Item 2. Management’s Discussion and Analysis
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 acqu isitions;
business strategy;
government regulatory action;
the expected effects of changes in laws or accounting standards;
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 or other pandemics; inflation; the war in the Ukraine and related economic sanctions; our ability to successfully integrate any acquired operations; 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 privacy and the European Union's General Data Protection Regulation, and Second Revised Payment Service Directive requirements; changes in laws and regulations affecting our business, including tax and immigration laws and any laws regulating payments, including DCC transactions ; changes in our relationships with, or in fees charged by, our business partners; competition; the outcome of claims and other loss contingencies affecting Euronet; the cost of borrowing (including fluctuations in interest rates), availability of credit and terms of and compliance with debt covenants; 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 1 A — Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022 . 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.
25
OVERVIEW
COMPANY OVERVIEW, GEOGRAPHIC LOCATIONS AND PRINCIPAL PRODUCTS AND SERVICES
Euronet is a leading global financial technology solutions and payments provider. We offer payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers. Our primary product offerings include comprehensive ATM, point-of-sale ("POS"), card outsourcing, card issuing and merchant acquiring services, software solutions, electronic distribution of prepaid mobile airtime, managed services and other electronic payment products, foreign currency exchange services and global money transfer services. We operate in the following three segments:
1) The EFT Processing Segment processes transactions for a network of 51,402 ATMs and approximately 626,000 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, domestic and international surcharges and other value added services. Through this segment, we also offer a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems.
2) The epay Segment, which provides distribution, processing and collection services for electronic payment products and prepaid mobile airtime through a network of approximately 810,000 POS terminals in Europe, the Middle East, Asia Pacific, North America and South America. We also provide vouchers and physical gift fulfillment services in Europe.
3) The Money Transfer Segment, which provides global consumer-to-consumer money transfer services, primarily under the brand names Ria, IME, AFEX, and xe and global account-to-account money transfer services under the brand name xe. We offer services under the brand names Ria and IME through a network of sending agents, Company-owned stores, our websites and mobile applications, disbursing money transfers through a worldwide correspondent network that includes approximately 533,000 locations. xe is a provider of foreign currency exchange information and of fers money transfer services on its currency data websit es. 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 approximat ely 75% of our revenues denominated in currencies other than the U.S. dollar, any significant changes in foreign currency exchange rates will likely have a significant impact on our results of operations (for a further discussion, see Item 1 A - Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022 ).
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 30% and 27% of total consolidated revenues for the three and six months ended June 30, 2023 are derived from fees charged for transactions made by cardholders on our proprietary network of ATMs, fixed management fees and transaction fees we charge to customers for operating ATMs and processing debit and credit cards under outsourcing and cross-border acquiring agreements, foreign currency exchange margin on DCC transactions, domestic and international surcharge, foreign currency dispensing and other value added services such as advertising, prepaid telecommunication recharges, bill payment, and money transfers provided over ATMs. Revenues in this segment are also derived from cardless payment, banknote recycling, tax refund services, license fees, professional services and maintenance fees for proprietary applicati on software and sales of related hardware.
26
epay Segment — Revenues in the epay Segment, which represented approximately 28% and 29% o f total consolidated revenues for the three and six months ended June 30, 2023 a re primarily derived from commissions earned from the distribution of electronic content, vouchers, and physical gifts and commissions or processing fees rec eived from mobile phone operators for the processing and distribution of prepaid mobile airtime. Branded payments, which includes the distribution of digital media content, w ere 66% of epay Segment revenues for both the three and six months ended June 30, 2023. Branded payments include digital content such as music, games and software, as well as, other products including prepaid long distance calling card plans, prepaid Internet plans, prepaid debit cards, gift cards, vouchers, transport payments, lottery payments, bill payment, and money transfer.
Money Transfer Segment — Revenues in the Money Transfer Segment, which represented approximately 42% and 44% of total consolidated revenues for the three and six months ended June 30, 2023 , respectively, are primarily derived from transaction fees, as well as the margin earned from purchasing foreign currency at wholesale exchange rates and selling the foreign currency to customers at retail exchange rates. We have a sending network in place comprised of agents, customer service representatives, Company-owned stores, our websites and mobile applications, 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 2026. Thereafter, it will automatically renew for subsequent one -year terms unless either party provides notice to the contrary. The agreement imposes certain obligations on each party, the most significant being service level requirements by Ria and money transfer compliance requirements by Walmart. Any violation of these requirements by Ria could result in an obligation to indemnify Walmart or termination of the contract by Walmart. However, the agreement allows the parties to resolve disputes by mutual agreement without termination of the agreement.
Corporate Services, Eliminations and Other — In addition to operating in our principal operating segments described above, our “Corporate 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.
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, POS and merchant acquiring services , 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 in which we operate. These laws and regulations may impact our 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. Our ATM estate is dependent on contracts that cover large numbers of ATMs, and management is complicated by legal and regulatory considerations of local countries, as well as customers decisions whether to outsource ATMs or manage them internally. The EFT Segment is also dependent to a large degree on consumer travel patterns over which we have no control. Although international travel is returning to pre-pandemic levels in many parts of the globe, the war in Ukraine and related sanctions on Russia are negatively affecting the number of individuals traveling to and from Ukraine and the countries that border Ukraine and in many locations where we have ATMs .
27
2) The epay Segment opportunities include renewing existing and negotiating new agreements in target markets in which we operate, primarily with digital content providers, mobile operators, financial institutions and retailers. The overall growth rate in the digital media content and prepaid mobile phone 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 inherent 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. Recently, inflation has been increasing our cost structure in many parts of the world in which we operate.
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SEGMENT SUMMARY RESULTS OF OPERATIONS
Revenues and operating income by segment for the three and six months ended June 30, 2023 and 2022 are summarized in the tables below:
Revenues for the Three Months Ended June 30,
Year-over-Year Change
Revenues for the Six Months Ended June 30,
Year-over-Year Change
(dollar amounts in millions)
2023
2022
Increase
Amount
Increase
Percent
2023
2022
Increase
Amount
Increase
(Decrease)
Percent
EFT Processing
$
282.4
$
249.0
$
33.4
13
%
$
474.6
$
394.6
$
80.0
20
%
epay
263.8
227.7
36.1
16
%
501.2
463.5
37.7
8
%
Money Transfer
394.8
368.5
26.3
7
%
754.2
707.5
46.7
7
%
Total
941.0
845.2
95.8
11
%
1,730.0
1,565.6
164.4
11
%
Corporate services, eliminations and other
(1.9
)
( 1.9
)
—
—
%
(3.7
)
(3.8
)
0.1
(3)
%
Total
$
939.1
$
843.3
$
95.8
11
%
$
1,726.3
$
1,561.8
$
164.5
11
%
Operating Income (Loss) for the Three Months Ended June 30,
Year-over-Year Change
Operating Income (Loss) for the Six Months Ended June 30,
Year-over-Year Change
(dollar amounts in millions )
2023
2022
Increase (Decrease)
Amount
Increase
Percent
2023
2022
Increase (Decrease)
Amount
Increase
Percent
EFT Processing
$
69.1
$
54.8
$
14.3
26
%
$
76.0
$
48.5
$
27.5
57
%
epay
26.8
24.3
2.5
10
%
54.3
50.5
3.8
8
%
Money Transfer
47.2
40.6
6.6
16
%
79.8
73.9
5.9
8
%
Total
143.1
119.7
23.4
20
%
210.1
172.9
37.2
22
%
Corporate services, eliminations and other
(20.5
)
( 18.6
)
(1.9
)
10
%
(41.9
)
(35.1
)
(6.8
)
19
%
Total
$
122.6
$
101.1
$
21.5
21
%
$
168.2
$
137.8
$
30.4
22
%
29
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.
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 June 30,
Average Translation Rate
Six Months Ended June 30,
Currency (dollars per foreign currency)
2023
2022
Increase (Decrease)
Percent
2023
2022
Increase
(Decrease)
Percent
Australian dollar
$
0.6680
$
0.7151
(7)
%
$
0.6759
$
0.7194
(6)
%
British pounds sterling
$
1.2518
$
1.2574
—
%
$
1.2332
$
1.2994
(5)
%
Canadian dollar
$
0.7448
$
0.7837
(5)
%
$
0.7423
$
0.7866
(6)
%
euro
$
1.0885
$
1.0656
2
%
$
1.0805
$
1.0939
(1)
%
Hungarian forint
$
0.0029
$
0.0028
4
%
$
0.0028
$
0.0029
(3)
%
Indian rupee
$
0.0122
$
0.0130
(6)
%
$
0.0122
$
0.0131
(7)
%
Malaysian ringgit
$
0.2213
$
0.2302
(4)
%
$
0.2247
$
0.2344
(4)
%
New Zealand dollar
$
0.6183
$
0.6510
(5)
%
$
0.6239
$
0.6636
(6)
%
Polish zloty
$
0.2398
$
0.2296
4
%
$
0.2338
$
0.2364
(1)
%
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COMPARISON OF OPERATING RESULTS FOR THE THREE ANDSIX MONTHS ENDED JUNE 30 , 2023 AND 2022
EFT PROCESSING SEGMENT
The following table summarizes the results of operations for our EFT Processing Segment for the three and six months ended June 30, 2023 and 2022 :
Three Months Ended June 30,
Year-over-Year Change
Six Months Ended June 30,
Year-over-Year Change
(dollar amounts in millions )
2023
2022
Increase
(Decrease)
Amount
Increase
(Decrease) Percent
2023
2022
Increase
(Decrease)
Amount
Increase
(Decrease) Percent
Total revenues
$
282.4
$
249.0
$
33.4
13
%
$
474.6
$
394.6
$
80.0
20
%
Operating expenses:
Direct operating costs
142.1
123.8
18.3
15
%
261.1
217.1
44.0
20
%
Salaries and benefits
30.8
27.7
3.1
11
%
58.3
52.9
5.4
10
%
Selling, general and administrative
16.6
17.0
(0.4
)
(2)
%
32.7
28.1
4.6
16
%
Depreciation and amortization
23.8
25.7
(1.9
)
(7)
%
46.5
48.0
(1.5
)
(3)
%
Total operating expenses
213.3
194.2
19.1
10
%
398.6
346.1
52.5
15
%
Operating income
$
69.1
$
54.8
$
14.3
26
%
$
76.0
$
48.5
$
27.5
57
%
Transactions processed (millions)
2,035
1,573
462
29
%
3,872
2,902
970
33
%
Active ATMs as of June 30,
51,402
50,178
1,224
2
%
51,402
50,178
1,224
2
%
Average Active ATMs
50,295
48,938
1,357
3
%
48,285
46,166
2,119
5
%
Revenues
EFT Processing Segment total revenues were $282.4 million for the three months ended June 30, 2023 , an increase of $33.4 million or 13 % compared to the same period in 2022 . EFT Processing Segment total revenues were $474.6 million for the six months ended June 30, 2023, an increase of $80.0 million or 20%. The increase in revenues was primarily due to the increase in domestic and international cash withdrawal transactions resulting from the reduction of travel restrictions across Europe, the increase in low-value point-of-sale transactions in Europe and low-value payment processing transactions in Asia Pacific. Fluctuations in foreign currency exchange rates increased revenues by approximately $0.8 m illion and $0.4 million for the three and six months ended June 30, 2023 compared to the same period in 2022 .
Average monthly revenues per ATM increased to $1,872 for the three months ended June 30, 2023 compared to $ 1,696 for the same period in 2022 . Average monthly revenues per ATM increased to $1,638 for the six months ended June 30, 2023 compared to $1,425 for the same period in 2022. Revenues per transaction decreased to $0.14 for the three months ended June 30, 2023 compared to $ 0.16 for the same period in 2022 . The increase in average monthly revenues per ATM was primarily due to the increase in domestic and international cash withdrawal transactions resulting from increased travel across Europe, partially offset by the increase in volume of low-value point-of-sale transactions in Europe and low-value payment processing transactions in Asia Pacific, which also contributed to the decrease in revenues per transaction.
Direct operating costs
EFT Processing Segment direct operating costs were $142.1 million for the three months ended June 30, 2023 , an increase of $18.3 million or 15 % compared to the same period in 2022 . EFT Processing Segment direct operating costs were $261.1 million for the six months ended June 30, 2023 , an increase of $44.0 million or 20 % compared to the same period in 2022 . 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.
31
The increase in direct costs was primarily due to the increase in domestic and international cash withdrawal transactions resulting from the increase in travel across Europe, the increase in low-value point-of-sale transactions in Europe and low-value payment processing transactions in Asia Pacific. Fluctuations in foreign currency exchange rates decreased direct operating costs by approximately $1.0 million and $0.1 million for the three and six months ended June 30, 2023 compared to the same period in 2022 .
Gross profit
Gross profit, which is calculated as revenues less direct operating costs, was $140.3 million for the three months ended June 30, 2023, an increase of $15.1 million or 12% compared to $125.2million for the same period in 2022. Gross profit, was $213.5 million for the six months ended June 30, 2023, an increase of $36.0 million or 20% compared to $177.5 million for the same period in 2022. Gross profit as a percentage of revenues (“gross margin”) decreased to 49.7% and 45.0% for the three and six months ended June 30, 2023, compared to 50.3% and 45.0% for the same periods in 2022. The increase in gross profit was primarily due to the incremental volume of transactions that were processed on our network relative to the fixed costs incurred, and the higher number of high value and high margin DCC transactions due to increased travel.
Salaries and benefits
Salaries and benefits expenses were $30.8 million for the three months ended June 30, 2023, an increase of $3.1 million or 11% c ompared to the same period in 2022 . Salaries and benefits expenses were $58.3 million for the six months ended June 30, 2023, an increase of $5.4 million or 10% c ompared to the same period in 2022 . The increase is primarily due to an increase in salaries and headcount to support the growth of the business. Fluctuations in foreign currency exchange rates in the countries in which we employ our workforce had no significant impact. As a percentage of revenues, these expenses decreased to 10.9 % and 12.3% for the three and six months ended June 30, 2023 , compared to 11.1% and 13.4% for the same periods in 2022 .
Selling, general and administrative
Selling, general and administrative expenses were $16.6 million for the three months ended June 30, 2023 , a decrease of $0.4 million or 2% compared to the same period in 2022 . The decrease was primarily due to a recovery of tourism in Europe compared to the prior year. Selling, general and administrative expenses were $32.7 million for the six months ended June 30, 2023 , an increase of $4.6 million or 16% compared to the same period in 2022 . The increase was primarily due to an increase in professional fees. As a percentage of revenues, these expenses decreased to 5.9 % and 6.9% for the three and six months ended June 30, 2023 , compared to 6.8 % and 7.1% for the same periods in 2022 .
Depreciation and amortization
Depreciation and amortization expenses were $23.8 million for the three months ended June 30, 2023, a decrease of $1.9 million or 7% compared to the same period in 2022 . Depreciation and amortization expenses were $46.5 million for the six months ended June 30, 2023, a decrease of $1.5 million or 3% compared to the same period in 2022 . As a percentage of revenues, these expenses decreased to 8.4 % and 9.8% for the three and six months ended June 30, 2023 , compared to 10.3 % and 12.2% for the same periods in 2022 .
Operating income
EFT Processing Segment had operating income of $69.1 million for the three months ended June 30, 2023, an increase of $14.3 million or 26% c ompared to the same period in 2022 . EFT Processing Segment had operating income of $76.0 million for the six months ended June 30, 2023, an increase of $27.5 million or 57% compared to the same period in 2022 . O perating income as a percentage of revenues (“operating margin”) increased to 24.5% and 16.0% for the three and six months ended June 30, 2023 , compared to 22.0% and 12.3% for the same periods in 2022 . The increase in operating income and improved operating margin were primarily due to increased volumes processed on our network, and associated revenues, compared to the same periods in 2022.
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EPAY SEGMENT
The following table presents the results of operations for the three and six months ended June 30, 2023 and 2022 for our epay Segment:
Three Months Ended June 30,
Year-over-Year Change
Six Months Ended June 30,
Year-over-Year Change
(dollar amounts in millions )
2023
2022
Increase (Decrease) Amount
Increase
(Decrease) Percent
2023
2022
Increase (Decrease) Amount
Increase
(Decrease) Percent
Total revenues
$
263.8
$
227.7
$
36.1
16
%
$
501.2
$
463.5
$
37.7
8
%
Operating expenses:
Direct operating costs
204.2
173.7
30.5
18
%
382.3
352.0
30.3
9
%
Salaries and benefits
22.0
19.8
2.2
11
%
43.4
40.0
3.4
9
%
Selling, general and administrative
9.1
8.3
0.8
10
%
17.9
17.7
0.2
1
%
Depreciation and amortization
1.7
1.6
0.1
6
%
3.3
3.3
—
—
Total operating expenses
237.0
203.4
33.6
17
%
446.9
413.0
33.9
8
%
Operating income
$
26.8
$
24.3
$
2.5
10
%
$
54.3
$
50.5
$
3.8
8
%
Transactions proce ssed (mi llions)
984
1,116
(132
)
(12)
%
1,958
1,980
(22
)
(1)
%
Revenues
epay Segment total revenues were $263.8 million for the three months ended June 30, 2023 , an increase of $36.1 million or 16% compared to the same period in 2022 . epay Segment total revenues were $501.2 million for the six months ended June 30, 2023 , an increase of $37.7 million or 8% compared to the same period in 2022 . The increase in revenue for the three months ended June 30, 2023 was driven by continued expansion in mobile and digital branded payments. Fluctuations in foreign currency exchange rates increased revenue by approximately $1.3 and $0.2 million for the three and six months ended June 30, 2023 , compared to the same periods in 2022.
Revenue per transaction increased to $0.27 and $0.26 for the three and six months ended June 30, 2023 , respectively, compared to $0.20 and $0.23 for the same periods in 2022 . The increase in revenue per transaction was primarily due to the decrease in the number of mobile transactions processed in a region where we generally earn lower revenues per transaction for the three and six month periods.
Direct operating costs
epay Segment direct operating costs were $204.2 million for the three months ended June 30, 2023 , an increase of $30.5 million or 18% compared to the same period in 2022 . epay Segment direct operating costs were $382.3 million for the six months ended June 30, 2023 , an increase of $30.3 million or 9% compared to the same period in 2022 . 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. Foreign currency exchange rates increased direct operating costs by $1.2 million and $0.2 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 .
Gross profit
Gross profit was $59.6 million for the three months ended June 30, 2023 , an increase of $5.6 million or 10% compared to $54.0 million for the same period in 2022 . Gross profit was $118.9 million for the six months ended June 30, 2023 , an increase of $7.4 million or 7% compared to $111.5 million for the same period in 2022 . Gross margin decreased to 22.6% and 23.7% for the three and six months ended June 30, 2023 , compared to 23.7% and 24.1% for the same periods in 2022 . The decrease in gross profit and gross margin was primarily due to the shift in the mix of transactions processed .
33
Salaries and benefits
Salaries and benefits expenses were $22.0 million for the three months ended June 30, 2023 , an increase of $2.2 million or 11% compared to the same period in 2022 . Salaries and benefits expenses were $43.4 million for the six months ended June 30, 2023 , an increase of $3.4 million or 9% compared to the same period in 2022 . The fluctuations in salaries and benefits were driven by an increase in salaries and headcount to support the growth of the business. As a percentage of revenues, these expenses decreased and increased to 8.3 % and 8.7%, respectively, for the three and six months ended June 30, 2023, compared to 8.7% and 8.6% for the same periods in 2022 .
Selling, general and administrative
Selling, general and administrative expenses were $9.1 million for the three months ended June 30, 2023 , an increase of $0.8 million or 10 % compared to the same period in 2022 . Selling, general and administrative expenses were $17.9 million for the six months ended June 30, 2023 , an increase of $0.2 million or 1 % compared to the same periods in 2022 . As a percentage of revenues, these expenses decreased to 3.4 % and 3.6% for the three and six months ended June 30, 2023 , compared to 3.6 % and 3.8% for the same periods in 2022 .
Depreciation and amortization
Depreciation and amortization expenses were $1.7 million for the three months ended June 30, 2023 , an increase of $0.1 million or 6 % compared to the same period in 2022 . Depreciation and amortization expenses were $3.3 million for both the six months ended June 30, 2023 and 2022 . 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 were 0.6% and 0.7% for the three and six months ended June 30, 2023 , respectively, compared to 0.7% and 0.7% for the same periods in 2022.
Operating income
epay Segment operating income was $26.8 million for the three months ended June 30, 2023 , an increase of $2.5 million or 10% c ompared to the same period in 2022 . epay Segment operating income was $54.3 million for the six months ended June 30, 2023 , an increase of $3.8 million or 8% c ompared to the same period in 2022 . Operating margin decreased to 10.2 % and 10.8 % for the three and six months ended June 30, 2023 , compared to 10.7 % and 10.9% for the same periods in 2022 . Operating income per transaction was $ 0.03 f or both the three and six m onths ended June 30, 2023, respectively compared to $0.02 and $0.03 for same periods in 2022 . The changes in operating income and operating margin for the three and six months ended June 30, 2023 compared to the same periods in 2022 were primarily due to the shift in the mix of transactions processed .
34
MONEY TRANSFER SEGMENT
The following table presents the results of operations for the three and six months ended June 30, 2023 and 2022 for the Money Transfer Segment:
Three Months Ended June 30,
Year-over-Year Change
Six Months Ended June 30,
Year-over-Year Change
(dollar amounts in millions )
2023
2022
Increase (Decrease) Amount
Increase
(Decrease) Percent
2023
2022
Increase (Decrease) Amount
Increase (Decrease) Percent
Total revenues
$
394.8
$
368.5
$
26.3
7
%
$
754.2
$
707.5
$
46.7
7
%
Operating expenses:
Direct operating costs
213.7
205.0
8.7
4
%
410.0
393.5
16.5
4
%
Salaries and benefits
78.5
68.0
10.5
15
%
152.8
135.3
17.5
13
%
Selling, general and administrative
47.3
46.3
1.0
2
%
95.0
87.3
7.7
9
%
Depreciation and amortization
8.1
8.6
(0.5
)
(6)
%
16.6
17.5
(0.9
)
(5)
%
Total operating expenses
347.6
327.9
19.7
6
%
674.4
633.6
40.8
6
%
Operating income
$
47.2
$
40.6
$
6.6
16
%
$
79.8
$
73.9
$
5.9
8
%
Transactions processed (millions)
41.1
37.3
3.8
10
%
78.6
70.7
7.9
11
%
Revenues
Money Transfer Segment total revenues were $394.8 million for the three months ended June 30, 2023 , an increase of $26.3 million or 7 % compared to the same period in 2022 . Money Transfer Segment total revenues were $754.2 million for the six months ended June 30, 2023 , an increase of $46.7 million or 7 % compared to the same period in 2022 . The increase in revenues was primarily due to an increase in international-originated money transfers, U.S. outbound transactions, and direct-to-consumer digital transactions, partially offset by a decrease in U.S. domestic transactions. Revenues per transaction decreased to $9.61 and $9.60 for the three and six months ended June 30, 2023 , compared to $9.88 and $10.01 for the same period in 2022 due to a shift in the mix of transactions processed. Fluctuations in foreign currency exchange rates increased revenues by approximately $1.0 million and $34 thousand for the three and six months ended June 30, 2023, compared to the same periods in 2022 .
Direct operating costs
Money Transfer Segment direct operating costs were $213.7 million for the three months ended June 30, 2023 , an increase of 8.7 million or 4% c ompared to the same period in 2022 . Money Transfer Segment direct operating costs were $410.0 million for the six months ended June 30, 2023 , an increase of $16.5 million or 4 % compared to the same period in 2022 . 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 international-originated and U.S. outbound money transfer transactions.
Gross profit
Gross profit was $181.1 million for the three months ended June 30, 2023 , an increase of $17.6 million or 11% compared to $163.5 million for the same period in 2022 . Gross profit was $344.2 million for the six months ended June 30, 2023 , an increase of $30.2 million or 10% compared to $314.0 million for the same period in 2022 . Gross margin increased to 45.9% and 45.6% for the three and six months ended June 30, 2023, compared to 44.4% and 44.4% for the same periods in 2022. The increase in gross profit and gross margin was primarily due t o increases in international-originated money transfers, U.S. outbound money transfers and direct-to-consumer digital transactions .
35
Salaries and benefits
Salaries and benefits expenses were $78.5 million for the three months ended June 30, 2023, an increase of $10.5 million or 15% compared to the same period in 2022 . Salaries and benefits expenses were $152.8 million for the six months ended June 30, 2023, an increase of $17.5 million or 13% compared to the same period in 2022 . The increase in salaries and benefits was primarily driven by an increase in salaries and headcount to support the growth of the business. As a percentage of revenues, these expenses increased to 19.9 % and 20.3% for the three and six months ended June 30, 2023 , compared to 18.5% and 19.1%, for the same periods in 2022 .
Selling, general and administrative
Selling, general and administrative expenses were $47.3 million for the three months ended June 30, 2023 , an increase of $1.0 million or 2 % compared to the same period in 2022 . Selling, general and administrative expenses were $95.0 million for the six months ended June 30, 2023 , an increase of $7.7 million or 9 % compared to the same period in 2022 . The increase was primarily due to an increase in hardware and soft ware expenses, professional fees, marketing expenses and travel related expenses. As a percentage of revenues, these expenses decreased and increased to 12.0 % and 12.6% for the three and six months ended June 30, 2023 , compared to 12.6% and 12.3% for the same periods in 2022 .
Depreciation and amortization
Depreciation and amortization expenses were $8.1 million for the three months ended June 30, 2023, a decrease of $0.5 million or 6 % compared to the same period in 2022 . Depreciation and amortization expenses were $16.6 million for the six months ended June 30, 2023, a decrease of $0.9 million or 5 % compared to the same period in 2022 . Depreciation and amortization expense 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 2.1 % and 2.2% for the three and six months ended June 30, 2023, compared to 2.3 % and 2.5% for the same periods in 2022 .
Operating income
Money Transfer Segment operating income was $47.2 million for the three months ended June 30, 2023 , an increase of $6.6 million or 16 % compared to the same period in 2022 . Money Transfer Segment operating income was $79.8 million for the six months ended June 30, 2023 , an increase of $5.9 million or 8 % compared to the same period in 2022 . Operating margin increased to 12.0% and 10.6% for the three and six months ended June 30, 2023 , compared to 11.0 % and 10.4% for the same periods in 2022 . Operating income per transaction increased and decreased to $ 1.15 and $1.02, respectively, for the three and six months ended June 30, 2023 , compared to $1.09 and $1.05 for the same period in 2022 due to a shift in the mix of transactions processed .
CORPORATE SERVICES
The following table presents the operating expenses for the three and six months ended June 30, 2023 and 2022 for Corporate Services:
Three Months Ended June 30,
Year-over-Year Change
Six Months Ended June 30,
Year-over-Year Change
(dollar amounts in millions )
2023
2022
Increase (Decrease)
Amount
Increase (Decrease)
Percent
2023
2022
Increase
Amount
Increase
Percent
Salaries and benefits
$
18.1
$
15.9
$
2.2
14
%
$
36.8
$
30.0
$
6.8
23
%
Selling, general and administrative
2.3
2.6
(0.3
)
(12)
%
4.9
4.9
—
—
Depreciation and amortization
0.1
0.1
—
—
0.2
0.2
—
—
Total operating expenses
$
20.5
$
18.6
$
1.9
10
%
$
41.9
$
35.1
$
6.8
19
%
36
Corporate operating expenses
Total Corporate operating expenses were $20.5 million and $41.9 million for the three and six months ended June 30, 2023 , an increase of $1.9 million or 10% and $6.8 million or 19% compared to the same periods in 2022 . The increase is primarily due to an increase in long-term and short-term incentive compensation expense for the three and six months ended June 30, 2023, compared to the same periods in 2022, due to improved company performance.
OTHER EXPENSE, NET
Three Months Ended June 30,
Year-over-Year Change
Six Months Ended June 30,
Year-over-Year Change
(dollar amounts in millions )
2023
2022
Increase (Decrease) Amount
Increase
(Decrease) Percent
2023
2022
Increase (Decrease) Amount
Increase
(Decrease) Percent
Interest income
$
3.5
$
0.2
$
3.3
1,650
%
$
6.1
$
0.3
$
5.8
1,933
%
Interest expense
(14.0
)
(8.8
)
(5.2
)
59
%
(24.1
)
(14.9
)
(9.2
)
62
%
Foreign currency exchange gain (loss), net
6.3
(14.7
)
21.0
(143)
%
5.2
(20.2
)
25.4
(126)
%
Other gains (losses)
(0.1
)
—
(0.1
)
N/A
(0.1
)
0.2
(0.3
)
(150)
%
Other expense, net
$
(4.3
)
$
(23.3
)
$
19.0
(82)
%
$
(12.9
)
$
(34.6
)
$
21.7
(63)
%
Interest income
Interest income was $3.5 million for the three months ended June 30, 2023 , an increase of $3.3 million or 1,650 % compared to the same period in 2022 . Interest income was $6.1 million for the six months ended June 30, 2023 , an increase of $5.8 million or 1,933% compared to the same period in 2022 . This increase was driven by an increase in interest rates on our interest bearing bank accounts.
Interest expense
Interest expense was $14.0 million for the three months ended June 30, 2023 , an increase of $ 5.2 million or 59 % compared to the same period in 2022 . Interest expense was $24.1 million for the six months ended June 30, 2023 , an increase of $9.2 million or 62% compared to the same period in 2022 . This increase was driven by an increase in interest rates on our Credit Facility.
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 net foreign currency exchange gains of $6.3 million and $5.2 million for the three and six months ended June 30, 2023 , compared to net foreign currency exchange losses of $14.7 million and $20.2 million for the same periods in 2022. These realized and unrealized foreign currency exchange gains and 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
The Company's effective income tax rate was 27.3% and 31.9% for the three and six months ended June 30, 2023, compared to 26.7% and 36.7% for the same periods ended June 30, 2022. The Company's effective income tax rate for the three and six months ended June 30, 2023 was higher than the applicable statutory income tax rate of 21% as a result of the Company’s U.S. deferred tax activity and certain foreign earnings being subject to higher local statutory tax rates.
37
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 $86.1 million for the three months ended June 30, 2023, an increase of $28.8 million or 50% compared to t he same period in 2022 . The increase in net income was primarily attributable to the $95.8 million increase in revenues, across all of our three segments, largely driven by successful business operations. The increased revenues led to a $38.4 million increase in gross profit. The increase in gross profit was partially offset by a $10.5 million increase in salaries and benefits expense in the Money Transfer segment.
Net income attributable to Euronet was $106.2 million for the six months ended June 30, 2023, an increase of $40.7 million or 62% compared to t he same period in 2022 . The increase in net income was pri marily attributable to the $164.5 million increase in revenues, largely driven by increases within the EFT Segment as tourism and cross-border travel increased. The increased revenues led to a $73.7 million increase in gross profit. The increase in gross profit was partially offset by a $33.2 million increase in salaries and benefits expense.
LIQUIDITY AND CAPITAL RESOURCES
Working capital
As of June 30, 2023 , we had working capital of $1,207.4 million , which is calculated as the difference between total current assets and total current liabilities, compared to working capital of $1,372.6 million as of December 31, 2022 . The decrease in working capital was primarily due to a decrease in prepayments. Our ratio of current assets to current liabilities was 1.52 and 1.58 at June 30, 2023 and December 31, 2022 , 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 in order to cover 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 our revolving credit facilities, uncommitted credit agreements and cash flows from operations. As of June 30, 2023 , we had $776.3 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 $260.7 million from $515.6 million as of December 31, 2022 to $776.3 million as of June 30, 2023 as a result of the increase in number of active ATMs as of June 30, 2023 compared to December 31, 2022. The Company has $1,137.5 million of unrestricted cash as of June 30, 2023 compared to $1,131.2 million as of December 31, 2022 . Including the $776.3 million of cash in ATMs at June 30, 2023 , we have access to $2,192.6 million in available cash, and $1,057.2 million available under the Credit Facility with no significant long-term debt principal payments until March 2025.
38
The following table identifies cash and cash equivalents provided by/(used in) our operating, investing and financing activities for the six months ended June 30, 2023 and 2022 (in millions):
Six Months Ended June 30,
Liquidity
2023
2022
Cash and cash equivalents and restricted cash provided by (used in):
Operating activities
$
220.2
$
180.7
Investing activities
(45.5
)
(387.0
)
Financing activities
104.4
491.2
Effect of foreign currency exchange rate changes on cash and cash equivalents and restricted cash
(77.4
)
(195.2
)
Increase in cash and cash equivalents and restricted cash
$
201.7
$
89.7
Operating activity cash flow
Cash flows provided by operating activities were $220.2 million f or the six months ended June 30, 2023 compared to cash flows provided by operating activities of $180.7 million for the same period in 2022 . The increase in operating cash flows was primarily due to an increase in net income.
Investing activity cash flow
Cash flows used in investing activities were $45.5 million for the six months ended June 30, 2023 compared to $387.0 million for the same period in 2022 . The decrease in cash used in investing activities is primarily due to the $331.0 million of cash paid at the closing of PBMA in March 2022. Additionally, w e used $41.9 million for purchases of property and equipment for the six months ended June 30, 2023 compared to $53.1 million for the same period in 2022 .
Financing activity cash flow
Cash flows provided by financing activities were $104.4 million for the six months ended June 30, 2023 compared to cash flows provided by financing activities of $491.2 million for the same period in 2022 . Our borrowing activities on the Credit Facility for the six months ended June 30, 2023 consisted of net borrowings of $132.8 million compared to net borrowings of $663.7 million for the same period in 2022. The decrease in net borrowings on the Credit Facility, during the six months ended June 30, 2023, is primarily the result of decreased funding requirements for acquisitions. We repurchased $29.3 million of common stock during the six months ended June 30, 2023 compared to $175.3 million of repurchases during the same period of 2022 . We received proceeds of $2.4 million and $3.7 million during the six months ended June 30, 2023 and 2022 , respectively, for the issuance of stock in connection with our Stock Incentive Plan.
Effect of exchange rates on cash, cash equivalents and restricted cash
Fluctuations in f oreign currency exchange rates for the six months ended June 30, 2023 and 2022 had a negative impact of $77.4 million and $195.2 million, respectively, on cash, cash equivalents, and restricted cash. The negative impact on cash, cash equivalents, and restricted cash for the six months ended June 30, 2023 and 2022 was due primarily to the negative impact in the exchange rate of the U.S. dollar to the euro.
Other sources of capital
Credit Facility - On October 24, 2022, the Company amended its revolving credit agreement (the “Credit Facility”) to increase the facility from $1.03 billion to $1.25 billion and to extend the expiration to October 24, 2027. The revolving credit facility contains a sublimit of up to $250 million, with $150 million committed, for the issuance of letters of credit, a $75 million sublimit both for U.S. dollar swingline loans and for swingline loans in euros or British pounds sterling. The Credit Facility allows for borrowings in British pounds sterling, euro and U.S. dollars. Subject to certain conditions, the Company has the option to increase the Credit Facility by up to an additional $500 million by requesting additional commitments from existing or new lenders. Fees and interest on borrowings vary based upon the Company's corporate credit rating and will be based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over a secured overnight financing rate, as defined in the agreement, with a margin, including the facility fee, ranging from 1.00% to 1.625% or the base rate, as selected by the Company. The applicable margin for borrowings under the credit facility, based on the Company's current credit rating is 1.25% including the facility fee.
As of June 30, 2023 , we had $137.6 million of borrowings and $55.2 million of stand-by letters of credit outstanding under the Credit Facility. The remaining $1,057.2 million under the Credit Facility was available for borrowing.
39
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 June 30, 2023 , we have outstanding € 600 million ( $654.6 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.
Uncommitted Credit Agreements - On June 27, 2023, the Company entered into an Uncommitted Credit Agreement for $300 million, fully drawn and outstanding at June 30, 2023, for the sole purpose of providing vault cash for ATMs, that expires no later than November 30, 2023. The loan bears interest at the rate per annum equal to the secured overnight financing rate (“SOFR”) plus 1.125% . On June 26, 2023, the Company entered into an Uncommitted Loan Agreement for $150 million, fully drawn and outstanding at June 30, 2023, for the sole purpose of providing vault cash for ATMs, that expires no later than June 21, 2024. The loan is a Prime rate loan, a Bloomberg Short-term Bank Yield ("BSBY") rate loan plus 0.95% or bears interest at the rate agreed to by the Bank and the Company at the time such loan is made.
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 was $0.2 million outstanding under these other obligation arrangements as of both June 30, 2023 and December 31, 2022 .
Other uses of capital
Capital expenditures and needs - Total capital expenditures for the six months ended June 30, 2023 were $41.9 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 2023 are currently estimated to range from approximately $100 million to $110 million. At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on hand and amounts available under our 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
Historically, the countries in which we operate have experienced low and stable inflation. Therefore, the local currency in each of these markets is the functional currency. We have seen indications that the current inflationary period will put pressure on our results of operations and our financial position. We have seen some signs of inflation impacting discretionary spend items, such as gaming products, in our epay business, discretionary travel expenditures in EFT, as well as some pressure on send amounts in money transfer. A s a consequence of this inflationary period, w e expect to see increasing expenses forthcoming. 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 June 30, 2023 , there were no material changes from the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2022 . 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 June 30, 2023 . See also Note 14, Commitments, to the unaudited consolidated financial statements included elsewhere in this report.
CONTRACTUAL OBLIGATIONS
As of June 30, 2023 , 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, 2022 .
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