What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-02-23 compared with 2021-02-22 · 194 added, 274 removed, 392 unchanged (54% of the section changed)

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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.

1) The EFT Processing Segment, which processes transactions for a network of 42,713 ATMs and approximately 438,000 POS terminals across Europe, the Middle East, Africa, Asia Pacific, and the United States.

We provide comprehensive electronic payment solutions consisting of ATM cash withdrawal and deposit services, ATM network participation, outsourced ATM and POS management solutions, credit, debit and prepaid card outsourcing, DCC, and other value added services.

Through this segment, we also offer a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems.

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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 510,000 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).

xe is a provider of foreign currency exchange information and of fers money transfer services on its currency data websit es (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.

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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;

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;

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

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

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;

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.

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;

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).

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.

1) 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.

2) 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.

3)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.

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

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 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 years ended December 31 , 2021 and 2020 .

These types of orders were first put into effect in the first half of 2020.

As the number and rate of new cases has fluctuated in various locations around the global, the closures, restrictions and other social distancing orders have been modified, rescinded and/or re-imposed.

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 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.

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 and decreasing capital expenditures.

Segment Revenues and Operating Income For The Years Ended December 31, 2021 a nd 20 20

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Corporate services, eliminations and other

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.

Our annual consolidated revenues increased by 21 % for 2021 compared to 2020 .

The increase in revenues for 2021 was primarily due to the easing of COVID-19 related travel restrictions in 2021 compared to 2020, which led to an increase in demand for DCC, domestic and international surcharge and other value added services in our EFT Processing Segment as well as growth in the number of money transfers processed by the core Ria business and the number of transactions processed by our epay subsidiaries.

Our annual consolidated operating income increased by 295% for 2021 compared to 2020.

The increase in operating income for 2021 was primarily due to the increases in transaction volume across all three segments and corresponding increase in revenues, a $106.6 million decrease in non-cash impairment of goodwill and acquired intangible assets, partially offset by a $38.6 million increase in non-cash impairment of contract assets, and increases in stock-based compensation and selling general and administrative expenses.

Net income attributable to Euronet for 2021 was $70.7 million , or $1.32 per diluted share compared to a net loss to Euronet for 2020 of $ 3.4 million, or $ 0.06 per diluted share.

Impact of changes in foreign currency exchange rates

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Average Translation Rate Year Ended December 31,

2020 Increase (Decrease) Percent

2021 Increase Percent

Australian dollar

British pound

Canadian dollar

Hungarian forint

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Selling, general and administrative

Goodwill and acquired intangible assets impairment

Goodwill impairment

Depreciation and amortization

Total operating expenses

Operating (loss) income

Operating loss

Transactions processed (millions)

ATMs in service as of December 31

Average ATMs in service during the year

Active ATMs as of December 31

Average active ATMs

_________________

n/m — Not meaningful.

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 .

not meaningful

EFT Processing Segment total revenues were $591.1 million for the year ended December 31, 2021, an increase of $122.4 million or 26 % 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 December 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 year ended December 31 , 2021 compared to the same period in 2020 as cross-border travel and corresponding DCC and surcharge revenues increased, partially offset by the year ended December 31 , 2020 including two months of pre-COVID-19 level DCC and surcharge transaction volumes compared to the year ended December 31 , 2021 which had various levels of restrictions throughout the entire period.

Foreign currency movements increased revenues by approximately $12.3 million for the year ended December 31, 2021 , compared to the same period in 2020 .

Average monthly revenues per ATM increased to $1,188 for the year ended December 31, 2021 compared to $927 for the same period in 2020.

Revenues per transaction was $0.14 for both years ended December 31, 2021 and 2020.

For the year ended December 31, 2021, the average monthly revenues per ATM increased primarily due to the lower average ATM count in Asia Pacific, partially offset by increases in Europe, as we modified our estate of ATMs beginning in the second quarter of 2020 and DCC and international surcharge transactions began to recover from 2020 volumes.

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 .

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.

EFT Processing Segment direct operating costs were $354.3 million for the year ended December 31 , 2021 , an increase of $51.6 million or 17 % compared 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 year ended December 31 , 2021, the increase in direct operating costs was primarily due to the increase in transaction volumes, and costs associated with modifying our estate of ATMs .

Foreign currency movements increased direct operating costs by approximately $7.6 million for the year ended December 31, 2021 compared to the same period in 2020 .

Gross profit, which is calculated as revenues less direct operating costs, less acquired contract cost impairments, was $236.9 million for the year ended December 31 , 2021, an increase of $ 70.8 million or 43% compared to $166.1 million for the same period in 2020 .

Gross profit as a percentage of revenues (“gross margin”) increased to 40.1 % for the year ended December 31, 2021, compared to 35.4% for the same period in 2020.

For the year ended December 31, 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 $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.

Salaries and benefits expenses were $98.6 million for the year ended December 31 , 2021, an in crease of $7.1 million or 8% c ompared to the same period in 2020 .

The increase in salaries and benefits for the year ended December 31, 2021 compared to the same period in 2020 was primarily driven by an increase in bonus expense and a $2.3 million increase from foreign currency movements in the countries where we employ our workforce.

As a percentage of revenues, these expenses decreased to 16.7% for the year ended December 31, 2021, compared to 19.5% for the same period in 2020 .

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

Selling, general and administrative expenses were $47.8 million for the year ended December 31 , 2021, an increase of $12.4 million or 35% compared to the same period in 2020 .

The increase in these expenses is primarily driven by a $5.3 million increase in professional fees and a $2.4 million increase from foreign currency movements.

As a percentage of revenues, these expenses increased to 8.1 % for the year ended December 31 , 2021, compared to 7.5 % for the same period in 2020 .

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 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.

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.

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.

Depreciation and amortization expenses were $91.0 million for the year ended December 31 , 2021, an increase of $6.9 million or 8% compared to the same period in 2020 .

Foreign currency movements increased these expenses by $2.2 million for the year ended December 31, 2021, compared to the same period 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 15.4 % for the year ended December 31, 2021 , compared to 17.9% for the same period in 2020 .

Operating (loss)

EFT Processing Segment had operating losses of $0.5 million for the year ended December 31, 2021, a decrease of $66.2 million or 99% compared to the same period in 2020 .

O perating income (loss) as a percentage of revenues (“operating margin”) decreased to (0.1 %) for the year ended December 31 , 2021, compared to (14.2%) for the same period in 2020 .

Operating (loss) per transaction was less than ( $0.01) for the year ended December 31 , 2021, compared to ($0.02) for the same period in 2020 .

For the year ended December 31 , 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.

The following table summarizes the results of operations for our epay Segment for the years ended December 31, 2021 and 2020 :

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Year-over-Year Change

Increase (Decrease) Amount

Increase (Decrease) Percent

Increase Amount

Increase Percent

(dollar amounts in thousands)

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Transactions processed (billions)

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 .

epay Segment total revenues were $1,011.5 million for the year ended December 31, 2021, an increase of $176.0 million or 21% 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.

Foreign currency movements in creased revenues by approximately $22.4 million for the year ended December 31, 2021, compared to the same period 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 .

Revenues per transaction decreased to $0.32 for the year ended December 31, 2021, compared to $0.35 for the same period in 2020 .

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 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.

epay Segment direct operating costs were $760.9 million for the year ended December 31, 2021 , an increase of $130.5 million or 21 % 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 increase in direct operating costs was 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 $16.5 million for the year ended December 31, 2021, compared to the same period in 2020 .

Gross profit was $250.6 million for the year ended December 31, 2021, an increase of $45.5 million or 22% compared to $205.1 million for the same period in 2020 .

Gross margin increased to 24.8 % for the year ended December 31, 2021, compared to 24.6% for the same period in 2020 .

The increase in gross profit and gross margin is primarily driven by the increase in transaction volumes.

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 .

Salaries and benefits expenses were $79.5 million for the year ended December 31, 2021, an increase of $14.7 million or 23% compared 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 $2.4 million for the year ended December 31, 2021, compared to the same period in 2020.

As a percentage of revenues, these expenses increased to 7.9% for the year ended December 31, 2021, compared to 7.8% for the year ended December 31, 2020.

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 .

Selling, general and administrative expenses were $39.6 million for the year ended December 31, 2021, an increase of $3.8 million or 11% compared to the same period in 2020 .

Foreign currency movements increased these expenses by $1.2 million for the year ended December 31, 2021, compared to the same period in 2020 .

As a percentage of revenues, these expenses decreased to 3.9% for the year ended December 31, 2021, compared to 4.3 % for the same period in 2020.

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 .

Depreciation and amortization expenses were $8.5 million for the year ended December 31, 2021, an increase of $0.6 million or 8% 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 0.8% for the year ended December 31, 2021 , compared to 0.9 % for the same period in 2020 .

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.

epay Segment operating income was $123.0 million for the year ended December 31, 2021 , an increase of $26.4 million or 27% c ompared to the same period in 2020 .

Operating margin increased to 12.2 % for the year ended December 31, 2021 , compared to 11.6 % for the same period in 2020 .

Operating income per transaction was $0.04 for both years ended December 31, 2021 and 2020.

The increases in operating income and operating margin for the year ended December 31, 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

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Direct operating costs

Acquired contract cost impairment

Salaries and benefits

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Transactions processed (millions)

____________________

n/m — Not meaningful.

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.

Money Transfer Segment total revenues were $1,401.0 million for the year ended December 31, 2021, an increase of $217.1 million or 18% 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 increased to $10.37 for the year ended December 31, 2021, compared to $10.16 for the same period in 2020 .

Foreign currency movements increased revenues by approximately $30.3 million for the year ended December 31, 2021, compared to the same period in 2020 .

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 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 .

Money Transfer Segment direct operating costs were $793.2 million for the year ended December 31, 2021, an increase of $144.2 million or 22% 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 $15.3 million for the year ended December 31, 2021, compared to the same period in 2020 .

Acquired contract cost impairment

During the fourth quarter of 2021, we identified certain contract assets that had a carrying balance greater than the estimated remaining cash flows in the contracts and recorded a corresponding $38.6 million non-cash impairment of costs to fulfill a contract.

The impairment charge is the result of lower-than-expected customer transaction volumes related to these specific contracts, stemming primarily from COVID-19 related disruptions.

These charges are included in the gross profit calculation.

Gross profit was $569.1 million for the year ended December 31, 2021, an increase of $34.3 million or 6% compared to $534.8 million for the same period in 2020 .

Gross margin decreased to 40.6 % for the year ended December 31, 2021, compared to 45.2% for the same period in 2020 .

The increase in gross profit was primarily attributable to the increase in transaction volume and the decrease in gross margin is primarily attributable to the $38.6 million non-cash contract asset impairment charge and the increased agent commissions for the year ended December 31, 2021 compared to the same period in 2020.

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 .

Salaries and benefits expenses were $255.8 million for the year ended December 31, 2021, an increase of $42.3 million or 20% 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 $6.1 million for the year ended December 31, 2021, compared to the same period in 2020.

As a percentage of revenues, these expenses increased to 18.3% for the year ended December 31, 2021, compared to 18.0% for the same period in 2020 .

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 .

Selling, general and administrative expenses were $158.0 million for the year ended December 31, 2021, an increase of $15.8 million or 11% compared to the same period in 2020 .

The increase in these expenses is primarily driven by an increase in marketing expenses, professional fees and travel related expenses.

Foreign currency movements increased these expenses by $3.6 million for the year ended December 31, 2021, compared to the same period in 2020 .

As a percentage of revenues, these expenses decreased to 11.3% for the year ended December 31, 2021, compared to 12.0% for the same period in 2020.

Goodwill and acquired intangible assets impairment

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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.

Depreciation and amortization expenses were $35.7 million for the year ended December 31, 2021, an increase of $1.0 million or 3% 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 2.6 % for the year ended December 31, 2021 , compared to 2.9 % for the same period in 2020 .

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.

Money Transfer Segment operating income was $119.6 million for the year ended December 31 , 2021, an increase of $59.9 million or 100% compared to the same period in 2020 .

Operating margin increased to 8.5% for the year ended December 31, 2021, compared to 5.0 % for the same period in 2020 .

Operating income per transaction increased to $0.89 for the year ended December 31, 2021, compared to $0.51 for the same period in 2020 .

The increase in operating income, operating margin and operating income per transaction for the year ended December 31, 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, $38.6 million non-cash contract asset impairment and an increase in headcount to support the growth of the business.

Corporate Services

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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.

Total Corporate operating expenses were $58.1 million for the year ended December 31, 2021, an increase of $15.1 million or 35%, compared to the same period in 2020 .

The increase is primarily due to a $14.6 million increase in share based compensation for the year ended December 31, 2021, compared to the same period in 2020.

Other Expense, Net

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(dollar amounts in thousands)

Increase (Decrease) Amount

(Decrease) Amount

Increase (Decrease) Percent

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Interest expense

Foreign currency exchange loss, net

Other gains, net

Foreign currency exchange (loss) gain, net

Other expense, net

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 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.

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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.

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.

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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.

We recorded a net foreign currency exchange loss of $10.9 million for the year ended December 31, 2021, compared to a net foreign currency exchange loss of $3.8 million for the same period in 2020.

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.

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Goodwill and acquired intangible assets impairment

Acquired contract cost impairment

Other gains, net

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Income tax expense

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

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

Income tax benefit attributable to foreign currency exchange loss, net

Income tax expense, as adjusted

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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.

Our effective income tax rates were 48.0 % a nd 140.4 % for the years ended December 31, 2021 and 2020 , respectively.

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

Excluding foreign currency exchange gains (losses), goodwill and acquired intangible asset impairment, and acquired contract cost impairment items from pre-tax income, as well as the related tax effects for these items, our adjusted effective income tax rates were 36.1% and 13.2 % for the years ended December 31, 2021 and 2020 , respectively.

The effective income tax rate, as adjusted, for 2021 was higher than the applicable statutory income tax rate of 21% as a result of an increase in the valuation allowance related to the projected utilization of U.S.

tax benefits, the non-recognition of tax benefits from losses in certain foreign countries where we have a limited history of profitable earnings and certain foreign earnings being subject to higher local statutory tax rates.

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

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

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

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

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

Net (Income) Loss Attributable To Noncontrolling Interest

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

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:

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Euronet Infinitium Solutions

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.

Net Income (Loss) Attributable to Euronet

Net income attributable to Euronet was $70.7 million for the year ended December 31, 2021, an increase of $74.1 million compared to the net loss in the same period in 2020 .

For the year ended December 31, 2021, the increase in net income was primarily attributable to the $150.5 million increase in gross profit driven by an increase in transaction volumes across all three segments and $106.0 million decrease in non-cash goodwill and intangible assets impairment charges, partially offset by an $80.7 million increase in salaries and benefits, a $53.6 million increase in income tax expense, a $30.3 million increase in selling, general and administrative expenses, an $8.7 million increase in depreciation and amortization expenses, a $7.1 million increase in foreign currency exchange losses, and an increase in other expenses aggregating $2.0 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.

dollar reporting currency prior to consolidation and are recorded in comprehensive (loss) income.

As required by U.S.

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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 .

We recorded a net loss on translation adjustments of $78.5 million for 2021 and a net gain of $70.8 million for 2020 .

During 2021 , the U.S.

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

dollar strengthened compared to key foreign currencies, resulting in translation losses which were recorded in comprehensive (loss) income.

I n 2020 , the U.S.

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

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

Liquidity and Capital Resources

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As of December 31, 2021, we had working capital of $1,455.8 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 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.

The decrease in working capital was primarily due to the $159.8 million decrease in cash and cash equivalents, $77.5 million decrease in prepaid expenses and other current assets, $45.9 million increase in trade accounts payable, $22.7 million increase in income taxes payable, and $2.9 million aggregate increase in other working capital balances, offset by the $132.3 million increase in ATM cash, $85.5 million increase in trade accounts receivable, and $36.3 million decrease in accrued expenses and other current liabilities.

Our ratio of current assets to current liabilities was 1.79 and 1.81 at December 31, 2021 and December 31, 2020, respectively.

We require substantial working capital to finance operations.

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As of December 31, 2021 , we had approximately $543.4 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.

ATM cash increased $132.3 million from $411.1 million as of December 31, 2020 to $543.4 million as of December 31, 2021 as a result of the 13% increase in the number of active ATMs as of December 31, 2021 compared to December 31, 2020.

The Company has $1,260.5 million of unrestricted cash as of December 31, 2021 compared to $1,420.3 million as of December 31, 2020 .

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.

The decrease in unrestricted cash was primarily due to the $132.3 million increase in ATM cash as unrestricted cash was utilized to fill the additional active ATMs, the $227.8 million of shares repurchased under stock repurchase programs, and $92.2 million of capital expenditures, partially offset by the $406.6 million of cash provided by operating activities.

Including the $543.4 million of cash in ATMs at December 31, 2021, the Company has access to $1,803.9 million in available cash, and $689.3 million available under the Credit Facility with no significant long-term debt principal payments until October 2023.

In March 2021, the Company entered into an agreement to purchase the Piraeus Bank Merchant Acquiring business of Piraeus Bank for € 300 million, or approximately $ 360 millio n.

The closing is targeted for the first half of 2022 and is subject to regulatory approvals, finalization of the commercial agreements, and customary closing conditions.

The Company expects to finance the purchase price using cash on hand.

See Note 6, Acquisitions, to our Consolidated Financial Statements for additional information.

We had cash, cash equivalents and restricted cash of $2,086.1 million as of December 31, 2021 , of which $1,558.2 million was held outside of the U.S.

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

Increase in cash and cash equivalents and restricted cash

(Decrease) increase in cash and cash equivalents and restricted cash

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.

Cash flows provided by operating activities were $406.6 million f or the year ended December 31, 2021 compared to $253.5 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 $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.

Cash flows used in investing activities were $98.1 million for the year ended December 31, 2021 compared to $105.5 million for the same period in 2020 .

We used $92.2 million for purchases of property and equipment for the year ended December 31, 2021 compared to $97.6 million for the same period in 2020 .

Cash used for software development and other investing activities totaled $5.9 million and $7.8 million for the year ended December 31, 2021 and 2020 , respectively.

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.

Cash flows used in financing activities were $212.2 million for the year ended December 31, 2021 compared to cash flows provided by financing activities of $35.4 million for the same period in 2020 .

The increase in cash used in financing activities is primarily the result of the $13.0 million net borrowings on debt obligations for the year ended December 31, 2021 compared to $265.2 million for the same period in 2020 .

We repurchased $229.9 million of common stock during the year ended December 31, 2021 compared to repurchases of $241.5 million for the same period in 2020 .

$2.1 million of share repurchases during the year ended December 31, 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 $10.8 million and $18.1 million during the year ended December 31, 2021 and 2020 , respectively, for the issuance of stock in connection with our Stock Incentive Plan.

Other sources of capital

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

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

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

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 in 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.

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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.

There were $0.9 million outstanding under these other obligation arrangements as of both December 31, 2021 and December 31, 2020 .

Other uses of capital

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Total capital expenditures for 2022 are currently estimated to be approximately $95 million to $100 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.

Operating lease expenses were $55.6 million and $83.1 million for the years ended December 31, 2021 and 2020, respectively.

Finance lease expenses were not material for 2021 or 2020.

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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.

The Company 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.

The Company has repurchased $227.8 million of stock under this program.

On December 8, 2021, the Company put a repurchase program in place to repurchase up to $300 million in value, but not more than 5.0 million shares of common stock through December 8, 2023.

For the year ended December 31, 2021, t he Company repurchased 2.0 million shares under the repurchase programs at a weighted average purchase price of $113.88 for a total value of $227.8 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.

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

Inflation and functional currencies

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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.

We have certain significant off-balance sheet items described 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.

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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, 2021.

Contractual Obligations

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

Payments due by period

(in millions)

Long-term debt obligations, including interest

Obligations under operating leases (undiscounted)

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

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

For additional information on 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.

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

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

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

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

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

We have significant tax loss carryforwards, and other temporary differences, which are recorded as deferred tax assets and liabilities.

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In 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.

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

As of December 31, 2021 , the Consolidated Balance Sheet includes goodwill of $641.6 million and acquired intangible assets, net of accumulated amortization, of $97.8 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.

For the year ended December 31, 2021, no impairment of goodwill or acquired intangible assets has been identified.

Recently Issued Accounting Pronouncements

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the expected effects of changes in laws or accounting standards;

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

the impact of the COVID-19 pandemic, including its variants on our results of operations and financial position;

technological advances;

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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 effectiveness of vaccines and treatments against COVID-19 variants;

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis