EURONET WORLDWIDE, INC. 10-K

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 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. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Company Overview, Geographic Locations and Principal Products and Services Euronet is a leading electronic payments provider. We offer payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers. Our primary product offerings include comprehensive ATM, POS, card outsourcing, card issuing and merchant acquiring services, software solutions, electronic distribution of prepaid mobile airtime and other electronic payment products, foreign currency exchange services and global money transfer services. We operate in the following three segments: The EFT Processing Segment, which processes transactions for a network of 37,729 ATMs and approximately 340,000 POS terminals across Europe, the Middle East, Asia Pacific, and the United States. We provide comprehensive electronic payment solutions consisting of ATM cash withdrawal and deposit services, ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing, DCC, and other value added services. Through this segment, we also offer a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems. The epay Segment, which provides distribution, processing and collection services for prepaid mobile airtime and other electronic content. We operate a network of approximately 748,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services and other electronic content in Europe, the Middle East, Asia Pacific, the United States and South America. We also provide vouchers and physical gift fulfillment services in Europe. The Money Transfer Segment, which provides global consumer-to-consumer money transfer services, primarily under the brand names Ria, IME, AFEX, and xe and global account-to-account money transfer services under the brand name xe. We offer services under the brand names Ria and IME through a network of sending agents, Company-owned stores (primarily in North America, Europe and Malaysia) and our websites (riamoneytransfer.com and online.imeremit.com), disbursing money transfers through a worldwide correspondent network that includes approximately 464,000 locations. xe is a provider of foreign currency exchange information and offers money transfer services on its currency data websites (xe.com and x-rates.com). In addition to money transfers, we also offer customers bill payment services (primarily in the U.S.), payment alternatives such as money orders and prepaid debit cards, comprehensive check cashing services for a wide variety of issued checks, along with competitive foreign currency exchange services and prepaid mobile top-up. Through our xe brand, we offer cash management solutions and foreign currency risk management services to small-to-medium-sized businesses. We have six processing centers in Europe, five in Asia Pacific and two in North America. We have 36 principal offices in Europe, 14 in Asia Pacific, 10 in North America, three in the Middle East, two in South America and one in Africa. Our executive offices are located in Leawood, Kansas, USA. With approximately 71 % of our revenues denominated in currencies other than the U.S. dollar, any significant changes in foreign currency exchange rates will likely have a significant impact on our results of operations (for a further discussion, see Item 1 A - Risk Factors and Item 7 A - Quantitative and Qualitative Disclosures About Market Risk). 38 Sources of Revenues and Cash Flow Euronet earns revenues and income primarily from ATM management fees, transaction fees, commissions and foreign currency exchange margin. Each operating segment's sources of revenues are described below. EFT Processing Segment — Revenues in the EFT 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. Revenues in this segment are also derived from cardless payment, banknote recycling, tax refund services, license fees, professional services and maintenance fees for proprietary applicati on software and sales of related hardware. epay Segment — Revenues in the epay Segment, which represented approximately 33 % of total consolidated revenues for the year ended December 31, 2020 , are primarily derived from commissions or processing fees 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. Other electronic content offered by this segment includes digital content such as music, games and software, as well as, other products including prepaid long distance calling card plans, prepaid Internet plans, prepaid debit cards, gift cards, vouchers, transport payments, lottery payments, bill payment, and money transfer. Money Transfer Segment — Revenues in the Money Transfer Segment, which represented approximately 48 % of total consolidated revenues for the year ended December 31, 2020 , are primarily derived from transaction fees, as well as the margin earned from purchasing foreign currency at wholesale exchange rates and selling the foreign currency to customers at retail exchange rates. We have a sending agent network in place comprised of agents, customer service representatives, Company-owned stores, primarily in North America, Europe and Malaysia, and Ria, and xe branded websites, along with a worldwide network of correspondent agents, consisting primarily of financial institutions in the transfer destination countries. Sending and correspondent agents each earn fees for cash collection and distribution services, which are recognized as direct operating costs at the time of sale. The Company offers a money transfer product called Walmart-2-Walmart Money Transfer Service which allows customers to transfer money to and from Walmart stores in the U.S. Our Ria business executes the transfers with Walmart serving as both the sending agent and payout correspondent. Ria earns a lower margin from these transactions than its traditional money transfers; however, the arrangement has added a significant number of transactions to Ria's business. The agreement with Walmart establishes Ria as the only party through which Walmart will sell U.S. domestic money transfers branded with Walmart marks. The agreement is effective until April 2023. Thereafter, it will automatically renew for subsequent one year terms unless either party provides notice to the contrary. The agreement imposes certain obligations on each party, the most significant being service level requirements by Ria and money transfer compliance requirements by Walmart. Any violation of these requirements by Ria could result in an obligation to indemnify Walmart or termination of the contract by Walmart. However, the agreement allows the parties to resolve disputes by mutual agreement without termination of the agreement. Corporate Services, Eliminations and Other — In addition to operating in our principal operating segments described above, our "Corporate Services, Eliminations and Other" category includes non-operating activity, certain inter-segment eliminations and the cost of providing corporate and other administrative services to the operating segments, including most share-based compensation expense. These services are not directly identifiable with our reportable operating segments. 39 Opportunities and Challenges Our expansion plans and opportunities are focused on eight primary areas: increasing the number of ATMs and cash deposit terminals in our independent ATM networks; increasing transactions processed on our network of owned and operated ATMs and POS devices; signing new outsourced ATM and POS terminal management contracts; expanding value added services and other products offered by our EFT Processing Segment, including the sale of DCC, acquiring and other prepaid card services to banks and retailers; expanding our epay processing network and portfolio of digital content; expanding our money transfer services, cross-currency payments products and bill payment network; expanding our cash management solutions and foreign currency risk management services; and developing our credit and debit card outsourcing business. EFT Processing Segment — The continued expansion and development of our EFT Processing Segment business will depend on various factors including, but not limited to, the following: 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; our ability to enter into sponsorship agreements where our licenses are not applicable; our ability to enter into and renew ATM network cash supply agreements with financial institutions; the availability of financing for expansion; 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; the impact of changes in rules imposed by international card organizations such as Visa ® and Mastercard ® on card transactions on ATMs, including reductions in ATM interchange fees, restrictions on the ability to apply direct access fees, the ability to offer DCC transactions on ATMs, and increases in fees charged on DCC transactions; the impact of changes in laws and regulations affecting the profitability of our services, including regulation of DCC transactions by the E.U.; the impact of overall market trends on ATM transactions in our current target markets: our ability to expand and sign additional customers for the cross-border merchant processing and acquiring business; the continued development and implementation of our software products and their ability to interact with other leading products; and the impact of government imposed restrictions on travel into countries where we operate ATMs. 40 We consistently evaluate and add prospects to our list of potential ATM outsource customers. However, we cannot predict the increase or decrease in the number of ATMs we manage under outsourcing agreements because this depends largely on the willingness of banks to enter into outsourcing contracts with us. Due to the thorough internal reviews and extensive negotiations conducted by existing and prospective banking customers in choosing outsource vendors, the process of entering into or renewing outsourcing agreements can take several months. The process is further complicated by the legal and regulatory considerations of local countries. These agreements tend to cover large numbers of ATMs, so significant increases and decreases in our pool of managed ATMs could result from the acquisition or termination of one or more of these management contracts. Therefore, the timing of both current and new contract revenues is uncertain and unpredictable. Software products are an integral part of our product lines, and our investment in research, development, delivery and customer 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; our ability to use existing expertise and relationships with mobile operators, digital content providers and retailers to our advantage; the continued use of third-party providers such as ourselves to supply electronic processing solutions for existing and additional digital content; the development of mobile phone networks in the markets in which we do business and the increase in the number of mobile phone users; the overall pace of growth in the prepaid mobile phone and digital content market, including consumer shifts between prepaid and postpaid services; our market share of the retail distribution capacity; the development of new technologies that may compete with POS distribution of prepaid mobile airtime and other products; the level of commission that is paid to the various intermediaries in the electronic payment distribution chain; our ability to fully recover monies collected by retailers; our ability to add new and differentiated products in addition to those offered by mobile operators; our ability to develop and effectively market additional value added services; our ability to take advantage of cross-selling opportunities with our EFT Processing and Money Transfer Segments, including providing money transfer services through our distribution network; the availability of financing for further expansion; and the impact of government imposed restrictions on retailers with whom we partner. In all of the markets in which we operate, we are experiencing significant competition which will impact the rate at which we may be able to grow organically. Competition among prepaid mobile airtime and electronic content distributors results in the increase of commissions paid to retailers and increases in retailer attrition rates. To grow, we must capture market share from other prepaid mobile airtime and electronic content distributors, offer a superior product offering and demonstrate the value of a global network. In certain markets in which we operate, many of the factors that may contribute to rapid growth (growth in electronic content, expansion of our network of retailers and access to products of mobile operators and other content providers) remain present. 41 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; our ability to maintain our agent and correspondent networks; our ability to offer our products and services or develop new products and services at competitive prices to drive increases in transactions; the development of new technologies that may compete with our money transfer network, and our ability to acquire, develop and implement new technologies; the expansion of our services in markets where we operate and in new markets; our ability to strengthen our brands; our ability to fund working capital requirements; our ability to recover from agents funds collected from customers and our ability to recover advances made to correspondents; our ability to maintain compliance with the regulatory requirements of the jurisdictions in which we operate or plan to operate; our ability to take advantage of cross-selling opportunities with our epay Segment, including providing prepaid services through our stores and agents worldwide; our ability to leverage our banking and merchant/retailer relationships to expand money transfer corridors to Europe, Asia and Africa, including high growth corridors to Central and Eastern European countries; the availability of financing for further expansion; the ability to maintain banking relationships necessary for us to service our customers; our ability to successfully expand our agent network in Europe using our payment institution licenses under the Second Payment Services Directive ("PSD 2 ") and using our various licenses in the United States; our ability to provide additional value-added products under the xe brand; and the impact of government imposed restrictions on our network of agents and correspondents. The accounting policies of each segment are the same as those referenced in the summary of significant 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. Our ability to effectively manage our growth has required us to expand our operating systems and employee base, particularly at the management level, which has added incremental operating costs. An inability to continue to effectively manage expansion could have a material adverse effect on our business, growth, financial condition or results of operations. Inadequate technology and resources would impair our ability to maintain current processing technology and efficiencies, as well as deliver new and innovative services to compete in the marketplace. 42 COVID-19 The outbreak of the COVID-19 (coronavirus) pandemic has resulted in varying degrees of travel restrictions and shelter-in-place and other social distancing orders in most of the countries where the Company operates during the year ended December 31, 2020. Although the majority of these orders went into effect in late February 2020 or early March 2020, new orders continue to be implemented, or reinstated, as the pandemic spreads around the globe and there is a resurgence of infections. The EFT Segment has experienced declines in certain transaction volumes due to these restrictions, especially high-margin cross-border transactions. The epay Segment has experienced the impacts of consumer movement restrictions in certain markets, while other markets have been positively impacted where the Company has a higher mix of digital distribution or a higher concentration of retailers that are deemed essential and have remained open during the pandemic. In response to the COVID-19 pandemic driven impacts, the Company implemented several key measures to offset the impact across the business, including renegotiating certain third party contracts, reducing travel, decreasing capital expenditures, and expanding ATM seasonal deactivations (placing them in dormancy status, terminating, or re-negotiating) in more sites and more markets. Segment Revenues and Operating Income For The Years Ended December 31, 2020 a nd 2019 Revenues Operating Income (Expense) (in thousands) 2020 2019 2020 2019 EFT Processing $ 468,726 $ 888,712 $ (66,711) $ 296,640 epay 835,517 769,329 96,678 89,204 Money Transfer 1,183,849 1,096,226 59,709 134,790 Total 2,488,092 2,754,267 89,676 520,634 Corporate services, eliminations and other (5,392) (4,158 ) (43,054) (45,440 ) Total $ 2,482,700 $ 2,750,109 $ 46,622 $ 475,194 Summary 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. 43 Impact of changes in foreign currency exchange rates Our revenues and local expenses are recorded in the functional currencies of our operating entities, and then are translated into U.S. dollars for reporting purposes; therefore, amounts we earn outside the U.S. are negatively impacted by a stronger U.S. dollar and positively impacted by a weaker U.S. dollar. Considering the results by country and the associated functional currency, our 2020 consolidated operating income was approximately 7 % higher due to changes in foreign currency exchange rates when compared to 2019 . If significant, in our discussion we will refer to the impact of fluctuations in foreign currency exchange rates in our comparison of operating segment results. To provide further perspective on the impact of foreign currency exchange rates, the following table shows the changes in values relative to the U.S. dollar during 2020 and 2019 , of the currencies of the countries in which we have our most significant operations: Average Translation Rate Year Ended December 31, 2020 Increase (Decrease) Percent Currency 2020 2019 Australian dollar $ 0.6904 $ 0.6954 (1) % British pound $ 1.2835 $ 1.2771 1 % euro $ 1.1412 $ 1.1194 2 % Hungarian forint $ 0.0033 $ 0.0034 (3) % Indian rupee $ 0.0135 $ 0.0142 (5) % Malaysian ringgit $ 0.2383 $ 0.2416 (1) % New Zealand dollar $ 0.6504 $ 0.6591 (1) % Polish zloty $ 0.2571 $ 0.2606 (1) % 44 Comparison of Operating Results For The Years Ended December 31, 2020 and 2019 - By Operating Segment EFT Processing Segment The following table summarizes the results of operations for our EFT Processing Segment for the years ended December 31, 2020 and 2019 : Year Ended December 31, Year-over-Year Change (dollar amounts in thousands) 2020 2019 Increase (Decrease) Amount Increase (Decrease) Percent Total revenues $ 468,726 $ 888,712 $ (419,986) (47) % Operating expenses: Direct operating costs 302,637 397,132 (94,495) (24) % Salaries and benefits 91,526 87,603 3,923 4 % Selling, general and administrative 35,388 35,518 (130) (0) % Goodwill and acquired intangible assets impairment 21,861 — 21,861 n/m Depreciation and amortization 84,025 71,819 12,206 17 % Total operating expenses 535,437 592,072 (56,635) (10) % Operating (loss) income $ (66,711) $ 296,640 $ (363,351) (122) % Transactions processed (millions) 3,275 3,052 223 7 % ATMs in service as of December 31 37,729 46,070 (8,341) (18) % Average ATMs in service during the year 42,126 44,756 (2,630) (6) % ____________________ n/m — Not meaningful. Revenues EFT Processing Segment total revenues were $468.7 million for 2020, a decrease of $ 420.0 million or 47 % compared to 2019 . Total revenues for 2020 decreased due to the impact of fewer active ATMs and fewer high-margin cross-border transactions (DCC), related to COVID-19 pandemic-driven government-imposed border and business closures and shelter-in-place orders. The government imposed border and business closures and shelter-in-place orders were in effect for the majority of 2020. These closures resulted in a decrease in revenues for 2020 compared to 2019. Foreign currency movements decreased total revenues by approximately $1.0 million for 2020 compared to 2019 . Average monthly revenues per ATM decreased to $927 for 2020 compared to $ 1,655 for 2019 . Revenues per transaction decreased to $ 0.14 for 2020 compared to $ 0.29 for 2019 . The decreases in average monthly revenues per ATM and revenue per transaction were attributable to the decreases in 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 $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 . 45 Gross profit Gross profit, which is calculated as revenues less direct operating costs, was $ 166.1 million for 2020, a decrease of $325.5 million or 66% compared to $ 491.6 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 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 were $ 35.4 million for 2020, a decrease of $ 0.1 million or flat compared to 2019 . As a percentage of revenues these expenses increased to 7.5 % for 2020 compared to 4.0 % for 2019 . The increase was primarily due to an increase in bad debt expense, partially offset by a decrease in travel related expenses. Goodwill and acquired intangible assets impairment Due to the economic impacts of the COVID-19 pandemic, the Company recorded a $21.9 million non-cash goodwill impairment charge related to two reporting units during the second quarter of 2020. A $14.0 million non-cash goodwill impairment charge was recorded for Innova as a result of the decline in VAT refund activity directly related to the decline in international tourism within the European Union, and a $7.9 million non-cash goodwill impairment charge was recorded for Pure Commerce related to the decline in international tourism in Asia Pacific. Depreciation and amortization Depreciation and amortization expenses were $84.0 million for 2020, an increase of $12.2 million or 17% compared to 2019 . The increase was primarily attributable to the deployment of additional ATMs (and subsequent seasonal deactivation) and software assets. As a percentage of revenues these expenses increased to 17.9 % for 2020 compared to 8.1 % for 2019 . Operating (loss) income 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. 46 epay Segment The following table summarizes the results of operations for our epay Segment for the years ended December 31, 2020 and 2019: Year Ended December 31, Year-over-Year Change Increase (Decrease) Amount Increase (Decrease) Percent (dollar amounts in thousands) 2020 2019 Total revenues $ 835,517 $ 769,329 $ 66,188 9 % Operating expenses: Direct operating costs 630,391 576,757 53,634 9 % Salaries and benefits 64,769 61,540 3,229 5 % Selling, general and administrative 35,789 35,054 735 2 % Depreciation and amortization 7,890 6,774 1,116 16 % Total operating expenses 738,839 680,125 58,714 9 % Operating income $ 96,678 $ 89,204 $ 7,474 8 % Transactions processed (billions) 2.40 1.54 0.86 56 % Revenues epay Segment total revenues were $ 835.5 million for 2020, an increase of $ 66.2 million or 9 % compared to 2019 . Revenue was higher by approximately $10 million related to a temporary increase in available margin provided by a mobile operator which was entirely passed on to the retailer. The remaining increase in total revenues was primarily due to an increase in the number of transactions processed driven by continued digital media growth . Foreign currency movements increased total revenues by approximately $0.5 million for 2020 compared to 2019 . The epay segment was impacted by COVID-19 pandemic-driven government-imposed shelter-in-place orders and business closures, primarily at retail outlets, which were partially offset by increases in digital media offerings in Asia. Revenues per transaction decreased to $ 0.35 for 2020 compared to $ 0.50 for 2019 . The decrease in revenues per transaction was primarily driven by the increase in the number of mobile transactions processed in a region where we generally earn lower revenues per transaction. Direct operating costs epay Segment direct operating costs were $ 630.4 million for 2020 , an increase of $53.6 million or 9% compared to 2019 . Direct operating costs in our epay Segment include the commissions we pay to retail merchants for the distribution and sale of prepaid mobile airtime and other prepaid products, expenses incurred to operate POS terminals and the cost of vouchers sold and physical gifts fulfilled. The increase in direct operating costs was primarily due to the increase in transaction volumes for the large volume of low-value mobile top-up and digital transactions. Foreign currency movements decreased direct operating costs by approximately $0.3 million for 2020 compared to 2019 . Gross profit Gross profit was $ 205.1 million for 2020, an increase of $12.5 million or 6% compared to $192.6 million for 2019 . Gross margin decreased to 24.6 % for 2020 compared to 25.0 % for 2019 . The increase in gross profit and the decrease in gross margin is driven by the increase in transaction volumes processed in regions where we generally earn lower revenues per transaction. 47 Salaries and benefits Salaries and benefits expenses were $ 64.8 million for 2020, an increase of $3.2 million or 5 % compared to 2019 . The increase in salaries and benefits was driven by an increase in headcount to support the growth of the business. As a percentage of revenues, these expenses decreased to 7.8% for 2020 compared to 8.0 % for 2019 . Selling, general and administrative Selling, general and administrative expenses were $ 35.8 million for 2020, an increase of $ 0.7 million or 2 % compared to 2019 . The increase in selling, general and administrative expenses was driven by maintenance costs in hardware and software to operate the business, partially offset by a decrease in travel related expenses. As a percentage of revenues, these expenses decreased to 4.3 % for 2020 compared to 4.6 % for 2019 . Depreciation and amortization Depreciation and amortization expenses were $7.9 million for 2020, an increase of $ 1.1 million or 16 % compared to 2019 . Depreciation and amortization expenses primarily represent depreciation of POS terminals we install in retail stores and amortization of acquired intangible assets. The increase is primarily due to the addition of POS terminals and software assets. As a percentage of revenues, these expenses were flat at 0.9 % for both 2020 and 2019 . Operating income epay Segment operating income was $ 96.7 million for 2020, an increase of $ 7.5 million or 8 % compared to 2019 . Operating margin was 11.6% for both 2020 and 2019 and operating income per transaction was $ 0.04 for 2020 compared to $ 0.06 for 2019 . The increase in operating income and consistent operating margin was primarily due to an increase in the number of higher-margin digital media transactions and the decrease in operating income per transaction was driven by transactions processed in a region where we generally earn lower revenues per transaction. Money Transfer Segment The following table summarizes the results of operations for our Money Transfer Segment for the years ended December 31 , 2020 and 2019 : Year Ended December 31, Year-over-Year Change (dollar amounts in thousands) 2020 2019 Increase (Decrease) Amount Increase (Decrease) Percent Total revenues $ 1,183,849 $ 1,096,226 $ 87,623 8 % Operating expenses: Direct operating costs 649,033 586,730 62,303 11 % Salaries and benefits 213,511 208,792 4,719 2 % Selling, general and administrative 142,161 133,068 9,093 7 % Goodwill and acquired intangible assets impairment 84,741 — 84,741 n/m Depreciation and amortization 34,694 32,846 1,848 6 % Total operating expenses 1,124,140 961,436 162,704 17 % Operating income $ 59,709 $ 134,790 $ (75,081) (56) % Transactions processed (millions) 116.5 114.5 2.0 2 % ____________________ n/m — Not meaningful. 48 Revenues 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 $ 649.0 million for 2020 , an increase of $ 62.3 million or 11 % compared to 2019 . Direct operating costs in the Money Transfer Segment primarily consist of commissions paid to agents who originate money transfers on our behalf and correspondent agents who disburse funds to the customers' destination beneficiaries, together with less significant costs, such as bank depository fees. The increase in direct operating costs was primarily due the increase in the number of U.S. outbound and international-originated money transfer transactions, partially offset by the impact of the U.S. dollar strengthening against key foreign currencies. Foreign currency movements increased direct operating costs by approximately $4.3 million for 2020 compared to 2019 . Gross profit Gross profit was $534.8 million for 2020, an increase of $ 25.3 million or 5% compared to $ 509.5 million for 2019 . Gross margin decreased to 45.2 % for 2020 compared to 46.5 % for 2019 . The increase in gross profit was primarily due t o increases in U.S. outbound and international-originated money transfers . Salaries and benefits Salaries and benefits expenses were $ 213.5 million for 2020, an increase of $4.7 million or 2 % compared to 2019 . The increase in salaries and benefits was primarily driven by an increase in headcount to support the growth of the business, partially offset by a decrease in bonus expense. As a percentage of revenues, these expenses de creased to 18.0 % for 2020 compared to 19.0% for 2019 . Selling, general and administrative Selling, general and administrative expenses were $142.2 million for 2020, an increase of $9.1 million or 7 % compared to 2019 . The increase was primarily due to expenses incurred to support the growth of our money transfer services, the expansion of new products and services in both the U.S. and foreign markets, and an increase in bad debt expense, partially offset by a decrease in travel related expenses. As a percentage of revenues, these expenses 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. 49 Depreciation and amortization Depreciation and amortization expenses were $34.7 million for 2020, an increase of $ 1.8 million or 6% compared to 2019 . Depreciation and amortization expenses primarily represent amortization of acquired intangible assets and depreciation of money transfer terminals, computers and software, leasehold improvements and office equipment. The increase is primarily due to investments made to support the growth in the business. As a percentage of revenues, these expenses de creased to 2.9% for 2020 compared to 3.0 % for 2019. Operating income Money Transfer Segment operating income was $59.7 million for 2020 , a decrease of $ 75.1 million or 56 % compared to 2019 . Operating margin decreased to 5. 0 % for 2020 compared to 12.3 % for 2019 and operating income per transaction decreased to $ 0.51 for 2020 compared to $ 1.18 for 2019 . The decreases in operating income and operating margin were primarily driven by the non-cash goodwill impairment charge and the increase in selling, general and administrative expenses incurred to support the expansion of new products and markets, partially offset by increases in higher margin transactions for U.S. outbound and international-originated money transfers during the third and fourth quarter of 2020. Corporate Services The following table summarizes the results of operations for Corporate Services for the years ended December 31, 2020 and 2019 : Year Ended December 31, Year-over-Year Change (dollar amounts in thousands) 2020 2019 Increase (Decrease) Amount Increase (Decrease) Percent Salaries and benefits $ 34,336 $ 36,809 $ (2,473) (7) % Selling, general and administrative 8,306 8,326 (20) (0) % Depreciation and amortization 412 305 107 35 % Total operating expenses $ 43,054 $ 45,440 $ (2,386) (5) % Corporate operating expenses Total Corporate operating expenses were $43.1 million for 2020, a decrease of $2.4 million or 5% compared to 2019 . The decrease is attributable to a decrease in bonus expense. Other Expense, Net Year Ended December 31, Year-over-Year Change (dollar amounts in thousands) 2020 2019 Increase (Decrease) Amount Increase (Decrease) Percent Interest income $ 1,040 $ 1,969 $ (929) (47) % Interest expense (36,604) (36,237 ) (367) 1 % Other gains, net 869 (9,820) 10,689 (109) % Foreign currency exchange (loss) gain, net (3,756) 2,701 (6,457) (239) % Other expense, net $ (38,451) $ (41,387 ) $ 2,936 (7) % 50 Other gains, net In 2019 , the Company provided a notice of redemption on the outstanding Retired Convertible Notes. Prior to the redemption date, approximately $ 352.4 million principal amount of the Retired Convertible Notes was submitted for conversion for the remainder. The Company settled the principal amount with cash and issuing shares of common stock valued at $ 147.24 per share. In accordance with ASC 470 , the Company recognized a loss of $ 9.8 million on the conversion of those Restricted Convertible Notes and the redemption of the remaining Retired Convertible Notes, representing the difference between the fair value of the Retired Convertible Notes and the carrying value of the Retired Convertible Notes at the time of conversion and redemption. Foreign currency exchange (loss) gain, net Foreign currency exchange activity includes gains and losses on certain foreign currency exchange derivative contracts and the impact of remeasurement of assets and liabilities denominated in foreign currencies. Assets and liabilities denominated in currencies other than the local currency of each of our subsidiaries give rise to foreign currency exchange gains and losses. Foreign currency exchange gains and losses that result from remeasurement of these assets and liabilities are recorded in net income. The majority of our foreign currency exchange gains or losses are due to the remeasurement of intercompany loans which are not considered a long-term investment in nature and are in a currency other than the functional currency of one of the parties to the loan. For example, we make intercompany loans based in euros from our corporate division, which is comprised of U.S. dollar functional currency entities, to certain European entities that use the euro as the functional currency. As the U.S. dollar strengthens against the euro, foreign currency exchange losses are recognized by our corporate entities because the number of euros to be received in settlement of the loans decreases in U.S. dollar terms. Conversely, in this example, in periods where the U.S. dollar weakens, our corporate entities will record foreign currency exchange gains. We recorded a net foreign currency exchange loss of $ 3.8 million for 2020 and a net foreign currency exchange gain of $ 2.7 million in 2019 . These realized and unrealized foreign currency exchange losses and gains reflect the fluctuation in the value of the U.S. dollar against the currencies of the countries in which we operated during the respective periods. Income Tax Expense Our effective income tax rates as reported and as adjusted are calculated below: Year Ended December 31, (dollar amounts in thousands) 2020 2019 Income before income taxes $ 8,171 $ 433,807 Income tax expense (11,475) (87,112 ) Net income $ (3,304) $ 346,695 Effective income tax rate 140.4 % 20.1 % Income before income taxes $ 8,171 $ 433,807 Adjust: Goodwill and acquired intangible assets impairment (106,602) — Adjust: Other gains, net 869 (9,820) Adjust: Foreign currency exchange (loss) gain, net (3,756) 2,701 Income before income taxes, as adjusted $ 117,660 $ 440,926 Income tax expense $ (11,475) $ (87,112 ) Adjust: Income tax benefit (expense) attributable to 2017 U.S. Tax Reform — 25,728 Adjust: Income tax benefit (expense) attributable to foreign currency exchange (loss) gain, net 4,055 10,990 Income tax expense, as adjusted $ (15,530) $ (123,830 ) Effective income tax rate, as adjusted 13.2 % 28.1 % 51 We calculate our effective income tax rate by dividing income tax expense by pre-tax book income. Our effective income tax rates were 140 .4 % and 20.1 % for the years ended December 31, 2020 and 2019 , respectively. On December 22, 2017, the U.S. enacted into law what is informally called the Tax Cuts and Jobs Act of 2017 ("U.S. Tax Reform"). In the fourth quarter of 2019 after additional regulatory guidance was issued by applicable taxing authorities, the Company elected to claim U.S. foreign tax credits, which reduced the net tax expense by $ 25.7 million . See Note 14 , Income Taxes, to the Consolidated Financial Statements for further information. The effective income tax rates were also significantly influenced by the impact of the goodwill and acquired intangible asset impairment and foreign currency exchange gains (losses). Excluding foreign currency exchange gains (losses) and goodwill and acquired intangible asset impairment items from pre-tax income, as well as the related tax effects for these items, our adjusted effective income tax rates were 13.2 % and 28.1 % for the years ended December 31, 2020 and 2019 , respectively. The effective income tax rate, as adjusted, for 2020 was lower than the applicable statutory income tax rate of 21 % primarily because of the release of unrecognized tax benefits for the completion of foreign country tax audits. The effective income tax rate, as adjusted, for 2019 was higher than the applicable statutory income tax rate of 21 % primarily because of higher income tax rates in foreign countries where we have significant operations. and the tax effects of the global intangible low-taxed income ("GILTI") provision of U.S. Tax Reform. We determine income tax expense based upon enacted tax laws applicable in each of the taxing jurisdictions where we conduct business. Based on our interpretation of such laws, and considering the evidence of available facts and circumstances and baseline operating forecasts, we have accrued the estimated income tax effects of certain transactions, business ventures, contract and organizational structures, and the estimated future reversal of timing differences. Should a taxing jurisdiction change its laws or dispute our conclusions, or should management become aware of new facts or other evidence that could alter our conclusions, the resulting impact to our estimates could have a material adverse effect on our results of operations and financial condition. Income before income taxes, as adjusted, income tax expense, as adjusted and effective income tax rate, as adjusted, are non-U.S. GAAP financial measures that management believes are useful for understanding why our effective income tax rates are significantly different than would be expected. These non-U.S. GAAP measures are used by management to conduct and evaluate its business during its regular review of operating results for the periods presented. Our total liability for uncertain tax positions under Accounting Standards Codification ("ASC") 740-10-25 and - 30 was $ 39.8 million as of December 31, 2020 . The application of ASC 740-10-25 and -30 requires significant judgment in assessing the outcome of future income tax examinations and their potential impact on the Company's estimated effective income tax rate and the value of deferred tax assets, such as those related to the Company's net operating loss carryforwards. It is reasonably possible that the balance of gross unrecognized tax benefits could significantly change within the next twelve months, as a result of the resolution of audit examinations and expirations of certain statutes of limitations and, accordingly, materially affect our Consolidated Financial Statements. At this time, it is not possible to estimate the range of change due to the uncertainty of potential outcomes. 52 Net (Income) Loss Attributable To Noncontrolling Interest Net income attributable to noncontrolling interests was $ 0.1 million for 2020 and net loss attributable to noncontrolling interests was $ 0.1 million for 2019 . Noncontrolling interests represent the elimination of net income or loss attributable to the minority shareholders' portion of the following consolidated subsidiaries that are not wholly owned: Subsidiary 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 (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 Translation gains and losses are the result of translating our foreign entities' balance sheets from local functional currency to the U.S. dollar reporting currency prior to consolidation and are recorded in comprehensive income. As required by U.S. GAAP, during this translation process, asset and liability accounts are translated at current foreign currency exchange rates and equity accounts are translated at historical rates. Historical rates represent the rates in effect when the balances in our equity accounts were originally created. By using this mix of rates to convert the balance sheet from functional currency to U.S. dollars, differences between current and historical exchange rates generate this translation adjustment. We recorded a net gain on translation adjustments of $ 70.8 million for 2020 and a net loss of $ 13.9 million for 2019 . During 2020, the U.S. dollar weakened compared to key foreign currencies, resulting in translation gains which were recorded in comprehensive income. I n 2019 , the U.S. dollar strengthened compared to most currencies, resulting in translation losses which were recorded in comprehensive income. Liquidity and Capital Resources Working capital As of December 31, 2020 , we had working capital of $ 1,510.5 million, which is calculated as the difference between total current assets and total current liabilities, compared to working capital of $ 1,284.8 million as of December 31, 2019 . The increase in working capital is primarily driven by an increase in borrowings on our revolving credit facility of $270.4 million and operating results for 2020, partially offset by $239.8 million of share repurchases during the first quarter of 2020. This $270.4 million was utilized to facilitate effective cash management for year-end payment and settlement requirements across many countries and was repaid in January 2021. Our ratio of current assets to current liabilities was 1.81 and 1.79 as of December 31, 2020 and December 31, 2019 , respectively. 53 We require substantial working capital to finance operations. The Money Transfer Segment funds the payout of the majority of our consumer-to-consumer money transfer services before receiving the benefit of amounts collected from customers by agents. Working capital needs increase due to weekends and banking holidays. As a result, we may report more or less working capital for the Money Transfer Segment based solely upon the day on which the reporting period ends. The epay Segment produces positive working capital, but much of it is restricted in connection with the administration of its customer collection and vendor remittance activities. In our EFT Processing Segment, we obtain a significant portion of the cash required to operate our ATMs through various cash supply arrangements, the amount of which is not recorded on Euronet's Consolidated Balance Sheets. However, in certain countries, we fund the cash required to operate our ATM network from borrowings under the revolving credit facilities and cash flows from operations. As of December 31, 2020 , we had approximately $ 411.1 million of our own cash in use or designated for use in our ATM network, which is recorded in ATM cash on Euronet's Consolidated Balance Sheet. ATM cash decreased $254.5 million from $665.6 million as of December 31, 2019 to $411.1 million as of December 31, 2020 as a result of the reduction in number of active ATMs as of December 31, 2020 compared to December 31, 2019. The Company has $1,420.3 million of unrestricted cash as of December 31, 2020 compared to $786.1 million as of December 31, 2019. The increase in cash is primarily due to the transfer of ATM cash to unrestricted cash, cash generated from operations, and additional borrowings on the Credit Facility of $270.4 million, partially offset by $239.8 million in share repurchases during the first quarter of 2020. Including the $411.1 million of cash in ATMs at December 31, 2020, the Company has access to $1,831.4 million in available cash, and $668.8 million available under the credit facility with no significant long-term debt principal payments until October 2023. We had cash, cash equivalents and restricted cash of $2,099.5 million as of December 31, 2020 , of which $ 1,394.8 million was held outside of the U.S. and is expected to be indefinitely reinvested for continued use in foreign operations. Repatriation of these assets to the U.S. could have negative tax consequences. The following table identifies cash and cash equivalents provided by/(used in) our operating, investing and financing activities for the years ended December 31, 2020 and 2019 (in thousands): Year Ended December 31, Liquidity 2020 2019 Cash and cash equivalents and restricted cash provided by (used in): Operating activities $ 253,505 $ 504,488 Investing activities (105,531) (229,027 ) Financing activities 35,398 416,298 Effect of foreign currency exchange rate changes on cash and cash equivalents and restricted cash 98,757 (5,332 ) Increase in cash and cash equivalents and restricted cash $ 282,129 $ 686,427 Operating cash flow Cash flows provided by operating activities were $253.5 million for 2020 compared to $504.5 million for 2019. The decrease in operating cash flows was primarily due to the decrease in net income, partially offset by fluctuations in working capital mainly associated with the timing of the settlement processes with content providers in the epay Segment, with correspondents in the Money Transfer Segment, and with card organizations and banks in the EFT Processing Segment. 54 Investing activity cash flow Cash flows used in investing activities were $105.5 million for 2020 compared to $229.0 million for 2019. The decrease is primarily the result of a $93.1 million decrease in acquisitions during 2020 compared to 2019. We used $97.6 million for purchases of property and equipment in 2020 compared to $131.3 million in 2019 . The decrease in purchases of property and equipment is primarily driven by the COVID-19 pandemic related impacts to the EFT segment. Cash used for software development and other investing activities totaled $7.8 million in 2020 compared to $7.3 million in 2019 . Other investing activities consists mainly of proceeds from the sale of property and equipment of $1.0 million for 2020 and $3.7 million for 2019. Financing activity cash flow Cash flows provided financing activities were $35.4 million for 2020 compared to $416.3 million for 2019 . The net borrowings on debt obligations were $265.2 million for 2020 compared to $500.2 million in 2019 . The decrease in net borrowings was the result of the issuance of $1,194.9 million of Convertible Notes and Senior Notes during 2019 which were used to fund the operating cash of our IAD networks, repay revolving credit facility borrowings and repurchase a portion of existing convertible notes, partially offset by $270.4 million outstanding on the Credit Facility as of December 31, 2020. We repurchased $241.5 million and $74.5 million of our common stock during 2020 and 2019 , respectively. Of the $241.5 million repurchased shares, $239.8 million of Euronet common stock was repurchased under our repurchase program. We received proceeds of $18.1 million and $15.0 million during 2020 and 2019 , respectively, for the issuance of stock in connection with our Stock Incentive Plan. Other sources of capital Credit Facility - On October 17, 2018, the Company entered into a $1.0 billion unsecured credit agreement (the "Credit Facility") that expires on October 17, 2023. The Credit Facility allows for borrowings in Australian dollars, British pounds sterling, Canadian dollars, Czech koruna, Danish krone, euro, Hungarian forints, Japanese yen, New Zealand dollars, Norwegian krone, Polish zlotys, Swedish krona, Swiss francs, and U.S. dollars. The Credit Facility contains a $200 million sublimit for the issuance of letters of credit, a $50 million sublimit for U.S. dollar swingline loans, and a $90 million sublimit for certain foreign currencies swingline loans. As of December 31, 2020 , fees and interest on borrowings are based upon the Company's corporate credit rating (as defined in the Credit Facility) and are based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over the London InterBank Offered Rate ("LIBOR") or a margin over the base rate, as selected by us, with the applicable margin ranging from 1.125% to 2.0% (or 0.175% to 1.0% for base rate loans). As of December 31, 2020 , we had $ 270.4 million of borrowings and $60.8 million of stand-by letters of credit outstanding under the Credit Facility. The remaining $668.8 million under the Credit Facility was available for borrowing. As of December 31, 2020, the weighted average interest rate under the Credit Facility was 1.2%, excluding amortization of deferred financing costs. Convertible debt - On March 18, 2019, we completed the sale of $525.0 million in principal amount of Convertible Senior Notes due 2049 (“Convertible Notes”). As of December 31, 2020 the carrying value of the Convertible Notes was $452.2 million. The Convertible Notes were issued pursuant to an indenture, dated as of March 18, 2019 (the “Indenture”), by and between the Company and U.S. Bank National Association, as trustee. The Convertible Notes have an interest rate of 0.75% per annum payable semi-annually in March and September, and are convertible into shares of Euronet common stock at a conversion price of approximately $188.73 per share if certain conditions are met (relating to the closing prices of Euronet common stock exceeding certain thresholds for specified periods). Holders of the Convertible Notes have the option to require the Company to repurchase for cash all or part of their Convertible Notes on each of March 15, 2025, 2029, 2034, 2039 and 2044 at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date. In connection with the issuance of the Convertible Notes, we recorded $12.8 million in debt issuance costs, which are being amortized through March 1, 2025. 55 For the Retired Convertible Notes, in accordance with ASC 470, the Company recognized a loss of $9.8 million on the conversion and redemption of the debt in 2019, representing the difference between the fair value of the Retired Convertible Notes and the carrying value of the Retired Convertible Notes at the time of conversion. Senior Notes - On May 22, 2019, the Company completed the sale of €600 million ($669.9 million) aggregate principal amount of Senior Notes that expire on May 2026 (the “Senior Notes”). The Senior Notes accrue interest at a rate of 1.375% per year, payable annually in arrears commencing May 22, 2020, until maturity or earlier redemption. As of December 31, 2020 , the Company has outstanding €600 million ( $732.8 million ) principal amount of the Senior Notes. In addition, the Company may redeem some or all of these notes on or after February 22, 2026 at their principal amount plus any accrued and unpaid interest. Other debt obligations — Certain of our subsidiaries have available credit lines and overdraft facilities to generally supplement short-term working capital requirements, when necessary. There were $0.9 million and $6.2 million outstanding under these other obligation arrangements as of December 31, 2020 and December 31, 2019, respectively. Other uses of capital Capital expenditures and needs — Total capital expenditures for 2020 were $96.2 million . These capital expenditures were primarily for the purchase of ATMs to expand our IAD network in Europe, the purchase and installation of ATMs in key under-penetrated markets, the purchase of POS 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. The Company reduced capital expenditures for 2020 due to the COVID-19 pandemic. Contractual lease obligations — The Company has entered into contractually binding operating and finance lease commitments to operate the business. Operating lease expenses were $83.1 million for the year ended December 31, 2020 and $130.5 million for the year ended December 31, 2019. Finance lease expenses were not material for 2020 or 2019. For additional information on operating and finance lease obligations, see Note 13 , Leases, to the Consolidated Financial Statements. At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on hand and amounts available under our Credit Facility and other existing and potential future financings will be sufficient to meet our debt, leasing, and capital expenditure obligations. If our capital resources are not sufficient to meet these obligations, we will seek to refinance our debt and/or issue additional equity under terms acceptable to us. However, we can offer no assurances that we will be able to obtain favorable terms for the refinancing of any of our debt or other obligations or for the issuance of additional equity. Share repurchase plan The Company's Board of Directors had authorized a stock repurchase program allowing Euronet to repurchase up to $375 million in value or 10.0 million shares of stock through March 31, 2020. The Company repurchased all $375 million of stock under this program. On March 11, 2019, in connection with the issuance of the Convertible Notes, the Board of Directors authorized an additional repurchase program of $120 million in value of the Company's common stock through March 11, 2021. The Company has repurchased $110.6 million of stock under this program. On February 26, 2020, the Company put a repurchase program in place to repurchase up to $250 million in value, but not more than 5.0 million shares of common stock through February 28, 2022. For the year ended December 31, 2020, 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 Generally, the countries in which we operate have experienced low and stable inflation in recent years. Therefore, the local currency in each of these markets is the functional currency. Currently, we do not believe that inflation will have a significant effect on our results of operations or financial position. We continually review inflation and the functional currency in each of the countries where we operate. 56 Off Balance Sheet Arrangements We have certain significant off balance sheet items described below, in the following section, “Contractual Obligations” and in Note 20, Commitments, to the Consolidated Financial Statements. On occasion, we grant guarantees of the obligations of our subsidiaries and we sometimes enter into agreements with unaffiliated third parties that contain indemnification provisions, the terms of which may vary depending on the negotiated terms of each respective agreement. Our liability under such indemnification provisions may be subject to time and materiality limitations, monetary caps and other conditions and defenses. To date, we are not aware of any significant claims made by the indemnified parties or parties to whom we have provided guarantees on behalf of our subsidiaries and, accordingly, no liabilities have been recorded as of December 31, 2020. Contractual Obligations The follow ing table summarizes our contractual obligations as of December 31, 2020: Payments due by period (in millions) Total Less than 1 year 1-3 years 3-5 years More than 5 years Long-term debt obligations, including interest $ 1,608.4 $ 17.3 $ 304.5 $ 549.9 $ 736.7 Obligations under operating leases (undiscounted) 163.8 48.6 60.8 27.3 27.1 Total $ 1,772.2 $ 65.9 $ 365.3 $ 577.2 $ 763.8 The computation of interest for debt obligations with variable interest rates reflects interest rates in effect at December 31, 2020 and assumes no change in our revolving credit borrowings prior to the maturity date of our credit facility. For additional information on debt obligations, see Note 11, Debt Obligations, to the Consolidated Financial Statements. For additional information on operating lease obligations, see Note 13, Leases, to the Consolidated Financial Statements. Our total liability for uncertain tax positions under Accounting Standards Codification ("ASC") 740-10-25 and -30 was $39.8 million as of December 31, 2020. The application of ASC 740-10-25 and -30 requires significant judgment in assessing the outcome of future income tax examinations and their potential impact on the Company's estimated effective income tax rate and the value of deferred tax assets, such as those related to the Company's net operating loss carryforwards. It is reasonably possible that the balance of gross unrecognized tax benefits could significantly change within the next twelve months, as a result of the resolution of audit examinations and expirations of certain statutes of limitations and, accordingly, materially affect our Consolidated Financial Statements. At this time, it is not possible to estimate the range of change due to the uncertainty of potential outcomes. Critical Accounting Policies and Estimates 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 intangible assets and goodwill. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from these estimates. For a summary of all of the Company's significant accounting policies, see Note 3, Summary of Significant Accounting Policies and Practices, to the accompanying Consolidated Financial Statements. 57 Accounting for income taxes The deferred income tax effects of transactions reported in different periods for financial reporting and income tax return purposes are recorded under the asset and liability method prescribed under ASC Topic 740, Income Taxes ("ASC 740"). This method gives consideration to the future tax consequences of deferred income or expense items and immediately recognizes changes in income tax laws upon enactment. The statement of income effect is generally derived from changes in deferred income taxes, net of valuation allowances, on the 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. Deferred tax assets realizable in future periods are recorded net of a valuation allowance based on an assessment of each entity's, or group of entities', ability to generate sufficient taxable income within an appropriate period, in a specific tax jurisdiction. In assessing the recognition of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will be realized. As more fully described in Note 14 , Income Taxes, to the Consolidated Financial Statements, gross deferred tax assets were $274.2 million as of December 31, 2020 , partially offset by a valuation allowance of $ 77.6 million . The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We make judgments and estimates on the scheduled reversal of deferred tax liabilities, historical and projected future taxable income in each country in which we operate, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and current projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe it is more likely than not that we will realize the benefits of these deductible differences, net of the existing valuation allowance at December 31, 2020 . If we have a history of generating taxable income in a certain country in which we operate, and baseline forecasts project continued taxable income in this country, we will reduce the valuation allowance for those deferred tax assets that we expect to realize. Additionally, we follow the provisions of ASC 740-10-25 and -30 to account for uncertainty in income tax positions. Applying the standard requires substantial management judgment and use of estimates in determining whether the impact of a tax position is "more likely than not" of being sustained on audit by the relevant taxing authority. We consider many factors when evaluating and estimating our tax positions, which may require periodic adjustments and which may not accurately anticipate actual outcomes. It is reasonably possible that amounts reserved for potential exposure could change significantly as a result of the conclusion of tax examinations and, accordingly, materially affect our operating results. Business combinations In accordance with ASC Topic 805, Business Combinations ("ASC 805"), we allocate the acquisition purchase price of an acquired entity to the assets acquired, including identifiable intangibles, and liabilities assumed based on their estimated fair values at the date of acquisition. Management applies various valuation methodologies to these acquired assets and assumed liabilities which often involve a significant degree of judgment, particularly when liquid markets do not exist for the particular item being valued. Examples 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. 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. 58 Goodwill and intangible assets In accordance with ASC Topic 350, Intangibles - Goodwill and Other (“ASC 350”) , we evaluate the carrying value of our indefinite-lived assets, including goodwill, at least annually or more frequently whenever events or changes in circumstances indicate that the asset may be impaired, or in the case of goodwill, that the fair value of the reporting unit may be less than its carrying amount. Our annual impairment tests are performed during the fourth quarter and are performed at the reporting unit level. Our annual process for evaluating goodwill allows us to perform a qualitative assessment for all reporting units, and then perform a quantitative goodwill impairment test for those reporting units in which it is deemed necessary. The qualitative factors evaluated by the Company include: economic conditions of the local business environment, overall financial performance, sensitivity analysis from the most recent quantitative test, and other entity specific factors as deemed appropriate. If we determine a quantitative goodwill impairment test is appropriate, the test involves comparing the fair value of a reporting unit to its carrying amount, including goodwill, after any long-lived asset impairment charges. Generally, the fair value is determined using discounted projected future cash flows and market multiple of earnings. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, a goodwill impairment loss is recognized in an amount equal to the excess. Determining the fair value of reporting units requires significant management judgment in estimating future cash flows and assessing potential market and economic conditions. It is reasonably possible that our operations will not perform as expected, or that estimates or assumptions could change, which may result in the recording of material non-cash impairment charges during the year in which these determinations take place. The COVID-19 pandemic and subsequent mitigation efforts, which included global business shutdowns, the closing of borders and the implementation of mandatory social distancing requirements, created an unprecedented disruption to our business beginning in the first half of 2020. These mitigation efforts coupled with the negative economic impacts to the tourism industry caused some of our reporting units to either have a temporary or sustained decline in revenues and earnings and necessitated changes to our forecasted outlook. We determined the totality of these events constituted a triggering event that required us to perform an interim goodwill impairment assessment as of June 1, 2020. We concluded a triggering event had occurred for six reporting units, resulting in quantitative impairment tests. Three reporting units are within the EFT segment, two reporting units are within the Money Transfer segment, and one reporting unit is within the epay segment. The fair value of these reporting units were determined using weighted results from the discounted cash flow model ("DCF model") and guideline public company method ("Market Approach model"). A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including forecasted revenue, forecasted EBITDA margin, and discount rate. Significant assumptions and inputs in the Market Approach model are EBITDA, EBITDA market multiple, and the estimated control premium. The DCF Model and Market Approach Model utilize Level 3 inputs in the fair value hierarchy as they include unobservable inputs that require significant management assumptions. The results of the June 1, 2020 quantitative test were that three of the six reporting units’ fair value exceeded their respective carrying amounts. For the remaining three reporting units, the quantitative test indicated that the fair value of each of the reporting units was less than the respective carrying amounts. As a result, we recorded a non-cash goodwill impairment charge of $104.6 million with respect to the xe, Innova and Pure Commerce reporting units. A total of $21.9 million of the impairment charge was included within the EFT Segment, and $82.7 million of the impairment charge was included in the Money Transfer Segment. Subsequent to June 1, 2020 and through year-end, including the fourth quarter annual impairment test, management monitored whether there were events or changes in circumstances that had occurred, at a reporting unit level, to indicate that goodwill was impaired or further impaired. There were no indications of impairment and no additional non-cash goodwill impairment charges were recorded. 59 Acquired finite-lived intangible assets are amortized over their estimated useful lives. We evaluate the recoverability of our intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to its fair value. In addition to the recoverability assessment, we routinely review the remaining estimated useful lives of our finite-lived intangible assets. If we reduce the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized over the revised estimated useful life. As of December 31, 2020 , the Consolidated Balance Sheet includes goodwill of $665.8 million and acquired intangible assets, net of accumulated amortization, of $121.9 million. The Company recorded $104.6 million of non-cash goodwill impairment charges and $2.0 million of acquired intangible asset impairment charges for the year ended December 31, 2020 . For more detail on the Company's impairment charges, see Note 9 , Goodwill and Acquired Intangible Assets, Net, to the accompanying Consolidated Financial Statements. Recently Issued Accounting Pronouncements See Item 8 of Part II, "Financial Statements and Supplementary Data - Note 3 - Summary of Significant Accounting Policies and Practices. Forward-Looking Statements This document contains statements that constitute forward-looking statements within the meaning of section 27A of the Securities Act of 1 933 and section 21E of the Securities Exchange Act of 1934 ("Exchange Act"). Generally, the words "believe," "expect," "anticipate," "intend," "estimate," "will" and similar expressions identify forward-looking statements. However, the absence of these words or similar expressions does not mean the statement is not forward-looking. All statements other than statements of historical facts included in this document are forward-looking statements, including, but not limited to, statements regarding the following: o ur business plans and financing plans and requirements; trends affecting our business plans and financing plans and requirements; trends affecting our business; the adequacy of capital to meet our capital requirements and expansion plans; the assumptions underlying our business plans; our ability to repay indebtedness; our estimated capital expenditures; the potential outcome of loss contingencies; our expectations regarding the closing of any pending acquisitions; business strategy; government regulatory action; the expected effects of changes in laws or accounting standards; the impact of the COVID-19 pandemic on our results of operations and financial position; technological advances; and projected costs and revenues. 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. 60 Investors are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may materially differ from those in the forward-looking statements as a result of various factors, including, but not limited to, conditions in world financial markets and general economic conditions, including impacts from the COVID-19 pandemic; the speed and effectiveness of rollouts for vaccines and treatments for COVID-19; the effects in Europe of the U.K.'s departure from the E.U. and economic conditions in specific countries and regions; technological developments affecting the market for our products and services; our ability to successfully introduce new products and services; foreign currency exchange rate fluctuations; the effects of any breach of our computer systems or those of our customers or vendors, including our financial processing networks or those of other third parties; interruptions in any of our systems or those of our vendors or other third parties; our ability to renew existing contracts at profitable rates; changes in fees payable for transactions performed for cards bearing international logos or over switching networks such as card transactions on ATMs; our ability to comply with increasingly stringent regulatory requirements, including anti-money laundering, anti-terrorism, anti-bribery, sanctions, consumer and data protection and the European Union's General Data Protection Regulation and Second Revised Payment Service Directive requirements; changes in laws and regulations affecting our business, including tax and immigration laws and any laws regulating payments, including DCC transactions, changes in our relationships with, or in fees charged by, our business partners; competition; the outcome of claims and other loss contingencies affecting Euronet; the cost of borrowing, availability of credit and terms of and compliance with debt covenants; and 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. 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.