million and $74.5 million of our common stock during 2020 and 2019 , respectively.

Of the $241.5 million repurchased shares, $239.8 million of Euronet common stock was repurchased under our repurchase program.

We received proceeds of $18.1 million and $15.0 million during 2020 and 2019 , respectively, for the issuance of stock in connection with our Stock Incentive Plan.

Other sources of capital

Credit Facility — On October 17, 2018, the Company entered into a new $1.0 billion unsecured credit agreement (the "Credit Facility") that expires on October 17, 2023.

The Credit Facility allows for borrowings in Australian Dollars, British Pounds Sterling, Canadian Dollars, Czech Koruna, Danish Krone, Euros, Hungarian Forints, Japanese Yen, New Zealand Dollars, Norwegian Krone, Polish Zlotys, Swedish Krona, Swiss Francs, and U.S.

The revolving credit facility contains a $200 million sublimit for the issuance of letters of credit, a $50 million sublimit for U.S.

Credit Facility - On October 17, 2018, the Company entered into a $1.0 billion unsecured credit agreement (the "Credit Facility") that expires on October 17, 2023.

The Credit Facility allows for borrowings in Australian dollars, British pounds sterling, Canadian dollars, Czech koruna, Danish krone, euro, Hungarian forints, Japanese yen, New Zealand dollars, Norwegian krone, Polish zlotys, Swedish krona, Swiss francs, and U.S.

The Credit Facility contains a $200 million sublimit for the issuance of letters of credit, a $50 million sublimit for U.S.

dollar swingline loans, and a $90 million sublimit for certain foreign currencies swingline loans.

As of December 31, 2019 , fees and interest on borrowings are based upon the Company's corporate credit rating (as defined in the credit agreement) and are based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over the London InterBank Offered Rate ("LIBOR") or a margin over the base rate, as selected by us, with the applicable margin ranging from 1.125% to 2.0% (or 0.175% to 1.0% for base rate loans).

As of December 31, 2019 , we had no borrowings and the outstanding stand-by letters of credit under the revolving credit facility were $53.0 million .

The remaining $947.0 million under the revolving credit facility was available for borrowing.

As of December 31, 2019 , the weighted average interest rate under the revolving credit facility was 2.7% , excluding amortization of deferred financing costs.

Convertible debt — On March 18, 2019, we completed the sale of $525.0 million in principal amount of Convertible Senior Notes due 2049 (“Convertible Notes”), and retired $401.5 million Convertible Senior Notes that would have been due in 2044 ("Retired Notes").

The Retired Notes had an interest rate of 1.5% per annum payable semi-annually in April and October, and were convertible into shares of Euronet Common Stock

As of December 31, 2020 , fees and interest on borrowings are based upon the Company's corporate credit rating (as defined in the Credit Facility) and are based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over the London InterBank Offered Rate ("LIBOR") or a margin over the base rate, as selected by us, with the applicable margin ranging from 1.125% to 2.0% (or 0.175% to 1.0% for base rate loans).

As of December 31, 2020 , we had $ 270.4 million of borrowings and $60.8 million of stand-by letters of credit outstanding under the Credit Facility.

The remaining $668.8 million under the Credit Facility was available for borrowing.

As of December 31, 2020, the weighted average interest rate under the Credit Facility was 1.2%, excluding amortization of deferred financing costs.

Convertible debt - On March 18, 2019, we completed the sale of $525.0 million in principal amount of Convertible Senior Notes due 2049 (“Convertible Notes”).

As of December 31, 2020 the carrying value of the Convertible Notes was $452.2 million.

The Convertible Notes were issued pursuant to an indenture, dated as of March 18, 2019 (the “Indenture”), by and between the Company and U.S.

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The Convertible Notes have an interest rate of 0.75% per annum payable semi-annually in March and September, and are convertible into shares of Euronet common stock at a conversion price of approximately $188.73 per share if certain conditions are met (relating to the closing prices of Euronet common stock exceeding certain thresholds for specified periods).

Holders of the Convertible Notes have the option to require the Company to repurchase for cash all or part of their Convertible Notes on each of March 15, 2025, 2029, 2034, 2039 and 2044 at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date.

Holders of the Convertible Notes have the option to require the Company to repurchase for cash all or part of their Convertible Notes on each of March 15, 2025, 2029, 2034, 2039 and 2044 at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date.

In connection with the issuance of the Convertible Notes, we recorded $12.8 million in debt issuance costs, which are being amortized through March 1, 2025.

For the Retired Convertible Notes, in accordance with ASC 470, the Company recognized a loss of $9.8 million on the conversion and redemption of the debt in 2019, representing the difference between the fair value of the Retired Convertible Notes and the carrying value of the Retired Convertible Notes at the time of conversion.

Senior Notes - On May 22, 2019, the Company completed the sale of €600 million ($669.9 million) aggregate principal amount of Senior Notes that expire on May 2026 (the “Senior Notes”).

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As of December 31, 2020 , the Company has outstanding €600 million ( $732.8 million ) principal amount of the Senior Notes.

In addition, the Company

may redeem some or all of these notes on or after February 22, 2026 at their principal amount plus any accrued and unpaid interest.

In addition, the Company may redeem some or all of these notes on or after February 22, 2026 at their principal amount plus any accrued and unpaid interest.

Other debt obligations — Certain of our subsidiaries have available credit lines and overdraft facilities to generally supplement short-term working capital requirements, when necessary.

There were $6.2 million and $38.5 million outstanding under these other obligation arrangements as of December 31, 2019 and 2018 , respectively.

Short-term debt obligations at December 31, 2019 were primarily comprised of $6.2 million due in 2020 under these other obligation arrangements.

There were $0.9 million and $6.2 million outstanding under these other obligation arrangements as of December 31, 2020 and December 31, 2019, respectively.

Other uses of capital

Capital expenditures and needs — Total capital expenditures for 2020 were $96.2 million .

These capital expenditures were primarily for the purchase of ATMs to expand our IAD network in Europe, the purchase and installation of ATMs in key under-penetrated markets, the purchase of POS terminals for the epay and Money Transfer Segments, and office, data center and company store computer equipment and software.

These capital expenditures were primarily for the purchase of ATMs to expand our IAD network in Europe, the purchase and installation of ATMs in key under-penetrated markets, the purchase of POS ter minals for the epay and Money Transfer Segments, and office, data center and company store computer equipment and software.

Total capital expenditures for 2021 are currently estimated to be approximately $ 135 million to $ 140 million.

At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on hand and amounts available under our revolving credit facility and other existing and potential future financing will be sufficient to meet our debt, leasing, and capital expenditure obligations.

The Company reduced capital expenditures for 2020 due to the COVID-19 pandemic.

Contractual lease obligations — The Company has entered into contractually binding operating and finance lease commitments to operate the business.

Operating lease expenses were $83.1 million for the year ended December 31, 2020 and $130.5 million for the year ended December 31, 2019.

Finance lease expenses were not material for 2020 or 2019.

For additional information on operating and finance lease obligations, see Note 13 , Leases, to the Consolidated Financial Statements.

At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on hand and amounts available under our Credit Facility and other existing and potential future financings will be sufficient to meet our debt, leasing, and capital expenditure obligations.

If our capital resources are not sufficient to meet these obligations, we will seek to refinance our debt and/or issue additional equity under terms acceptable to us.

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Share repurchase plan

The Company's Board of Directors has authorized a stock repurchase program ("Repurchase Program"), allowing Euronet to repurchase up to $375 million in value or 10.0 million shares of stock through March 31, 2020.

The Company's Board of Directors had authorized a stock repurchase program allowing Euronet to repurchase up to $375 million in value or 10.0 million shares of stock through March 31, 2020.

The Company repurchased all $375 million of stock under this program.

On March 11, 2019, in connection with the issuance of the Convertible Notes, the Board of Directors authorized an additional repurchase program of $120 million in value of the Company's common stock through March 11, 2021.

Repurchases under either program may take place in the open market or in privately negotiated transactions, including derivative transactions, and may be made under a Rule 10b5-1 plan.

For the year end December 31, 2019 , the Company repurchased 0.5 million shares under the Repurchase Program at a weighted average purchase price of $143.76 for a total value of $70.9 million .

For the year ended December 31, 2018, the Company repurchased 2.0 million shares under the Repurchase Program at a weighted average purchase price of $86.10 for a total value of $175.0 million.

The Company has repurchased $110.6 million of stock under this program.

On February 26, 2020, the Company put a repurchase program in place to repurchase up to $250 million in value, but not more than 5.0 million shares of common stock through February 28, 2022.

For the year ended December 31, 2020, t he Company repurchased 2.1 million shares under the repurchase programs at a weighted average purchase price of $114.41 for a total value of $239.8 million .

Repurchases under either of the current programs may take place in the open market or in privately negotiated transactions, including derivative transactions, and may be made under a Rule 10b5-1 plan.

Inflation and functional currencies

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Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2019 :

The follow ing table summarizes our contractual obligations as of December 31, 2020:

Payments due by period

(in thousands)

(in millions)

Long-term debt obligations, including interest

Obligations under operating leases

Obligations under finance leases

Purchase obligations

Obligations under operating leases (undiscounted)

The computation of interest for debt obligations with variable interest rates reflects interest rates in effect at December 31, 2020 and assumes no change in our revolving credit borrowings prior to the maturity date of our credit facility.

For additional information on debt obligations, see Note 11, Debt Obligations, to the Consolidated Financial Statements.

For additional information on capital and operating lease obligations, see Note 12, Leases, to the Consolidated Financial Statements.

Purchase obligations primarily consist of ATM maintenance and services as well as telecommunications services and professional fees.

For additional information on operating lease obligations, see Note 13, Leases, to the Consolidated Financial Statements.

Our total liability for uncertain tax positions under Accounting Standards Codification ("ASC") 740-10-25 and -30 was $39.8 million as of December 31, 2020.

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Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S.

T he preparation of financial statements in conformity with U.S.

GAAP which requires management to make estimates, judgments and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes.

Management considers an accounting policy and estimate to be critical if it requires the use of assumptions that were uncertain at the time the estimate was made and if changes in the estimate or selection of a different estimate could have a material effect on the Company's financial condition and results of operations.

Our most critical estimates and assumptions are used for computing income taxes, allocating the purchase price to assets acquired and liabilities assumed in acquisitions, and potential impairment of long-lived assets and goodwill.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

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This method gives consideration to the future tax consequences of deferred income or expense items and immediately recognizes changes in income tax laws upon enactment.

The statement of income effect is generally derived from changes in deferred income taxes, net of valuation allowances, on the balance sheet as measured by differences in the book and tax bases of our assets and liabilities.

The statement of income effect is generally derived from changes in deferred income taxes, net of valuation allowances, on the ba lance 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.

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In assessing the recognition of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

As more fully described in Note 13, Taxes, to the Consolidated Financial Statements, gross deferred tax assets were $278.6 million as of December 31, 2019 , partially offset by a valuation allowance of $83.2 million .

As more fully described in Note 14 , Income Taxes, to the Consolidated Financial Statements, gross deferred tax assets were $274.2 million as of December 31, 2020 , partially offset by a valuation allowance of $ 77.6 million .

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

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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.

Examples o f 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.

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In accordance with ASC Topic 350, Intangibles - Goodwill and Other (“ASC 350”) , we evaluate the carrying value of our indefinite-lived assets, including goodwill, at least annually or more frequently whenever events or changes in circumstances indicate that the asset may be impaired, or in the case of goodwill, that the fair value of the reporting unit may be less than its carrying amount.

Impairment tests are performed annually during the fourth quarter and are performed at the reporting unit level.

Our annual process for evaluating goodwill requires us to perform a qualitative assessment for all reporting units not subjected directly to the quantitative goodwill impairment test.

Our annual impairment tests are performed during the fourth quarter and are performed at the reporting unit level.

Our annual process for evaluating goodwill allows us to perform a qualitative assessment for all reporting units, and then perform a quantitative goodwill impairment test for those reporting units in which it is deemed necessary.

The qualitative factors evaluated by the Company include:

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If we determine a quantitative goodwill impairment test is appropriate, the test involves comparing the fair value of a reporting unit to its carrying amount, including goodwill, after any long-lived asset impairment charges.

Generally, the fair value represents discounted projected future cash flows and market multiple of earnings.

If the carrying amount of the reporting unit's goodwill exceeds the fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess.

Generally, the fair value is determined using discounted projected future cash flows and market multiple of earnings.

If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, a goodwill impairment loss is recognized in an amount equal to the excess.

Determining the fair value of reporting units requires significant management judgment in estimating future cash flows and assessing potential market and economic conditions.

It is reasonably possible that our operations will not perform as expected, or that estimates or assumptions could change, which may result in the recording of material non-cash impairment charges during the year in which these determinations take place.

The COVID-19 pandemic and subsequent mitigation efforts, which included global business shutdowns, the closing of borders and the implementation of mandatory social distancing requirements, created an unprecedented disruption to our business beginning in the first half of 2020.

These mitigation efforts coupled with the negative economic impacts to the tourism industry caused some of our reporting units to either have a temporary or sustained decline in revenues and earnings and necessitated changes to our forecasted outlook.

We determined the totality of these events constituted a triggering event that required us to perform an interim goodwill impairment assessment as of June 1, 2020.

We concluded a triggering event had occurred for six reporting units, resulting in quantitative impairment tests.

Three reporting units are within the EFT segment, two reporting units are within the Money Transfer segment, and one reporting unit is within the epay segment.

The fair value of these reporting units were determined using weighted results from the discounted cash flow model ("DCF model") and guideline public company method ("Market Approach model").

A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including forecasted revenue, forecasted EBITDA margin, and discount rate.

Significant assumptions and inputs in the Market Approach model are EBITDA, EBITDA market multiple, and the estimated control premium.

The DCF Model and Market Approach Model utilize Level 3 inputs in the fair value hierarchy as they include unobservable inputs that require significant management assumptions.

The results of the June 1, 2020 quantitative test were that three of the six reporting units’ fair value exceeded their respective carrying amounts.

For the remaining three reporting units, the quantitative test indicated that the fair value of each of the reporting units was less than the respective carrying amounts.

As a result, we recorded a non-cash goodwill impairment charge of $104.6 million with respect to the xe, Innova and Pure Commerce reporting units.

A total of $21.9 million of the impairment charge was included within the EFT Segment, and $82.7 million of the impairment charge was included in the Money Transfer Segment.

Subsequent to June 1, 2020 and through year-end, including the fourth quarter annual impairment test, management monitored whether there were events or changes in circumstances that had occurred, at a reporting unit level, to indicate that goodwill was impaired or further impaired.

There were no indications of impairment and no additional non-cash goodwill impairment charges were recorded.

Acquired finite-lived intangible assets are amortized over their estimated useful lives.

We evaluate the recoverability of our intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable.

The evaluation is performed at the lowest level for which identifiable cash flows are largely

independent of the cash flows of other assets and liabilities.

The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate.

If such review indicates that the

carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value.

If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to its fair value.

In addition to the recoverability assessment, we routinely review the remaining estimated useful lives of our finite-lived intangible assets.

If we reduce the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized over the revised estimated useful life.

As of December 31, 2019 , the Consolidated Balance Sheets includes goodwill of $743.8 million and acquired intangible assets, net of accumulated amortization, of $141.8 million .

For the year ended December 31, 2019 , no impairment of goodwill or acquired intangible assets has been identified.

As of December 31, 2020 , the Consolidated Balance Sheet includes goodwill of $665.8 million and acquired intangible assets, net of accumulated amortization, of $121.9 million.

The Company recorded $104.6 million of non-cash goodwill impairment charges and $2.0 million of acquired intangible asset impairment charges for the year ended December 31, 2020 .

For more detail on the Company's impairment charges, see Note 9 , Goodwill and Acquired Intangible Assets, Net, to the accompanying Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

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All statements other than statements of historical facts included in this document are forward-looking statements, including, but not limited to, statements regarding the following:

our business plans and financing plans and requirements;

o ur business plans and financing plans and requirements;

trends affecting our business plans and financing plans and requirements;

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the expected effects of changes in laws or accounting standards;

the impact of the COVID-19 pandemic on our results of operations and financial position;

technological advances;

projected costs and revenues.

Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to be correct.

Al though we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to be correct.

Investors are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties.

Actual results may materially differ from those in the forward-looking statements as a result of various factors, including, but not limited to, conditions in world financial markets and general economic conditions, including the effects in Europe of the U.K.'s departure from the E.U.

the speed and effectiveness of rollouts for vaccines and treatments for COVID-19;

the effects in Europe of the U.K.'s departure from the E.U.

and economic conditions in specific countries and regions;

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changes in fees payable for transactions performed for cards bearing international logos or over switching networks such as card transactions on ATMs;

our ability to comply with increasingly stringent regulatory requirements, including anti-money laundering, anti-terrorism, anti-bribery, consumer and data protection and the European Union's General Data Protection Regulation and Second Revised Payment Service Directive requirements;

our ability to comply with increasingly stringent regulatory requirements, including anti-money laundering, anti-terrorism, anti-bribery, sanctions, consumer and data protection and the European Union's General Data Protection Regulation and Second Revised Payment Service Directive requirements;

changes in laws and regulations affecting our business, including tax and immigration laws and any laws regulating payments, including DCC transactions, changes in our relationships with, or in fees charged by, our business partners;

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the cost of borrowing, availability of credit and terms of and compliance with debt covenants;

impacts from the COVID-19 virus;

and renewal of sources of funding as they expire and the availability of replacement funding and those factors referred to above and as set forth and more fully described in Part I, Item 1A — Risk Factors.

and ren ewal 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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis