EURONET WORLDWIDE, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The terms "Euronet," the "Company," "we" and "us" as used herein refer to Euronet Worldwide, Inc. and its subsidiaries. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This report contains statements that constitute forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934 (“Exchange Act”). Generally, the words "believe," "expect," "anticipate," "intend," "estimate," "will" and similar expressions identify forward-looking statements. However, the absence of these words or similar expressions does not mean the statement is not forward-looking. All statements other than statements of historical facts included in this document are forward-looking statements, including, but not limited to, statements regarding the following: our business plans and financing plans and requirements; trends affecting our business plans and financing plans and requirements; trends affecting our business; the adequacy of capital to meet our capital requirements and expansion plans; the assumptions underlying our business plans; our ability to repay indebtedness; our estimated capital expenditures; the potential outcome of loss contingencies; our expectations regarding the closing of any pending acquisitions; business strategy; government regulatory action; the expected effects of changes in laws or accounting standards; the impact of the COVID-19 pandemic on our results of operations and financial position; technological advances; and projected costs and revenues. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to be correct. Investors are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may materially differ from those in the forward-looking statements as a result of various factors, including, but not limited to, conditions in world financial markets and general economic conditions, including impacts from the COVID-19 pandemic; the effects in Europe of the U.K.'s departure from the E.U. and economic conditions in specific countries and regions; technological developments affecting the market for our products and services; our ability to successfully introduce new products and services; foreign currency exchange rate fluctuations; the effects of any breach of our computer systems or those of our customers or vendors, including our financial processing networks or those of other third parties; interruptions in any of our systems or those of our vendors or other third parties; our ability to renew existing contracts at profitable rates; changes in fees payable for transactions performed for cards bearing international logos or over switching networks such as card transactions on ATMs; our ability to comply with increasingly stringent regulatory requirements, including anti-money laundering, anti-terrorism, anti-bribery, sanctions, consumer and data protection and the European Union's General Data Protection Regulation and Second Revised Payment Service Directive requirements; changes in laws and regulations affecting our business, including tax and immigration laws and any laws regulating payments, including DCC transactions, changes in our relationships with, or in fees charged by, our business partners; competition; the outcome of claims and other loss contingencies affecting Euronet; the cost of borrowing, availability of credit and terms of and compliance with debt covenants; and renewal of sources of funding as they expire and the availability of replacement funding and those factors referred to above and as set forth and more fully described in Part I, Item 1A — Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2020 . Our Annual Report on Form 10-K is available on the SEC's EDGAR website at www.sec.gov, and copies may also be obtained by contacting the Company. Any forward-looking statements made in this Form 10-Q speak only as of the date of this report. Except as required by law, we do not intend, and do not undertake any obligation, to update any forward-looking statements to reflect future events or circumstances after the date of such statements. 22 Table of Contents OVERVIEW COMPANY OVERVIEW, GEOGRAPHIC LOCATIONS AND PRINCIPAL PRODUCTS AND SERVICES Euronet is a leading electronic payments provider. We offer payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers. Our primary product offerings include comprehensive Automated Teller Machine ("ATM"), point-of-sale ("POS"), card outsourcing, card issuing and merchant acquiring services, software solutions, electronic distribution of prepaid mobile airtime and other electronic payment products, foreign currency exchange services and global money transfer services. We operate in the following three segments: T he EFT Processing Segment, which processes transactions for a network of 45,520 active ATMs and approximately 400,000 POS terminals across Europe, the Middle East, Asia Pacific, the United States and Africa. We provide comprehensive electronic payment solutions consisting of ATM cash withdrawal and deposit services, ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing, dynamic currency conversion ("DCC"), and other value added services. Through this segment, we also offer a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems. The epay Segment, which provides distribution, processing and collection services for prepaid mobile airtime and other electronic content. We operate a network of approximately 739,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services and other electronic content in Europe, the Middle East, Asia Pacific, the United States and South America. We also provide vouchers and physical gift fulfillment services in Europe. The Money Transfer Segment, which provides global consumer-to-consumer money transfer services, primarily under the brand names Ria, AFEX, IME and xe and global account-to-account money transfer services under the brand name xe. We offer services under the brand names Ria, AFEX and IME through a network of sending agents, Company-owned stores (primarily in North America, Europe and Malaysia) and our websites (riamoneytransfer.com and online.imeremit.com), disbursing money transfers through a worldwide correspondent network that includes approximately 507,000 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 73% of our revenues denominated in currencies other than the U.S. dollar, any significant changes in foreign currency exchange rates will likely have a significant impact on our results of operations (for a further discussion, see Item 1A - Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020). SOURCES OF REVENUES AND CASH FLOW Euronet earns revenues and income primarily from ATM management fees, transaction fees, commissions and foreign currency exchange margin. Each operating segment’s sources of revenues are described below. EFT Processing Segment — Revenues in the EFT Processing Segment, which represented approximately 28 % and 20% of total consolidated revenues for the three and nine months ended September 30, 2021, respectively, are derived from fees charged for transactions made by cardholders on our proprietary network of ATMs, fixed management fees and transaction fees we charge to customers for operating ATMs and processing debit and credit cards under outsourcing and cross-border acquiring agreements, foreign currency exchange margin on DCC transactions, domestic and international surcharge, foreign currency dispensing and other value added services such as advertising, prepaid telecommunication recharges, bill payment, and money transfers provided over ATMs. Revenues in this segment are also derived from cardless payment, banknote recycling, tax refund services, license fees, professional services and maintenance fees for proprietary application software and sales of related hardware. 23 Table of Contents epay Segment — Revenues in the epay Segment, which represented approximately 29 % and 33% of total consolidated revenues for the three and nine months ended September 30, 2021, respectively, are primarily derived from commissions or processing fees received from mobile phone operators for the processing and distribution of prepaid mobile airtime and commissions earned from the distribution of other electronic content, vouchers, and physical gifts. The proportion of epay Segment revenues earned from the distribution of prepaid mobile phone time compared with other electronic products has decreased over time, and digital media content now produces approximately 67 % of epay Segment revenues. Other electronic content offered by this segment includes digital content such as music, games and software, as well as other products, including mobile wallets, prepaid long distance calling card plans, prepaid Internet plans, prepaid debit cards, gift cards, vouchers, transport payments, lottery payments, bill payment and money transfer. Money Transfer Segment — Revenues in the Money Transfer Segment, which represented approximately 43 % and 47% of total consolidated revenues for the three and nine months ended September 30, 2021, respectively, a re primarily derived from transaction fees, as well as the margin earned from purchasing foreign currency at wholesale exchange rates and selling the foreign currency to customers at retail exchange rates. We have a sending agent network in place comprised of agents, customer service representatives, Company-owned stores, primarily in North America, Europe and Malaysia, and Ria, IME and xe branded websites, along with a worldwide network of correspondent agents, consisting primarily of financial institutions in the transfer destination countries. Sending and correspondent agents each earn fees for cash collection and distribution services, which are recognized as direct operating costs at the time of sale. We offer a money transfer product called Walmart-2-Walmart Money Transfer Service which allows customers to transfer money to and from Walmart stores in the U.S. Our Ria business executes the transfers with Walmart serving as both the sending agent and payout correspondent. Ria earns a lower margin from these transactions than its traditional money transfers; however, the arrangement has added a significant number of transactions to Ria's business. The agreement with Walmart establishes Ria as the only party through which Walmart will sell U.S. domestic money transfers branded with Walmart marks. The agreement is effective until April 2023. Thereafter, it will automatically renew for subsequent one year terms unless either party provides notice to the contrary. The agreement imposes certain obligations on each party, the most significant being service level requirements by Ria and money transfer compliance requirements by Walmart. Any violation of these requirements by Ria could result in an obligation to indemnify Walmart or termination of the contract by Walmart. However, the agreement allows the parties to resolve disputes by mutual agreement without termination of the agreement. Corporate Services, Eliminations and Other — In addition to operating in our principal operating segments described above, our “Corporate Services, Eliminations and Other” category includes non-operating activity, certain inter-segment eliminations and the cost of providing corporate and other administrative services to the operating segments, including most share-based compensation expense. These services are not directly identifiable with our reportable operating segments. Opportunities and Challenges The global product markets in which we operate are large and fragmented, which poses both opportunities and challenges for our technology to disrupt new and existing competition. As an organization, our focus is on increasing our market presence through both physical (ATMs, POS terminals, company stores and agent correspondents) and digital assets and providing new and improved products and services for customers through all of our channels, which may in turn drive an increase in the number of transactions on our networks. Each of these opportunities also presents us with challenges, including differentiating our portfolio of products and services in highly competitive markets, the successful development and implementation of our software products and access to financing for expansion. The EFT Processing Segment opportunities include physical expansion into target markets, developing value added products or services, increasing high value DCC and surcharge transactions and efficiently leveraging our portfolio of software solutions. Our opportunities are dependent on renewing and expanding our card acceptance, ATM and POS management and outsourcing, cash supply and other commercial agreements with customers and financial institutions. Operational challenges in the EFT Processing Segment include obtaining and maintaining the required licenses and sponsorship agreements in markets in which we operate and navigating frequently changing rules imposed by international card organizations, such as Visa ® and Mastercard ® , that govern ATM interchange fees, direct access fees and other restrictions. Our profitability is dependent on the laws and regulations that govern DCC transactions, specifically in the E.U., as well as the laws and regulations of each country that we operate in that may impact the volume of cross-border and cross-currency transactions . The timing and amount of revenues in the EFT Processing Segment is uncertain and unpredictable due to inherent limitations in managing our estate of ATMs, which is dependent on contracts that cover large numbers of ATMs, which are complicated by legal and regulatory considerations of local countries, as well as our customers' decisions whether to outsource ATMs. 24 Table of Contents The epay Segment opportunities include renewing existing and negotiating new agreements in target markets in which we operate, primarily with mobile operators, digital content providers, financial institutions and retailers. The overall growth rate in the prepaid mobile phone and digital media content markets, shifts between prepaid and postpaid services, and our market share in those respective markets will have a significant impact on our ability to maintain and grow the epay Segment revenues. There is significant competition in these markets that may impact our ability to grow organically and increase the margin we earn and the margin that we pay to retailers. The profitability of the epay Segment is dependent on our ability to adapt to new technologies that may compete with POS distribution of digital content and prepaid mobile airtime, as well as our ability to leverage cross-selling opportunities with our EFT and Money Transfer Segments. The epay Segment opportunities may be impacted by government-imposed restrictions on retailers and/or content providers with whom we partner in countries in which we have a presence, and corresponding licensure requirements mandated upon such parties to legally operate in such countries . The Money Transfer Segment opportunities include expanding our portfolio of products and services to new and existing customers around the globe, which in turn may lead to an increase in transaction volumes. The opportunities to expand are contingent on our ability to effectively leverage our network of bank accounts for digital money transfer delivery, maintaining our physical agent network, cross selling opportunities with our EFT and epay segments and our penetration into high growth money transfer corridors. The challenges inherit in these opportunities include maintaining compliance with all regulatory requirements, maintaining all required licenses, ensuring the recoverability of funds advanced to agents and the continued reliance on the technologies required to operate our business. The volume of transactions processed on our network is impacted by shifts in our customer base, which can change rapidly with worker migration patterns and changes in unbanked populations across the globe. Foreign regulations that impact cross-border migration patterns and the money transfer markets can significantly impact our ability to grow the number of transactions on our network. For all segments, our continued expansion may involve additional acquisitions that could divert our resources and management time and require integration of new assets with our existing networks and services. Our ability to effectively manage our growth has required us to expand our operating systems and employee base, particularly at the management level, which has added incremental operating costs. An inability to continue to effectively manage expansion could have a material adverse effect on our business, growth, financial condition or results of operations. Inadequate technology and resources would impair our ability to maintain current processing technology and efficiencies, as well as deliver new and innovative services to compete in the marketplace. COVID-19 The outbreak of the COVID- 19 (coronavirus) pandemic has resulted in varying degrees of border and business closures, travel restrictions and other social distancing orders in most of the countries where we operate during the three and nine months ended September 30, 2021 and 2020 . These types of orders were first put into effect in late February 2020 or early March 2020. As the number and rate of new cases has fluctuated in various locations around the global, the closures, restrictions and other social distancing orders have been modified, rescinded and/or re-imposed. Although vaccines for COVID-19 are widely available in the U.S. and the European Union, their availability is still limited in many parts of the world where we operate. In addition, the rate of acceptance and long term effectiveness of the vaccines, especially against new variants, are still unknown. The EFT Segment has experienced declines in certain transaction volumes due to these restrictions, especially high-margin cross-border transactions. The epay Segment has experienced the impacts of consumer movement restrictions in certain markets, while other markets have been positively impacted where we have a higher mix of digital distribution or a higher concentration of retailers that are deemed essential and have remained open during the pandemic. The Money Transf er Segment continues to be impacted by the pandemic-related restrictions in certain markets that limit customers' ability to access our network of company-owned stores and agents. In response to the COVID- 19 pandemic driven impacts, we implemented several key measures to offset the impact across the business, including re-negotiating certain third party contracts, reducing travel, decreasing capital expenditures, and increasing the number of seasonal ATM deactivations (placing them in dormancy status, terminating, or re-negotiating) in more sites and more markets. 25 Table of Contents SEGMENT SUMMARY RESULTS OF OPERATIONS Revenues and operating income by segment for the three and nine months ended September 30, 2021 and 2020 are summarized in the tables below: Revenues for the Three Months Ended September 30, Year-over-Year Change Revenues for the Nine Months Ended September 30, Year-over-Year Change (dollar amounts in thousands) 2021 2020 Increase (Decrease) Amount Increase (Decrease) Percent 2021 2020 Increase (Decrease) Amount Increase (Decrease) Percent EFT Processing $ 227,129 $ 144,062 $ 83,067 58 % $ 427,687 $ 368,375 $ 59,312 16 % epay 238,319 198,939 39,380 20 % 724,540 559,413 165,127 30 % Money Transfer 353,451 323,092 30,359 9 % 1,037,659 852,189 185,470 22 % Total 818,899 666,093 152,806 23 % 2,189,886 1,779,977 409,909 23 % Corporate Services, Eliminations and Other (2,339 ) ( 1,742 ) (597 ) 34 % (5,970 ) ( 3,916 ) (2,054 ) 52 % Total $ 816,560 $ 664,351 $ 152,209 23 % $ 2,183,916 $ 1,776,061 $ 407,855 23 % Operating Income (Expense) for the Three Months Ended September 30, Year-over-Year Change Operating (Loss) Income for the Nine Months Ended September 30, Year-over-Year Change (dollar amounts in thousands) 2021 2020 Increase (Decrease) Amount Increase (Decrease) Percent 2021 2020 Increase (Decrease) Amount Increase (Decrease) Percent EFT Processing $ 63,202 $ 6,161 $ 57,041 926 % $ (2,230 ) $ (45,480 ) $ 43,250 (95) % epay 25,954 22,249 3,705 17 % 82,346 56,737 25,609 45 % Money Transfer 37,505 47,626 (10,121 ) ( 21 ) % 116,990 14,707 102,283 695 % Total 126,661 76,036 50,625 67 % 197,106 25,964 171,142 659 % Corporate Services, Eliminations and Other (12,167 ) ( 9,964 ) (2,203 ) 22 % (42,042 ) ( 29,561 ) (12,481 ) 42 % Total $ 114,494 $ 66,072 $ 48,422 73 % $ 155,064 $ (3,597 ) $ 158,661 ( 4,411 ) % Impact of changes in foreign currency exchange rates Our revenues and local expenses are recorded in the functional currencies of our operating entities, and then are translated into U.S. dollars for reporting purposes; therefore, amounts we earn outside the U.S. are negatively impacted by a stronger U.S. dollar and positively impacted by a weaker U.S. dollar. If significant, in our discussion we will refer to the impact of fluctuations in foreign currency exchange rates in our comparison of operating segment results. 26 Table of Contents To provide further perspective on the impact of foreign currency exchange rates, the following table shows the changes in values relative to the U.S. dollar of the currencies of the countries in which we have our most significant operations: Average Translation Rate Three Months Ended September 30, Average Translation Rate Nine Months Ended September 30, Currency (dollars per foreign currency) 2021 2020 Increase (Decrease) Percent 2021 2020 Increase Percent Australian dollar $ 0.7348 $ 0.7149 3 % $ 0.7589 $ 0.6768 12 % British pounds sterling $ 1.3783 $ 1.2916 7 % $ 1.3848 $ 1.2709 9 % euro $ 1.1787 $ 1.1689 1 % $ 1.1962 $ 1.1241 6 % Hungarian forint $ 0.0033 $ 0.0033 — % $ 0.0034 $ 0.0032 6 % Indian rupee $ 0.0135 $ 0.0135 — % $ 0.0136 $ 0.0135 1 % Malaysian ringgit $ 0.2385 $ 0.2382 0 % $ 0.2423 $ 0.2364 2 % New Zealand dollar $ 0.7007 $ 0.6619 6 % $ 0.7114 $ 0.6383 11 % Polish zloty $ 0.2585 $ 0.2633 (2) % $ 0.2634 $ 0.2544 4 % 27 Table of Contents COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020 EFT PROCESSING SEGMENT The following table summarizes the results of operations for our EFT Processing Segment for the three and nine months ended September 30, 2021 and 2020 : Three Months Ended September 30, Year-over-Year Change Nine Months Ended September 30, Year-over-Year Change (dollar amounts in thousands) 2021 2020 Increase (Decrease) Amount Increase (Decrease) Percent 2021 2020 Increase (Decrease) Amount Increase (Decrease) Percent Total revenues $ 227,129 $ 144,062 $ 83,067 58 % $ 427,687 $ 368,375 $ 59,312 16 % Operating expenses: Direct operating costs 106,321 82,626 23,695 29 % 258,614 232,627 25,987 11 % Salaries and benefits 23,665 25,182 (1,517 ) (6) % 71,334 68,562 2,772 4 % Selling, general and administrative 11,301 8,577 2,724 32 % 33,062 29,033 4,029 14 % Goodwill impairment — — — n/a — 21,861 (21,861 ) (100) % Depreciation and amortization 22,640 21,516 1,124 5 % 66,907 61,772 5,135 8 % Total operating expenses 163,927 137,901 26,026 19 % 429,917 413,855 16,062 4 % Operating income (loss) $ 63,202 $ 6,161 $ 57,041 926 % $ (2,230) $ (45,480 ) $ 43,250 (95) % Transactions processed (millions) 1,173 910 263 29 % 3,086 2,374 712 30 % Active ATMs as of September 30, 45,520 43,956 1,564 4 % 45,520 43,956 1,564 4 % Average active ATMs 45,595 44,259 1,336 3 % 40,913 43,143 ( 2,230 ) ( 5 ) % Revenues EFT Processing Segment total revenues were $227.1 million for the three months ended September 30, 2021, an increase of $83.1 million or 58% compared to the same period in 2020. EFT Processing Segment total revenues were $427.7 million for the nine months ended September 30, 2021, an increase of $59.3 million or 16% compared to the same period in 2020. Beginning in the late first quarter of 2020, the COVID-19 related government-imposed border and business closures, travel restrictions and other orders significantly reduced tourism throughout Europe, which led to a significant decrease in high-margin cross-border transactions (DCC) and surcharge transactions from March through September of 2020. During 2021, we began increasing our estate of active ATMs as certain countries began easing COVID-19 restrictions; however, remaining cross-border travel patterns prevented our volume of DCC and surcharge transactions from returning to pre-COVID-19 levels. Revenues increased for the three months ended September 30, 2021 compared to the same period in 2020 primarily due to the reactivation of ATMs and increase in high-margin cross-border transaction volumes during 2021. Revenues increased for the nine months ended September 30, 2021 compared to the same period in 2020 as cross-border travel and corresponding DCC and surcharge revenues increased, partially offset by the nine months ended September 30, 2020 including two months of pre-COVID-19 level DCC and surcharge transaction volumes compared to the nine months ended September 30, 2021 which had various levels of restrictions throughout the entire nine month period. Foreign currency movements increased revenues by approximately $1.7 million and $12.0 million for the three and nine months ended September 30, 2021 , respectively, compared to the same periods in 2020 . Average monthly revenues per ATM increased to $1,660 for the three months ended September 30, 2021 compared to $1,085 for the same period in 2020. Average monthly revenues per ATM increased to $1,162 for the nine months ended September 30, 2021 compared to $949 for the same period in 2020. Revenues per transaction increased to $0.19 for the three m onths ended September 30, 2021 compared to $0.16 for the same period in 2020. Revenues per transaction decreased to $0.14 for the nine m onths ended September 30, 2021 compared to $0.16 for the same period in 2020. For the three months ended September 30, 2021, the increase in average monthly revenues per ATM and revenues per transaction were attributable to the easing of COVID-19 restrictions throughout Europe and corresponding increase in cross-border DCC and surcharge transactions, partially offset by a shift in the mix of our transaction volume as we experienced a significant increase in the volume of lower revenue transactions (processing bank wallet transactions and payments for e-commerce sites) primarily in our Asia Pacific region. For the nine months ended September 30, 2021, the average monthly revenues per ATM increased primarily due to the lower average ATM count as we modified our estate of ATMs beginning in the second quarter of 2020, and revenues per transaction decreased due to the effect of lower DCC and surcharge revenues during January and February of 2021 compared to January and February 2020 prior to COVID-19's initial emergence as well as a shift in the mix of our transaction volume . 28 Table of Contents Direct operating costs EFT Processing Segment direct operating costs were $106.3 million for the three months ended September 30, 2021 , an increase of $23.7 million or 29 % compared to the same period in 2020 . EFT Processing Segment direct operating costs were $258.6 million for the nine months ended September 30, 2021 , an increase of $26.0 million or 11% co mpared to the same period in 2020 . Direct operating costs primarily consist of site rental fees, cash delivery costs, cash supply costs, maintenance, insurance, telecommunications, payment scheme processing fees, data center operations-related personnel, as well as the processing centers’ facility-related costs and other processing center-related expenses and commissions paid to retail merchants, banks and card processors involved with POS DCC transactions. For the three months ended September 30, 2021, the increase in direct operating costs was primarily due to the increase in the number of ATMs under management in Europe and the increase in transaction volumes. For the nine months ended September 30, 2021, the increase in direct operating costs was primarily due to the increase in transaction volumes, costs associated with modifying our estate of ATMs, and the weakening of the U.S. dollar . Foreign currency movements increased direct operating costs by approximately $0.6 million and $9.3 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020 . Gross profit Gross profit, which is calculated as revenues less direct operating costs, was $120.8 million for the three months ended September 30, 2021, an increase of $59.4 million or 97% compared to $61.4 million for the same period in 2020 . Gross profit was $169.1 million for the nine months ended September 30, 2021, an increase of $33.4 million or 25% compared to $135.7 million for the same period in 2020 . Gross profit as a percentage of revenues (“gross margin”) increased to 53.2 % and 39.5% for the three and nine months ended September 30, 2021, respectively , compared to 42.6% and 36.9% for the same periods in 2020, respectively. For the three and nine months ended September 30, 2021, the increase in gross profit and gross margin was primarily driven by the increase in cross-border transactions and overall increase in transaction volumes. Salaries and benefits Salaries and benefits expenses were $23.7 million for the three months ended September 30, 2021, a decrease of $1.5 million or 6% c ompared to the same period in 2020 . Salaries and benefits expenses were $71.3 million for the nine months ended September 30, 2021, an increase of $2.8 million or 4% c ompared to the same period in 2020 . The increase in salaries and benefits for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily driven by a $3.3 million increase from foreign currency movements in the countries where we employ our workforce. As a percentage of revenues, these expenses decreased to 10.4% and 16.7% for the three and nine months ended September 30, 2021, respectively, compared to 17.5% and 18.6% for the same periods in 2020, respectively . Selling, general and administrative Selling, general and administrative expenses were $11.3 million for the three months ended September 30, 2021, an increase of $2.7 million or 32% compared to the same period in 2020 . Selling, general and administrative expenses were $33.1 million for the nine months ended September 30, 2021, an increase of $4.0 million or 14% compared to the same period in 2020 . The increase in these expenses is primarily driven by an increase in professional fees and travel related expenses. As a percentage of revenues, these expenses decreased to 5.0 % and 7.7 % for the three and nine m onths ended September 30, 2021, respectively, compared to 6.0 % and 7.9% for the same periods in 2020, respectively . Goodwill 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 value added tax, or 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. 29 Table of Contents Depreciation and amortization Depreciation and amortization expenses were $22.6 million for the three months ended September 30, 2021, an increase of $1.1 million or 5% compared to the same period in 2020 . Depreciation and amortization expenses were $66.9 million for the nine months ended September 30, 2021, an increase of $5.1 million or 8% compared to the same period in 2020 . Foreign currency movements increased these expenses by $0.1 million and $2.9 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020, with the remainder of the increase driven by the acquisition of additional ATMs and software assets. As a percentage of revenues, these expenses decreased to 10.0 % and 15.6% for the three and nine months ended September 30, 2021 , respectively, compared to 14.9 % and 16.8% for the same periods in 2020, respectively . Operating income (loss) EFT Processing Segment had operating income of $63.2 million for the three months ended September 30, 2021, an increase of $57.0 million or 926% compared to the same period in 2020 . EFT Processing Segment had an operating loss of ( $2.2 million) for the nine months ended September 30, 2021, a decrease of $43.3 million or 95% compared to the operating loss in the same period in 2020 . O perating income (loss) as a percentage of revenues (“operating margin”) increased to 27.8 % and (0.5%) for the three and nine months ended September 30, 2021, respectively, compared to 4.3% and (12.3%) for the same periods in 2020, respectively . Operating income (loss) per transaction was $0.05 and ($0.00) for the three and nine months ended September 30, 2021, respectively, compared to $0.01 and ($0.02) for the same periods in 2020, respectively . For the three months ended September 30, 2021, the increases in operating income, operating margin and operating income per transaction were primarily driven by the easing of COVID-19 restrictions in limited regions where we operate. For the nine months ended September 30, 2021, the decrease in operating loss and increase in operating margin was primarily driven by the easing of COVID-19 restrictions in limited regions where we operate and the $21.9 million decrease in non-cash goodwill impairment charges , partially offset by the decrease in tourism in the months of January and February 2021 compared to the same periods in the prior period. EPAY SEGMENT The following table presents the results of operations for the three and nine months ended September 30, 2021 and 2020 for our epay Segment: Three Months Ended September 30, Year-over-Year Change Nine Months Ended September 30, Year-over-Year Change (dollar amounts in thousands) 2021 2020 Increase Amount Increase Percent 2021 2020 Increase Amount Increase Percent Total revenues $ 238,319 $ 198,939 $ 39,380 20 % $ 724,540 $ 559,413 $ 165,127 30 % Operating expenses: Direct operating costs 180,206 149,993 30,213 20 % 547,828 424,123 123,705 29 % Salaries and benefits 20,104 16,108 3,996 25 % 59,248 46,996 12,252 26 % Selling, general and administrative 9,802 8,455 1,347 16 % 28,594 25,928 2,666 10 % Depreciation and amortization 2,253 2,134 119 6 % 6,524 5,629 895 16 % Total operating expenses 212,365 176,690 35,675 20 % 642,194 502,676 139,518 28 % Operating income $ 25,954 $ 22,249 $ 3,705 17 % $ 82,346 $ 56,737 $ 25,609 45 % Transactions processed (millions) 811 661 150 23 % 2,266 1,692 574 34 % Revenues epay Segment total revenues were $238.3 million for the three months ended September 30, 2021, an increase of $39.4 million or 20% compared to the same period in 2020. epay Segment total revenues were $724.5 million for the nine months ended September 30, 2021, an increase of $165.1 million or 30% compared to the same period in 2020. The increase in revenues was primarily due to an increase in the number of transactions processed driven by continued digital media growth and the U.S. dollar weakening against key foreign currencies during 2021. Foreign currency movements in creased revenues by approximately $2.1 million and $31.0 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020 . The epay segment was impacted by COVID-19 pandemic-driven government-imposed lockdowns and business closures, primarily at retail outlets, which were offset by increases in digital media offerings in Asia and revenues derived from businesses that were classified as essential and remained open during the pandemic . 30 Table of Contents Revenues per transaction decreased to $0.29 and $0.32 for the three and nine months ended September 30, 2021, respectively, compared to $0.30 and $0.33 for the same periods in 2020, respectively . The decreases in revenues per transaction were 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 $180.2 million for the three months ended September 30, 2021 , an increase of $30.2 million or 20 % compared to the same period in 2020 . epay Segment direct operating costs were $547.8 million for the nine months ended September 30, 2021 , an increase of $123.7 million or 29 % compared to the same period in 2020 . Direct operating costs primarily consist of the commissions paid to retail merchants for the distribution and sale of prepaid mobile airtime and other prepaid products, expenses incurred to operate POS terminals and the cost of vouchers sold and physical gifts fulfilled. The increases in direct operating costs were primarily due to the increase in transaction volumes of low-value mobile top-up transactions, an increase in retailer commissions and the U.S. dollar weakening against key foreign currencies during 2021. Foreign currency movements increased direct operating costs by approximately $1.6 million and $22.9 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020 . Gross profit Gross profit was $58.1 million for the three months ended September 30, 2021, an increase of $9.2 million or 19% compared to $48.9 million for the same period in 2020 . Gross profit was $176.7 million for the nine months ended September 30, 2021, an increase of $41.4 million or 31% compared to $135.3 million for the same period in 2020 . Gross margin was 24.4 % for both the three and nine months ended September 30, 2021, compared to 24.6% and 24.2% for the same periods in 2020, respectively . The increase in gross profit is primarily driven by the increase in transaction volumes at relatively flat margins. Salaries and benefits Salaries and benefits expenses were $20.1 million for the three months ended September 30, 2021, an increase of $4.0 million or 25% compared to the same period in 2020 . Salaries and benefits expenses were $59.2 million for the nine months ended September 30, 2021, an increase of $12.3 million or 26% c ompared to the same period in 2020 . The increase in salaries and benefits was primarily driven by an increase in headcount to support the growth of the business and an increase in bonus expense. Foreign currency movements in the countries where we employ our workforce increased these expenses by $0.3 million and $3.0 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020. As a percentage of revenues, these expenses were 8.4% and 8.2% for the three and nine months ended September 30, 2021, respectively, compared to 8.1% and 8.4% for the same periods in 2020, respectively . Selling, general and administrative Selling, general and administrative expenses were $9.8 million for the three months ended September 30, 2021, an increase of $1.3 million or 16% compared to the same period in 2020 . Selling, general and administrative expenses were $28.6 million for the nine months ended September 30, 2021, an increase of $2.7 million or 10% compared to the same period in 2020 . Foreign currency movements increased these expenses by $0.1 million and $1.6 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020 . As a percentage of revenues, these expenses decreased to 4.1% and 3.9% for the three and nine months ended September 30, 2021, respectively, compared to 4.3 % and 4.6% for the same periods in 2020, respectively. Depreciation and amortization Depreciation and amortization expenses were $2.3 million for the three months ended September 30, 2021, an increase of $0.1 million or 6% compared to the same period in 2020 . Depreciation and amortization expenses were $6.5 million for the nine months ended September 30, 2021, an increase of $0.9 million or 16% compared to the same period in 2020 . Depreciation and amortization expense primarily represents depreciation of POS terminals we install in retail stores and amortization of acquired intangible assets. As a percentage of revenues, these expenses decreased to 0.9% for both the three and nine months ended September 30, 2021 , compared to 1.1 % and 1.0% for the same periods in 2020, respectively . 31 Table of Contents Operating income epay Segment operating income was $26.0 million for the three months ended September 30, 2021 , an increase of $3.7 million or 17% c ompared to the same period in 2020 . epay Segment operating income was $82.3 million for the nine months ended September 30, 2021 , an increase of $25.6 million or 45% c ompared to the same period in 2020 . Operating margin decreased to 10.9 % and increased to 11.4% for the three and nine months ended September 30, 2021 , respectively, compared to 11.2 % and 10.1% for the same periods in 2020 , respectively. Operating income per transaction was $0.03 and $0.04 for the three and nine m onths ended September 30, 2021, respectively, compared to $0.03 for both of the same periods in 2020. The increase in operating income and relatively flat operating margin for the three months ended September 30, 2021 compared to the same period in 2020 was primarily due to an increase in the number of overall transactions. The increases in operating income and operating margin for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to an increase in the number of higher-margin digital media transactions . MONEY TRANSFER SEGMENT The following table presents the results of operations for the three and nine months ended September 30, 2021 and 2020 for the Money Transfer Segment: Three Months Ended September 30, Year-over-Year Change Nine Months Ended September 30, Year-over-Year Change (dollar amounts in thousands) 2021 2020 Increase (Decrease) Amount Increase (Decrease) Percent 2021 2020 Increase (Decrease) Amount Increase (Decrease) Percent Total revenues $ 353,451 $ 323,092 $ 30,359 9 % $ 1,037,659 $ 852,189 $ 185,470 22 % Operating expenses: Direct operating costs 200,231 176,718 23,513 13 % 589,273 464,216 125,057 27 % Salaries and benefits 65,285 52,035 13,250 25 % 188,535 154,958 33,577 22 % Selling, general and administrative 41,533 36,601 4,932 13 % 115,975 108,355 7,620 7 % Goodwill and acquired intangible assets impairment — 1,467 (1,467 ) (100) % — 84,160 (84,160 ) (100) % Depreciation and amortization 8,897 8,645 252 3 % 26,886 25,793 1,093 4 % Total operating expenses 315,946 275,466 40,480 15 % 920,669 837,482 83,187 10 % Operating income $ 37,505 $ 47,626 $ (10,121 ) ( 21 ) % $ 116,990 $ 14,707 $ 102,283 695 % Transactions processed (millions) 34.1 30.9 3.2 10 % 99.4 84.1 15.3 18 % Revenues Money Transfer Segment total revenues were $353.5 million for the three months ended September 30, 2021, an increase of $30.4 million or 9% compared to the same period in 2020. Money Transfer Segment total revenues were $1,037.7 million for the nine months ended September 30, 2021, an increase of $185.5 million or 22% compared to the same period in 2020. The increase in revenues was primarily due to increases in U.S. outbound and international-originated money transfers, partially offset by decreases in the U.S. domestic business and transactions in the Middle East region. Revenues per transaction decreased to $10.37 and increased to $10.44 for the three and nine months ended September 30, 2021, respectively , compared to $10.46 and $10.13 for the same periods in 2020, respectively . Foreign currency movements increased revenues by approximately $3.2 million and $35.4 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020 . Direct operating costs Money Transfer Segment direct operating costs were $200.2 million for the three months ended September 30, 2021, an increase of $23.5 million or 13 % compared to the same period in 2020. Money Transfer Segment direct operating costs were $589.3 million for the nine months ended September 30, 2021, an increase of $125.1 million or 27 % compared to the same period in 2020. Direct operating costs primarily consist of commissions paid to agents who originate money transfers on our behalf and correspondent agents who disburse funds to the customers’ destination beneficiaries, together with less significant costs, such as bank depository fees. The increase in direct operating costs was primarily due to the increase in the number of U.S. outbound and international-originated money transfer transactions and corresponding increase in agent commissions. Foreign currency movements increased direct operating costs by approximately $1.6 million and $17.9 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020 . 32 Table of Contents During the third quarter of 2021, the Company evaluated $40.8 million of deferred contract acquisition costs related to a large retail contract due to lower than expected cash flows. An undiscounted cash flow analysis was performed comparing the carrying amount of the deferred contract acquisition costs to the projected undiscounted cash flows. The undiscounted cash flows exceeded the carrying amount indicating no impairment at September 30, 2021 . Gross profit Gross profit was $153.2 million for the three months ended September 30, 2021, an increase of $6.8 million or 5% compared to $146.4 million for the same period in 2020 . Gross profit was $448.4 million for the nine months ended September 30, 2021, an increase of $60.4 million or 16% compared to $388.0 million for the same period in 2020 . Gross margin decreased to 43.3 % and 43.2% for the three and nine months ended September 30, 2021, respectively , compared to 45.3% and 45.5% for the same periods in 2020, respectively . The increase in gross profit is primarily attributable to the increase in transactions and the decrease in gross margin is primarily attributable to the increase in direct operating costs driven by increased agent commissions for the three and nine months ended September 30, 2021 compared to the same periods in 2020. Salaries and benefits Salaries and benefits expenses were $65.3 million for the three months ended September 30, 2021, an increase of $13.3 million or 25% c ompared to the same period in 2020 . Salaries and benefits expenses were $188.5 million for the nine months ended September 30, 2021, an increase of $33.6 million or 22% c ompared to the same period in 2020 . The increase in salaries and benefits was primarily driven by an increase in headcount to support the growth of the business and an increase in bonus expense. Foreign currency movements in the countries where we employ our workforce increased these expenses by $0.9 million and $6.7 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020. As a percentage of revenues, these expenses increased to 18.5% and were flat at 18.2% for the three and nine months ended September 30, 2021, respectively, compared to 16.1% and 18.2% for the same periods in 2020, respectively . Selling, general and administrative Selling, general and administrative expenses were $41.5 million for the three months ended September 30, 2021, an increase of $4.9 million or 13% compared to the same period in 2020 . Selling, general and administrative expenses were $116.0 million for the nine months ended September 30, 2021, an increase of $7.6 million or 7% compared to the same period in 2020 . The increase in these expenses is primarily driven by an increase in professional fees and travel related expenses. Foreign currency movements decreased these expenses by $0.1 million and increased these expenses by $4.9 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020 . As a percentage of revenues, these expenses increased to 11.8% and decreased to 11.2% for the three and nine months ended September 30, 2021, respectively, compared to 11.3% and 12.7% for the same periods in 2020, respectively. Goodwill and acquired intangible assets impairment Due to the economic impacts of the COVID-19 pandemic, the Company recorded an $82.7 million non-cash goodwill impairment charge related to the xe reporting unit during the second quarter of 2020. The non-cash goodwill impairment charge was recorded for xe as a result of declines in the international payments business stemming from economic uncertainty. During the third quarter of 2020, a $1.5 million non-cash acquired intangible asset impairment charge was recorded for xe on previously acquired customer relationship intangible assets due to the discontinuation of trading with certain customers during the quarter. Depreciation and amortization Depreciation and amortization expenses were $8.9 million for the three months ended September 30, 2021, an increase of $0.3 million or 3% compared to the same period in 2020 . Depreciation and amortization expenses were $26.9 million for the nine months ended September 30, 2021, an increase of $1.1 million or 4% compared to the same period in 2020 . Depreciation and amortization primarily represents amortization of acquired intangible assets and depreciation of money transfer terminals, computers and software, leasehold improvements and office equipment. As a percentage of revenues, these expenses decreased to 2.5 % and 2.6% for the three and nine months ended September 30, 2021 , respectively, compared to 2.7 % and 3.0% for the same periods in 2020, respectively . 33 Table of Contents Operating income Money Transfer Segment operating income was $37.5 million for the three months ended September 30 , 2021, a decrease of $10.1 million or 21% compared to the same period in 2020 . Money Transfer Segment operating income was $117.0 million for the nine months ended September 30 , 2021, an increase of $102.3 million or 695% compared to the same period in 2020 . Operating margin decreased to 10.6% and increased to 11.3% for the three and nine months ended September 30, 2021, respectively, compared to 14.7 % and 1.7% for the same periods in 2020, respectively . Operating income per transaction decreased to $1.10 and increased to $1.18 for the three and nine months ended September 30, 2021, respectively , compared to $1.54 and $0.17 for the same periods in 2020, respectively . The decrease in operating income, operating margin and operating income per transaction for the three months ended September 30, 2021 compared to the same period in 2020 was primarily driven by the increase in agent commissions and increase in headcount to support the growth of the business. The increase in operating income, operating margin and operating income per transaction for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily driven by the decrease in non-cash goodwill impairment charges, and an increase in transaction volume, specifically the higher margin transactions for U.S. outbound and international-originated money transfers, partially offset by the increase in agent commissions and increase in headcount to support the growth of the business. CORPORATE SERVICES The following table presents the operating expenses for the three and nine months ended September 30, 2021 and 2020 for Corporate Services: Three Months Ended September 30, Year-over-Year Change Nine Months Ended September 30, Year-over-Year Change (dollar amounts in thousands) 2021 2020 Increase (Decrease) Amount Increase (Decrease) Percent 2021 2020 Increase (Decrease) Amount Increase (Decrease) Percent Salaries and benefits $ 10,367 $ 8,252 $ 2,115 26 % $ 37,043 $ 23,253 $ 13,790 59 % Selling, general and administrative 1,681 1,595 86 5 % 4,587 6,032 (1,445 ) (24) % Depreciation and amortization 119 117 2 2 % 412 276 136 49 % Total operating expenses $ 12,167 $ 9,964 $ 2,203 22 % $ 42,042 $ 29,561 $ 12,481 42 % Corporate operating expenses Total Corporate operating expenses were $12.2 million and $42.0 million for the three and nine months ended September 30, 2021, respectively, an increase of $2.2 million or 22% and $12.5 million or 42%, respectively, compared to the same periods in 2020 . The increases are primarily due to $1.8 million and $11.8 million increases in share based compensation for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020. OTHER EXPENSE, NET Three Months Ended September 30, Year-over-Year Change Nine Months Ended September 30, Year-over-Year Change (dollar amounts in thousands) 2021 2020 Increase (Decrease) Amount Increase (Decrease) Percent 2021 2020 Increase (Decrease) Amount Increase (Decrease) Percent Interest income $ 153 $ 139 $ 14 10 % $ 539 $ 867 $ ( 328 ) ( 38 ) % Interest expense (10,072 ) ( 9,477 ) (595) 6 % (28,718 ) ( 27,594 ) (1,124 ) 4 % Foreign currency exchange loss, net (8,135 ) (1,368 ) (6,767 ) 495 % (12,051 ) (17,679 ) 5,628 ( 32 ) % Other gains — — — n/a 31 728 (697 ) (96) % Other expense, net $ (18,054 ) $ ( 10,706 ) $ (7,348 ) 69 % $ (40,199 ) $ ( 43,678 ) $ 3,479 (8) % 34 Table of Contents Foreign currency exchange loss, net Foreign currency exchange activity includes gains and losses on certain foreign currency exchange derivative contracts and the impact of remeasurement of assets and liabilities denominated in foreign currencies. Assets and liabilities denominated in currencies other than the local currency of each of our subsidiaries give rise to foreign currency exchange gains and losses. Foreign currency exchange gains and losses that result from remeasurement of these assets and liabilities are recorded in net income. The majority of our foreign currency exchange gains or losses are due to the remeasurement of intercompany loans which are not considered a long-term investment in nature and are in a currency other than the functional currency of one of the parties to the loan. For example, we make intercompany loans based in euros from our corporate division, which is composed of U.S. dollar functional currency entities, to certain European entities that use the euro as the functional currency. As the U.S. dollar strengthens against the euro, foreign currency exchange losses are recognized by our corporate entities because the number of euros to be received in settlement of the loans decreases in U.S. dollar terms. Conversely, in this example, in periods where the U.S. dollar weakens, our corporate entities will record foreign currency exchange gains. We recorded a net foreign currency exchange loss of $8.1 million and $12.1 million for the three and nine months ended September 30, 2021, respectively, compared to a net foreign currency exchange loss of $1.4 million and $17.7 million for the same periods in 2020, respectively. These realized and unrealized foreign currency exchange losses reflect the fluctuation in the value of the U.S. dollar against the currencies of the countries in which we operated during the respective periods. INCOME TAX EXPENSE Our effective income tax rate was 23.6% and 35.8% for the three and nine months ended September 30, 2021 , respectively, compared to 27.2% and (55.9)% for the same periods in 2020, respectively. Our effective income tax rate for the three and nine months ended September 30, 2021 was higher than the applicable statutory income tax rate of 21 % as a result of certain foreign earnings being subject to higher local statutory tax rates, the non-recognition of tax benefits from losses in certain foreign countries where we have a limited history of profitable earnings and as a result of an increase in the valuation allowance in certain jurisdictions relating to the reversal of tax benefits recognized in the first quarter of 2021 for continuing net operating losses. Our effective income tax rate for the three and nine months ended S eptember 30, 2020 was different than the applicable statutory income tax rate of 21% primarily due to the non-deductible goodwill impairment charge during the second quarter of 2020 and as a result of an increase in the valuation allowance in certain jurisdictions relating to the reversal of tax benefits recognized in the first quarter of 2020 for net operating losses in those jurisdictions which have a limited history of profitable earnings. NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS Noncontrolling interests represent the elimination of net income or loss attributable to the minority shareholders’ portion of the following consolidated subsidiaries that are not wholly owned: Subsidiary Percent Owned Segment - Country Movilcarga 95% epay - Spain Euronet China 85% EFT - China Euronet Pakistan 70% EFT - Pakistan Euronet Infinitium Solutions 65% EFT - India NET INCOME (LOSS) ATTRIBUTABLE TO EURONET Net income attributable to Euronet was $73.9 million for the three months ended September 30, 2021, an increase of $33.6 million or 84% compared to the same period in 2020 . For the three months ended September 30, 2021, the increase in net income was primarily attributable to the $75.4 million increase in gross profit driven by an increase in transaction volumes, partially offset by a $17.8 million increase in salaries and benefits, a $9.1 million increase in selling, general and administrative expenses, a $7.7 million increase in income tax expense, a $6.8 million increase in net foreign currency exchange losses and an increase in other expenses aggregating $0.4 million . Net income attributable to Euronet was $73.9 million for the nine months ended September 30, 2021, an increase of $147.5 million or 200% compared to the net loss in the same period in 2020 . For the nine months ended September 30, 2021, the increase in net income was primarily attributable to the $135.2 million increase in gross profit driven by an increase in transaction volumes, a $106.0 million decrease in non-cash goodwill and intangible assets impairment charges and a $5.6 million decrease in foreign currency exchange losses, partially offset by a $62.4 million increase in salaries and benefits, a $14.7 million increase in income tax expense, a $12.9 million increase in selling, general and administrative expenses, a $7.3 million increase in depreciation and amortization expenses and an increase in other expenses aggregating $2.0 million. 35 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Working capital As of September 30, 2021 , we had working capital of $1,395.5 million , which is calculated as the difference between total current assets and total current liabilities, compared to working capital of $1,510.5 million as of December 31, 2020 . The decrease in working capital was primarily due to the $217.2 million decrease in the outstanding balance on the Credit Facility during the nine months ended September 30, 2021, partially offset by a $35.0 million increase in trade accounts receivable and a $34.7 million decrease in accrued expenses and other current liabilities . Our ratio of current assets to current liabilities was 1.85 and 1.81 at September 30, 2021 and December 31, 2020 , respectively. We require substantial working capital to finance operations. The Money Transfer Segment funds the payout of the majority of our consumer-to-consumer money transfer services before receiving the benefit of amounts collected from customers by agents. Working capital needs increase due to weekends and banking holidays. As a result, we may report more or less working capital for the Money Transfer Segment based solely upon the day on which the reporting period ends. The epay Segment produces positive working capital, some of which is restricted in connection with the administration of its customer collection and vendor remittance activities. In our EFT Processing Segment, we obtain a significant portion of the cash required to operate our ATMs through various cash supply arrangements, the amount of which is not recorded on Euronet's Consolidated Balance Sheets. However, in certain countries, we fund the cash required to operate our ATM network from borrowings under the revolving credit facilities and cash flows from operations. As of September 30, 2021 , we had $669.7 million of our own cash in use or designated for use in our ATM network, which is recorded in ATM cash on Euronet's Consolidated Balance Sheet. ATM cash increased $258.6 million from $411.1 million as of December 31, 2020 to $669.7 million as of September 30, 2021 as a result of the increase in the number of active ATMs as of September 30, 2021 compared to December 31, 2020. The Company has $1,048.5 million of unrestricted cash as of September 30, 2021 compared to $1,420.3 million as of December 31, 2020 . The decrease in unrestricted cash was primarily due to the $217.2 million net repayment of the outstanding balance on the Credit Facility during the nine months ended September 30, 2021 and the $258.6 million increase in ATM cash as unrestricted cash was utilized to fill the additional active ATMs. Including the $669.7 million of cash in ATMs at September 30, 2021, the Company has access to $1,718.2 million in available cash, and $918.9 million available under the Credit Facility with no significant long-term debt principal payments until March 2025. The following table identifies cash and cash equivalents provided by/(used in) our operating, investing and financing activities for the nine months ended September 30, 2021 and 2020 (in thousands): Nine Months Ended September 30, Liquidity 2021 2020 Cash and cash equivalents and restricted cash provided by (used in): Operating activities $ 304,340 $ 220,416 Investing activities (70,952 ) (77,073 ) Financing activities (216,291 ) (244,069 ) Effect of foreign currency exchange rate changes on cash and cash equivalents and restricted cash (82,667 ) 32,042 Decrease in cash and cash equivalents and restricted cash $ (65,570 ) $ (68,684 ) Operating activity cash flow Cash flows provided by operating activities were $304.3 million f or the nine months ended September 30, 2021 compared to $220.4 million for the same period in 2020 . The increase in operating cash flows was primarily due to the increase in net income and fluctuations in working capital mainly associated with the timing of the settlement processes with content providers in the epay Segment, with correspondents in the Money Transfer Segment, and with card organizations and banks in the EFT Processing Segment. Investing activity cash flow Cash flows used in investing activities were $71.0 million for the nine months ended September 30, 2021 compared to $77.1 million for the same period in 2020 . We used $66.1 million for purchases of property and equipment for the nine months ended September 30, 2021 compared to $71.4 million for the same period in 2020 . Cash used for software development and other investing activities totaled $4.9 million and $5.7 million for the nine months ended September 30, 2021 and 2020 , respectively. 36 Table of Contents Financing activity cash flow Cash flows used in financing activities were $216.3 million for the nine months ended September 30, 2021 compared to $244.1 million for the same period in 2020 . Our borrowing activities for the nine months ended September 30, 2021 consisted of net cash outflows of $217.0 million compared to net cash outflows of $5.0 million for the same period in 2020 . The increase in net cash outflows for the nine months ended September 30, 2021 compared to the same period in 2020 was the result of the net repayment of $217.2 million of the outstanding balance on the Credit Facility. We repurchased $1.0 million of common stock during the nine months ended September 30, 2021 compared to repurchases of $240.8 million for the same period in 2020 . The $1.0 million of share repurchases during the nine months ended September 30, 2021 were in connection with the settlement of Restricted Stock Unit awards and the exercise of option awards in certain countries in which we operate. We received proceeds of $6.4 million and $6.6 million during the nine months ended September 30, 2021 and 2020 , respectively, for the issuance of stock in connection with our Stock Incentive Plan. Other sources of capital Credit Facility - On October 17, 2018, the Company entered into a $1.0 billion unsecured credit agreement (the "Credit Facility") that expires on October 17, 2023. In May 2021, an additional lender joined the Credit Facility which increased the revolving commitment by $30 million. The Credit Facility allows for borrowings in Australian dollars, British pounds sterling, Canadian dollars, Czech koruna, Danish krone, euro, Hungarian forints, Japanese yen, New Zealand dollars, Norwegian krone, Polish zlotys, Swedish krona, Swiss francs, and U.S. dollars. The Credit Facility contains a $200 million sublimit for the issuance of letters of credit, a $50 million sublimit for U.S. Dollar swingline loans, and a $90 million sublimit for certain foreign currencies swingline loans. As of September 30, 2021 , fees and interest on borrowings are based upon our corporate credit rating (as defined in the credit agreement) and are based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over the London InterBank Offered Rate ("LIBOR") or a margin over the base rate, as selected by us, with the applicable margin ranging from 1.125% to 2.0% (or 0.175% to 1.0% for base rate loans). As of September 30, 2021 , we had $53.2 million of borrowings and $57.9 million of stand-by letters of credit outstanding under the Credit Facility. The remaining $918.9 million under the Credit Facility was available for borrowing. Convertible debt - On March 18, 2019, we completed the sale of $ 525.0 million in principal amount of Convertible Senior Notes due 2049 (“Convertible Notes”). The Convertible Notes were issued pursuant to an indenture, dated as of March 18, 2019 (the “Indenture”), by and between us and U.S. Bank National Association, as trustee. The Convertible Notes have an interest rate of 0.75 % per annum payable semi-annually in March and September, and are convertible into shares of Euronet common stock at a conversion price of approximately $ 188.73 per share if certain conditions are met (relating to the closing prices of Euronet common stock exceeding certain thresholds for specified periods). Holders of the Convertible Notes have the option to require us to repurchase for cash all or part of their Convertible Notes on each of March 15, 2025, 2029 , 2034 , 2039 and 2044 at a repurchase price equal to 100 % of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date. In connection with the issuance of the Convertible Notes, we recorded $ 12.8 million in debt issuance costs, which are being amortized through March 1, 2025. Senior Notes - On May 22, 2019, we completed the sale of €600 million ($669.9 million) aggregate principal amount of Senior Notes that expire on May 2026 (the “Senior Notes”). The Senior Notes accrue interest at a rate of 1.375% per year, payable annually in arrears on May 22 of each year, until maturity or earlier redemption. As of September 30, 2021 , we have outstanding €600 million ( $694.9 million ) principal amount of the Senior Notes. In addition, we may redeem some or all of these notes on or after February 22, 2026 at their principal amount plus any accrued and unpaid interest. Other debt obligations - Certain of our subsidiaries have available credit lines and overdraft facilities to generally supplement short-term working capital requirements, when necessary. There were $1.1 million and $0.9 million outstanding under these other obligation arrangements as of September 30, 2021 and December 31, 2020, respectively. Other uses of capital Capital expenditures and needs - Total capital expenditures for the nine months ended September 30, 2021 were $66.1 million . These capital expenditures were primarily for the purchase and installation of ATMs in key under-penetrated markets, the purchase of POS terminals for the epay and Money Transfer Segments, and office, data center and company store computer equipment and software. Total capital expenditures for 2021 are currently estimated to range from approximately $100 million to $105 million . 37 Table of Contents At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on hand and amounts available under our Credit Facility and other existing and potential future financing will be sufficient to meet our debt, leasing, and capital expenditure obligations. If our capital resources are not sufficient to meet these obligations, we will seek to refinance our debt and/or issue additional equity under terms acceptable to us. However, we can offer no assurances that we will be able to obtain favorable terms for the refinancing of any of our debt or other obligations or for the issuance of additional equity. Inflation and functional currencies Generally, the countries in which we operate have experienced low and stable inflation in recent years. Therefore, the local currency in each of these markets is the functional currency. Currently, we do not believe that inflation will have a significant effect on our results of operations or financial position. We continually review inflation and the functional currency in each of the countries where we operate. OFF BALANCE SHEET ARRANGEMENTS On occasion, we grant guarantees of the obligations of our subsidiaries and we sometimes enter into agreements with unaffiliated third parties that contain indemnification provisions, the terms of which may vary depending on the negotiated terms of each respective agreement. Our liability under such indemnification provisions may be subject to time and materiality limitations, monetary caps and other conditions and defenses. As of September 30, 2021 , there were no material changes from the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2020 . To date, we are not aware of any significant claims made by the indemnified parties or parties to whom we have provided guarantees on behalf of our subsidiaries and, accordingly, no liabilities have been recorded as of September 30, 2021 . See also Note 14, Commitments, to the unaudited consolidated financial statements included elsewhere in this report. CONTRACTUAL OBLIGATIONS As of September 30, 2021 , there have been no material changes outside the ordinary course of business in our future contractual obligations from the amounts reported within our Annual Report on Form 10-K for the year ended December 31, 2020 .