UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

EURONET WORLDWIDE, INC.

DELAWARE (State of other jurisdiction of incorporation or organization)		74-2806888 (I.R.S. employer identification no.)

Common Stock, $0.02 par value

Preferred Stock Purchase Rights

Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ  No o

Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ     Accelerated filer o     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes o  No þ

As of June 30, 2006, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $1,252 million. The aggregate market value was determined based on the closing price of the Common Stock on June 30, 2006.

At February 23, 2007, the registrant had 37,733,605 shares of common stock (the “Common Stock”) outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for its Annual Meeting of Shareholders in 2007, which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2006, are incorporated by reference into Part III of this Annual Report on Form 10-K.

 

 

Table of Contents

PART I							3
		ITEM 1.		BUSINESS			3
		ITEM 1A.		RISK FACTORS			16
		ITEM 2.		PROPERTIES			27
		ITEM 3.		LEGAL PROCEEDINGS			28
		ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			28
PART II							29
		ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES			29
		ITEM 6.		SELECTED FINANCIAL DATA			32
		ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			34
		ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			63
		ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			65
		ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			99
		ITEM 9A.		CONTROLS AND PROCEDURES			99
		ITEM 9B.		OTHER INFORMATION			101
PART III							102
		ITEM 10.		DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE			102
		ITEM 11.		EXECUTIVE COMPENSATION			102
		ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS			102
		ITEM 13.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE			102
		ITEM 14.		PRINCIPAL ACCOUNTANT FEES AND SERVICES			102
PART IV							102
		ITEM 15.		EXHIBITS AND FINANCIAL STATEMENT SCHEDULES			102

PART I

ITEM 1. BUSINESS

OVERVIEW

General Overview

Euronet Worldwide, Inc. (“Euronet” or the “Company”) is a leading electronic payments provider, offering automated teller machine (“ATM”) and point-of-sale (“POS”) operation and management services; card outsourcing services; software solutions; money transfer and bill payment services; and electronic prepaid top-up services to financial institutions, mobile operators and retailers. We operate and service the largest independent pan-European ATM network and the largest national private shared ATM network in India. We are also one of the largest providers of prepaid processing, or top-up services, for prepaid mobile airtime. We have processing centers in the U.S., Europe and Asia and have 17 principal offices in Europe, four in the Asia-Pacific region; four in the U.S. and one in the Middle East. We serve clients in approximately 100 countries. Our executive offices are located in Leawood, Kansas, U.S.

As of December 31, 2006, we operated in three principal business segments:

•

An EFT Processing Segment, in which we process transactions for a network of 8,885 ATMs and more than 44,000 POS terminals across Europe, the Middle East, Africa and Asia Pacific. We provide comprehensive electronic payment and transaction processing solutions consisting of ATM network participation; outsourced ATM, POS and card management solutions; and electronic recharge services for prepaid mobile airtime purchases via an ATM or directly from the handset.

•

A Prepaid Processing Segment, through which we provide distribution of prepaid mobile airtime and other prepaid products and collections services. Including terminals owned by unconsolidated subsidiaries, we operate a network of more than 296,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services across more than 161,000 retail locations in the U.S., Europe, Africa and Asia Pacific. This segment also includes our money transfer and bill payment business, Euronet Payments & Remittance, Inc. (“Euronet Payments & Remittance”). We provide electronic consumer money transfer services from the U.S. to destinations in Latin America, China, India and the Philippines and most recently from the U.K. to India. We also offer bill payment services to customers within the U.S., the U.K. and Poland.

•

A Software Solutions Segment, through which we offer a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems. We have added a leading global credit card issuing and merchant acquiring system to our existing portfolio of software solutions through Euronet Essentis Ltd., which was formed upon the 2006 acquisition of U.K.-based Essentis Limited.

Historical Perspective

The first company in the Euronet group was established in 1994 as a Hungarian limited liability company. We began operations in 1995, setting up a processing center and installing our first ATMs in Budapest, Hungary. We commenced operations in Poland and Germany in 1995 and 1996, respectively. The Euronet group was reorganized on March 6, 1997 in connection with its initial public offering, and at that time the operating entities of the Euronet group became wholly owned subsidiaries of Euronet Services Inc., a Delaware corporation. We changed our name from Euronet Services Inc. to Euronet Worldwide, Inc. in August 2001.

Until December 1998, we devoted substantially all of our resources to establishing and expanding our ATM network and outsourced ATM management services business in Central Europe (including Hungary, Poland, the Czech Republic and Croatia) and Germany. In December 1998, we acquired Arkansas Systems, Inc. (now known as “Euronet USA”), a U.S.-based company that produces electronic payment systems software for retail financial institutions internationally and that was a leading electronic payment software system for the IBM iSeries (formerly AS/400) platform. As a result of this acquisition, we were able to offer a broader and more complete line of services and solutions to the retail banking market, including software solutions related not only to ATMs, but also to POS devices, credit and debit card operations, the Internet, and telephone and mobile banking. We have invested in software research, development and delivery capabilities and have integrated our EFT Processing Segment and Software Solutions Segment. These two complementary segments present cross-selling opportunities within our combined customer base. We also use the electronic payment software system owned by Euronet USA in our operations center, creating opportunities to leverage the core infrastructure and software to provide innovative value-added electronic commerce products and services.

Between 1999 and 2001, we expanded our presence to Egypt, Greece, France and, in particular, the U.K., where we established a sizeable independent ATM network. We opened offices in each of these countries, and began to deploy Euronet-branded ATMs in addition to selling ATM outsourcing and network participation products and services.

Throughout 2001 and 2002, Euronet focused on the development of products to enhance transaction functionality via new and existing products, including mobile banking and event messaging. Another new product line, Electronic Recharge, was added, which enabled

customers to purchase prepaid mobile airtime from ATMs, POS terminals and directly from the mobile handset. Unlike in the U.S., where mobile phones companies have historically promoted postpaid plans, mobile phone companies in other countries generally promote prepaid plans. Thus, we saw processing prepaid transactions as an expansion opportunity.

In 2002, we entered into ATM outsourcing agreements and established an office in Slovakia. We also initiated operations in India, one of the largest emerging markets for ATM and card growth, by establishing the first and now the largest national private shared ATM network, called Cashnet. In the Indian market, we are focusing on ATM outsourcing services and electronic recharge products for replenishing prepaid mobile airtime via ATMs.

Euronet has progressively shifted its strategy from operating Euronet-owned ATMs to managing outsourced ATMs for financial institutions. In January 2003, we sold our ATM network in the U.K. and simultaneously signed a five-year ATM outsourcing agreement with the buyer. Additionally, in September 2003, we sold 272 ATMs in Hungary to an established Hungarian financial institution. In connection with the sale, we concurrently entered into a long-term outsourcing agreement and cash sponsorship arrangement with the financial institution. Due to the imposition of stringent new safety requirements for the operation of ATMs in France, which made it difficult to operate ATMs profitably, in May 2002 we sold our ATM operations in France.

Also in 2003, Euronet complemented its existing two business segments by acquiring a third business, e-pay Limited (“e-pay”), which had offices in the U.K. and Australia. e-pay focuses on processing transactions for prepaid services, primarily prepaid mobile airtime. We started reporting e-pay’s results in a new segment called the Prepaid Processing Segment. With this acquisition, we added offices in Basildon, U.K. and Sydney, Australia. Subsequent to this acquisition, e-pay expanded its operations into New Zealand, Ireland, Spain and Poland. Additionally, e-pay U.K. owns 40% of the shares of e-pay Malaysia Sdn Bhd (“e-pay Malaysia”), a company that offers electronic top-up in Malaysia and Indonesia. e-pay has agreements with mobile operators in those markets under which it supports the distribution of airtime to their subscribers through POS terminals.

Throughout 2003 and 2004, we expanded the Prepaid Processing Segment with acquisitions in Germany, Spain and the U.S. In November 2003, we acquired the German company, Transact Elektronische Zahlungssysteme GmbH (“Transact”), the market leader in electronic processing of prepaid mobile airtime top-up services in Germany. With this acquisition, we added an office in Martinsried, Germany. In November 2004, we established a Spanish entity, of which we hold an 80% interest, which purchased all of the prepaid processing and distribution assets of Grupo Meflur Corporacion (“Meflur”), a Spanish telecommunications distribution company. With this acquisition we added an office in Monzon, Spain. In the U.S. prepaid business, we enhanced our wholly owned subsidiary, PaySpot, Inc. (“PaySpot”), with four acquisitions of U.S.-based prepaid companies. In September 2003, we purchased all of the assets and assumed certain liabilities of Austin International Marketing and Investments, Inc. (“AIM”); in January 2004, PaySpot acquired 100% of the shares of Prepaid Concepts, Inc. (“Precept”); in May 2004, PaySpot acquired 100% of the assets of Electronic Payment Solutions (“EPS”); and in July 2004, PaySpot also acquired 100% of the shares of Call Processing, Inc (“CPI”).

In 2004, we expanded our EFT Processing Segment by increasing our Romanian office to support ATM outsourcing services and by establishing small administrative offices in Bulgaria and Russia to evaluate market opportunities in those countries. In July 2005, we further expanded our EFT Segment with the formation of a joint venture, Euronet Middle East, in Bahrain with Arab Financial Services Company B.S.C (c) (“AFS”), a regional leader in card outsourcing business, to offer ATM outsourcing services to financial institutions across the Middle East, North Africa, Gulf region and Pakistan. We own 49% of the shares of Euronet Middle East. In October 2005, we acquired Instreamline S.A., a Greek company that provides credit card and POS outsourcing services in addition to debit card and transaction gateway switching services in Greece and the Balkan region.

We continued to focus on expanding our Prepaid Processing Segment in 2005. In March 2005, we acquired 100% of the assets of Telerecarga S.A. (“Telerecarga”), a Spanish prepaid wireless top-up company. With this acquisition, we added an office in Madrid, Spain. We also increased our ownership stake in ATX Software Ltd. (“ATX”), a U.K.-based provider of electronic prepaid voucher solutions in Europe, Africa and other regions, from 10% to 51%. At the same time, we acquired 100% of the assets of Dynamic Telecom, Inc. (“Dynamic”), a prepaid service provider in the U.S. In May 2005, we launched our money transfer and bill payment services with the acquisition of TelecommUSA. With this acquisition, we formed Euronet Payments & Remittance and added an office in Charlotte, North Carolina, U.S. We now provide electronic consumer money transfer services from the U.S. to destinations in Latin America, China, India and the Philippines, and most recently, from the U.K. to India. We also offer bill payment services within the U.S., the U.K. and Poland. In two separate transactions, one in April 2005 and one in December 2005, we purchased an additional 64% of Europlanet a.d. (“Europlanet”), a Serbian company, increasing our share ownership in Europlanet to 100%. Europlanet is a debit card processor that owns, operates and manages a network of ATMs and POS terminals. Our initial 36% interest was acquired during 2002. For more information on these acquisitions see Note 4 — Acquisitions to the Consolidated Financial Statements.

In January 2006, through Jiayintong (Beijing) Technology Development Co. Ltd., our 75% owned joint venture with Ray Holdings in China, we entered into an ATM outsourcing pilot agreement with Postal Savings and Remittance Bureau (“PSRB” or “China Postal”), a financial institution located and organized in China. Under the pilot agreement we deployed and are providing all of the day-to-day outsourcing services for a total of 87 ATMs in Beijing, Shanghai and the Guangdong province, the three largest commercial centers in China. Additionally, during the third quarter 2006, we signed an ATM outsourcing agreement with a leading multinational bank to

deploy 50 ATMs in China beginning in January 2007. We are the first, and currently the only, provider of end-to-end ATM outsourcing services in China and we have established a technical processing and operations center in Beijing to operate these ATMs.

Also, in January 2006, we acquired the assets of Essentis Limited (“Essentis”), a U.K. company that developed a leading card issuing and merchant acquiring software system. With this acquisition, we added an office in Watford, U.K. The Essentis payment card issuing and merchant acquiring system is specifically designed to meet the needs of international institutions. Currently, institutions such as Bank of China, UBS, Moneris and ABN Amro, among others, are using Essentis Software. In addition to traditional software licensing, professional services and maintenance, we believe that the Essentis software will enable us to enter into and grow the card issuing and merchant acquiring business as an outsourcer and allow us to cross-sell our other EFT outsourcing offerings to Essentis customers.

Also in 2006, we expanded our prepaid operations into Austria using our German prepaid platform, Transact. We are leveraging one hundred percent of Transact’s business resources to oversee the Austrian market, which is our eleventh prepaid market.

In 2006, we successfully launched our EFT operations in Bulgaria and began deploying Euronet-branded ATMs. In April 2006, we opened an office in Kiev, Ukraine. We subsequently signed an ATM outsourcing agreement, which represents the first end-to-end ATM outsourcing agreement of its kind in Ukraine. We continue to be excited about the opportunities available in Central and Eastern European markets and our progress is indicative of the expansion opportunities available in these new markets.

In November 2006, we signed a stock purchase agreement to acquire Los Angeles-based RIA Envia, Inc. (“RIA”), the third-largest global money transfer company. Established in 1987, RIA originates transactions through a network of over 10,000 sending agents and 98 company-owned stores located throughout 13 countries in North America, the Caribbean, Europe and Asia and terminates transactions through a payer network of over 32,000 locations across 82 countries. We expect the acquisition to create significant opportunities for us in the growing money transfer industry, including the opportunity to provide RIA’s money transfer services to many of our prepaid top-up locations and to provide our prepaid services through RIA’s stores and agents worldwide. We also believe the geographic, economic and relationship synergies between RIA and our business are substantial and position us to provide remittance services across many markets around the world. Subject to regulatory approvals and other customary closing conditions, we anticipate the transaction to close during the first half of 2007.

Subsequent Developments

Agreement to acquire La Nacional — During January 2007, we signed a stock purchase agreement to acquire La Nacional, subject to regulatory approvals and other customary closing conditions. La Nacional is a money transfer company originating transactions through a network of sending agents and company-owned stores, located primarily in the Northeastern U.S., and terminating transactions through a worldwide payer network, primarily in the Dominican Republic. In addition to gaining a significant share of the U.S. to Dominican Republic money transfer corridor, the La Nacional acquisition will strengthen our retail presence in the Northeastern U.S. In connection with signing the agreement, we deposited funds in an escrow account created for the proposed acquisition. The escrowed funds can only be released by mutual agreement of the Company and La Nacional or through legal remedies available in the agreement.

We have become aware that on February 6, 2007, two employees of La Nacional working in different La Nacional stores were arrested for allegedly violating federal money laundering laws and certain state statutes. We are currently gathering additional information to assess the impact of these arrests on La Nacional and on our potential acquisition of that company. The outcome of our analysis is currently uncertain. No assurance can be given that we will close the La Nacional acquisition. See “Management Discussion and Analysis — Liquidity and Capital Resources — Other trends and uncertainties.”

Additionally, in January 2007, pursuant to a purchase agreement signed in August, 2006, we completed the acquisition of Brodos Romania SRL (“Brodos Romania”), a subsidiary of Brodos AG, a privately held German company providing retail and electronic distribution services to the mobile telephone industry. Brodos Romania is a leading electronic prepaid mobile airtime processor in Romania. Founded in 2001, Brodos Romania specializes in processing electronic purchases of prepaid mobile phone airtime primarily on POS terminals in Romania. The company also offers electronic recharge or top-up services for mobile airtime through ATMs, PC and electronic cash register systems. Brodos Romania marks our entry into the Romanian prepaid market, which is our twelfth prepaid market.

During February 2007, we completed the acquisition of the stock of Omega Logic, Ltd. (“Omega Logic”). Omega Logic is a prepaid top-up company based, and primarily operating, in the U.K. This acquisition will enhance our Prepaid Processing Segment business in the U.K.

BUSINESS SEGMENT OVERVIEW

For a discussion of operating results by segment, please see Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 15 — Business Segment Information to the Consolidated Financial Statements.

EFT PROCESSING SEGMENT

Overview

Our EFT Processing Segment provides outsourcing and network services to financial institutions and mobile phone companies, primarily in the developing markets of central, eastern and southern Europe (Hungary, Poland, the Czech Republic, Croatia, Romania, Slovakia, Albania, Serbia, Greece, Bulgaria and Ukraine), the Middle East, Africa and Asia Pacific (India and China), as well as in developed countries of Western Europe (Germany and the U.K.). We provide these services either through our Euronet-owned ATMs or through contracts under which we operate ATMs on behalf of financial institutions. Although all of these markets present opportunities for expanding the sales of our services, we believe opportunities for growth in the ATM services business are greater in our developing markets.

The major source of revenue generated by our ATM network is recurring monthly management fees and transaction-based fees. We receive fixed monthly fees under many of our outsourced management contracts. This element of revenue has been increasing over the last few years. Revenue sources of the EFT Processing Segment also include POS and credit and debit card network management revenue and prepaid mobile phone recharge revenue from ATMs or mobile phone handsets and ATM advertising revenue. The number of ATMs we operated increased from 7,211 at December 31, 2005 to 8,885 at December 31, 2006.

We monitor the number of transactions made by cardholders on our ATM network. These include cash withdrawals, balance inquiries, deposits, mobile phone airtime recharge purchases and certain denied (unauthorized) transactions. We do not bill certain transactions on our network to financial institutions, and we have excluded these transactions for reporting purposes. The number of transactions processed over our entire ATM network has increased over the last five years as indicated in the following table:

(in millions)		2002				2003				2004				2005				2006
EFT processing transactions per year			79.2				114.7				232.5				361.5				463.6

Our processing centers for the EFT Processing Segment are located in Budapest, Hungary; Mumbai, India; Athens, Greece; Belgrade, Serbia; and Beijing, China. They are staffed 24 hours a day, seven days a week and consist of production IBM iSeries computers, which run the Euronet GoldNet ATM software package. Our significant processing centers in Budapest and Mumbai both have an off-site real-time back up iSeries computer. This backup serves to replicate our existing data center and in the event of failure, would be used to bring up our system using data from our principal processing center. The processing centers’ data backup systems are designed to prevent the loss of transaction records due to power failure and permit the orderly shutdown of the switch in an emergency. Our software package is state-of-the-art and conforms to all relevant industry standards. The processing centers’ computers operate our ATMs and interface with financial institutions and international transaction authorization centers, including over 80 host-to-host connections with financial institutions and card organizations. Our EFT processing centers have been certified by a number of transaction exchange entities, such as Visa, LINK (UK’s national ATM interchange network) and Europay/MasterCard.

EFT Processing Products and Services

Outsourced Management Solutions

Euronet offers outsourced management services to financial institutions and other organizations using our processing centers’ electronic financial transaction processing software. Our outsourced management services include management of existing ATM networks, development of new ATM networks, management of POS networks, management of credit and debit card databases and other financial processing services. These services include 24-hour monitoring of each ATM’s status and cash condition, coordinating the cash delivery and management of cash levels in each ATM and providing automatic dispatches for necessary service calls. We also provide real-time transaction authorization, advanced monitoring, network gateway access, network switching, 24-hour customer service, maintenance, and cash settlement, forecasting and reporting. Since our infrastructure is sufficiently robust to support a significant increase in transactions, any new outsourced management services agreements should provide additional revenue with lower incremental cost.

Our outsourced management agreements generally provide for fixed monthly management fees and, in most cases, fees payable for each transaction. The transaction fees under these agreements are generally lower than card acceptance agreements, described below.

Euronet-Branded ATM Transaction Processing

Our Euronet-branded ATM network in central Europe is managed by an operations center that uses the Software Solutions Segment’s Integrated Transaction Management (“ITM”) core software solution. The ATMs in our networks are able to process transactions for

holders of credit and debit cards issued by or bearing the logos of financial institutions and international card organizations such as American Express, Diners Club International, Visa, MasterCard/Europay and China Union Pay organizations. This ability is accomplished through our agreements and relationships with these institutions, international credit and debit card issuers and international associations of card issuers.

In a typical ATM transaction, the transaction is routed from the ATM to our processing center, and then to the card issuer for authorization. Once authorization is received, the authorization message is routed back to the ATM and the transaction is completed. The card issuer is responsible for authorizing ATM transactions processed on our ATMs. This process normally takes less than 30 seconds.

When a bank cardholder conducts a transaction on a Euronet-owned ATM, we receive a fee from the cardholder’s bank for that transaction. The bank pays us this fee either directly or indirectly through a central switching and settlement network. When paid indirectly, this fee is referred to as the “interchange fee.” All of the banks in a shared ATM and POS switching system establish the amount of the interchange fee by agreement. We receive transaction-processing fees for successful transactions and, in certain circumstances, for transactions that are not completed because they fail to receive authorization. The fees paid to us by the card issuers are independent of any fees charged by the card issuers to cardholders in connection with the ATM transactions. We do not charge cardholders a transaction or access fee for using our ATMs.

We generally receive fees from our customers for four types of ATM transactions:

	•		cash withdrawals,
	•		balance inquiries,
	•		transactions not completed because the relevant card issuer does not give authorization, and
	•		prepaid telecommunication recharges.

Card Acceptance or Sponsorship Agreements

Our agreements with financial institutions and international card organizations generally provide that all credit and debit cards issued by the customer financial institution or organization may be used at all ATM machines we operate in a given market. In most markets, we have agreements with a financial institution under which we are designated as a service provider (which we refer to as “sponsorship agreements”) for the acceptance of cards bearing international logos, such as Visa and MasterCard. These card acceptance or sponsorship agreements allow us to receive transaction authorization directly from the card issuing institution or international card organization. Our agreements generally provide for a term of three to seven years and are automatically renewed unless either party provides notice of non-renewal prior to the termination date. In some cases, the agreements are terminable by either party upon six months notice. We are generally able to connect an institution to our network within 30 to 90 days of signing a card acceptance agreement. Generally, the financial institution provides the cash needed to complete transactions on the ATM, although we have contracted with a financial institution for cash supply in the Czech Republic. Under our card acceptance agreements, the ATM transaction fees we charge vary depending on the type of transaction and the number of transactions attributable to a particular card issuer. Our agreements generally provide for payment in local currency. Transaction fees are sometimes denominated in U.S. dollars or are adjusted for inflation. Transaction fees are billed to financial institutions and card organizations with payment terms typically no longer than one month.

Other Products and Services

Our network of owned or operated ATMs allows for the sale of financial and other products or services at a low incremental cost. We have developed value-added services in addition to basic cash withdrawal and balance inquiry transactions. These value added services include electronic bill payment, ATM advertising and the sale of prepaid mobile airtime recharge services from ATMs or mobile phone devices. We are committed to the ongoing development of innovative new products and services to offer our EFT processing customers and intend to implement additional services as markets develop.

In Poland, Hungary, Croatia, Romania, Czech Republic, Slovakia, India and the U.K., we have established electronic connections to some or all of the major mobile phone operators. These connections permit us to transmit to them electronic requests to recharge mobile phone accounts. We operate networks of ATMs in these markets to offer customers of the mobile operators the ability to credit their prepaid mobile phone accounts. We began to distribute prepaid mobile telephone vouchers on our networks in Hungary and Poland in November 1999. In May and October 2000, we added this service to our Czech Republic and Croatian ATM networks, respectively. In Poland, Hungary and Croatia, we have contracts with all of the local mobile operators.

We have expanded our outsourced management solutions beyond ATMs to include credit and debit card and POS terminal management and additional services, such as bill payment and prepaid mobile operator solutions. We support these services using our proprietary software products.

Since 1996, we have sold advertising on our network. Clients can display their advertisements on our ATM video screens, on the ATM receipts and on coupons dispensed with cash from the ATMs.

EFT Processing Segment Strategy

We believe financial institutions in both developing and developed markets are becoming more receptive to outsourcing the operation of their ATM, POS and card networks. The operation of these devices requires expensive hardware and software and specialized personnel. These resources are available to us and we offer them to financial institutions under outsourcing contracts. The expansion and enhancement of our outsourced management solutions in new and existing markets will remain an important business opportunity for Euronet. Increasing the number of non-owned ATMs that we operate under management agreements and continued development of our credit and debit card outsourcing business should provide continued growth while minimizing our capital investment.

We continually strive to make our own ATM networks more efficient by eliminating the underperforming ATMs and installing ATMs in more desirable locations. Moreover, we will make selective additions to our own ATM network if we see market demand and profit opportunities.

The EFT Segment’s ATM and Mobile Recharge line of services was substantially strengthened through complementary services offered by our Prepaid Processing Segment, where we provide top-up services through POS terminals. We intend to expand our technology and business methods into other markets where we operate and expect to leverage our relationships with mobile operators and financial institutions to facilitate expansion.

Seasonality

Our business is significantly impacted by seasonality. We normally experience our highest revenue level during the fourth quarter of each year, followed in order by the second quarter, third quarter and first quarter. We have estimated that, absent unusual circumstances (such as the impact of new acquisitions or unusually high levels of growth due to market factors), the overall revenue realized from our three business segments is likely to be approximately 5% to 10% lower during the first quarter of each year than in the fourth quarter of the year. We have historically experienced a less than 5% difference between the second and third quarters of each year.

Segment Significant Customers and Government Contracts

No individual customer makes up greater than 10% of consolidated total revenue, and we do not have any government contracts in the EFT Processing Segment. Our outsourcing contracts generally provide for a term of three to seven years and are automatically renewed unless either party provides written notice of non-renewal prior to the termination date. In some cases, the contracts are terminable by either party upon six months notice.

Competition

Our principal EFT Processing competitors include ATM networks owned by financial institutions and national switches consisting of consortiums of local banks that provide outsourcing and transaction services to financial institutions and independent ATM deployers in a particular country. Additionally, large, well-financed companies that operate ATMs offer ATM network and outsourcing services, and those that provide card outsourcing, POS processing and merchant acquiring services also compete with us in various markets. None of these competitors have a dominant market share in any of our markets. Competitive factors in our EFT Processing Segment include breadth of service offering network availability and response time, price to both the financial institution and to its customers, ATM location and access to other networks.

Certain independent (non bank-owned) companies provide electronic recharge on ATMs in individual markets in which we provide this service. We are not aware of any independent companies providing electronic recharge on ATMs across multiple markets in which we provide this service. In this area, we believe competition will come principally from banks providing such services on their own ATMs through relationships with mobile operators or from card transaction switching networks that add recharge transaction capabilities to their offerings (as is the case in the U.K. through the LINK network).

PREPAID PROCESSING SEGMENT

Overview

We currently offer prepaid mobile phone top-up services in the U.S., Europe, Africa and Asia Pacific, money transfer services to customers from the U.S. to destinations in Latin America, China, India and the Philippines, and bill payment services to customers within the U.S., U.K. and Poland. We are one of the largest providers of prepaid processing, or “top-up” services, for prepaid mobile airtime. We provide electronic top-up services for prepaid mobile airtime primarily in the U.K., Germany, Austria, Spain, Poland, Ireland, Australia, New Zealand, Malaysia, Indonesia and the U.S. on a network of more than 296,000 POS terminals across more than 161,000 retailer locations.

We began reporting the results of this segment in the first quarter 2003 after we acquired e-pay. As discussed above, we have continually expanded this business and plan to further expand our top-up business in our existing markets and other markets by taking advantage of our existing expertise together with relationships with mobile operators and retailers. For more details on our Prepaid acquisitions, see “General Overview—Historical Perspective.”

In May 2005, we launched our money transfer and bill payment services, Euronet Payments & Remittance, with the acquisition of TelecommUSA, a licensed money transfer and bill payment company in the U.S. Our patented card-based money transfer and bill payment system allows transactions to be initiated primarily through POS terminals and Integrated Cash Register Systems (“ICR”). Transactions can also be initiated through PC, fax or telephone. We plan to expand our money transfer and bill payment services by offering the product on many of our existing POS terminals in the U.S. and internationally.

Our processing centers for the Prepaid Processing Segment are located in Basildon, U.K.; Martinsried, Germany; Madrid, Spain; and Leawood, Kansas, U.S. The Basildon and Martinsried processing centers have off-site real time backup processing centers that are capable of providing high availability in the event of failure of the primary processing centers. Our processing centers in the U.S. and Madrid have on-site backup system designed to prevent the loss of transaction records due to power failure.

Sources of Revenue

The major source of revenue generated by our Prepaid Processing Segment is commissions or processing fees received from mobile operators and other telecommunications service providers or from distributors of prepaid wireless products for the distribution and/or processing of prepaid mobile airtime and other telecommunication products. The Prepaid Processing Segment also includes transaction fee revenue earned in the money transfer and bill payment business, as well as the difference between purchasing currency at wholesale exchange rates and selling the currency to consumers at retail exchange rates. We have origination and distribution agents in place for our money transfer services, which each earn a fee for the cash collection and distribution services. These fees are recognized as direct operating costs at the time of sale.

Customers using mobile phones pay for their usage in two ways:

	•		through “postpaid” accounts, where usage is billed at the end of each billing period, and
	•		through “prepaid” accounts, where customers pay in advance by crediting their accounts prior to usage.

Although mobile operators in the U.S. and certain European countries have provided service principally through postpaid accounts, the trend in most European and other countries offering wireless services has shifted toward prepaid accounts. This shift is driven, according to Ofcom, formerly Oftel (the U.K. telecommunications regulator) surveys, by customers’ belief that prepaid products better meet their needs and enable them to better control their monthly wireless expenditures.

Currently, two principal methods are available to credit prepaid accounts (referred to as “top-up” of accounts). The first is through the purchase of “scratch cards” bearing a PIN (personal identification number) that, when entered into a customer’s mobile phone account, credits the account by the value of airtime purchased. Scratch cards are sold predominantly through retail outlets. The second is through various electronic means of crediting accounts using POS terminals. Electronic top-up (or “e-top-up”) methods have several advantages over scratch cards, primarily because electronic methods do not require the cost of creation, distribution and management of a physical inventory of cards or involve the risk of losses stemming from fraud, theft and mismanagement.

Prior to 2004, scratch cards were the predominant method of crediting mobile phone accounts in most developed markets. However, a shift has occurred in these markets away from usage of scratch cards to more efficient e-top-up methods. In the U.K., for example, we estimate that in early 2000 approximately 10% of all top-ups were performed through e-top-ups and 90% through scratch cards. By December 2006, we estimate that as much as 97% of all U.K. top-ups in the retail channel were performed through e-top-ups and only 3% through scratch cards. This estimation excludes other methods of top-up through channels such as ATMs and/or directly with a mobile network operator.

Our Prepaid Processing Segment processes the sale of prepaid mobile phone minutes to consumers through networks of POS terminals and direct connections to the electronic payment systems of retailers. In some markets, we enter into agreements with mobile phone operators and connect directly to their back-office systems. In other markets, we distribute mobile phone time by connecting directly to the mobile operators or by purchasing PINs that enable airtime top-up. We then distribute the mobile phone time electronically through POS terminals, either via a direct credit from the mobile operator to the mobile phone, or via the sales of PINs. The business has grown rapidly over the past few years as new retailers have been added and prepaid airtime distribution has switched from scratch cards to electronic means.

In our prepaid markets, we expand our distribution networks through the signing of new contracts with retailers, and in some markets, through acquisition of existing networks. We also seek to improve the results of our existing networks through the addition of new mobile operators in markets where we do not already distribute all of the available prepaid time and the addition of other prepaid products not necessarily related to the mobile operators. In addition, in the U.S. we are expanding our sales presence in all sales segments. We are continuing to focus on our growing network of distributors, generally referred to as Independent Sales Organizations (“ISOs”) that are paid a commission for delivering us contracts with retailers in their network to distribute PINs from their terminals. In addition, we are increasing our focus on direct relationships with independent convenience store retailers and chains, where we can negotiate agreements with the merchant on a multiyear basis.

To distribute PINs, we establish an electronic connection with the POS terminals and maintain systems that monitor transaction levels at each terminal. As sales to customers of mobile airtime are completed, the customer pays the retailer and the retailer becomes obligated to make settlement to us of the principal amount of the phone time sold. We maintain systems that enable us to monitor the payment practices of each retailer. In the U.K. and Australia, these amounts are deposited in accounts that are held in trust for the mobile operators. In other countries, trust arrangements are not required and retailer accounts are directly debited on a contractually defined basis.

Prepaid Processing Products and Services

Prepaid Mobile Airtime Transaction Processing

We process prepaid mobile airtime top-up transactions on our POS network across the U.S., Europe, Africa and Asia Pacific for two types of clients: distributors and retailers. Both types of client transactions start with a consumer in a retail store. The retailer uses a specially programmed POS terminal in the store or the retailer’s electronic cash register (“ECR”) system that is connected to our network to buy prepaid airtime. The customer will select a predefined amount of prepaid airtime from the carrier of his choice, and the retailer enters the selection into the POS terminal. The consumer will pay that amount to the retailer (in cash or other payment methods accepted by the retailer). The POS device then transmits the selected transaction to our processing center. Using the electronic connection we maintain with the mobile operator or drawing from our inventory of PINs, the purchased amount of airtime will be either credited to the consumer’s account or delivered via a PIN printed by the terminal and given to the consumer. In the case of PINs printed by the terminal, the consumer must then call a mobile operator’s toll free number to activate the purchased airtime to this consumer’s mobile account.

One difference in our relationships with various retailers and distributors is how we charge for our services. For distributors and certain very large retailers we charge a processing fee. However, the majority of our transactions occur with smaller retailer clients. With these clients, we receive a commission on each transaction that is withheld from the payments made to the mobile operator, and we share that commission with the retailers.

We monitor the number of transactions made on our prepaid networks. The number of transactions processed on our entire POS network has increased over the last four years as indicated in the following table:

(in millions)		2003				2004				2005				2006
Prepaid processing transactions per year			102.1				228.6				348.1				458.1

Retailer and Distributor Contracts

We provide our prepaid services through POS terminals installed in retail outlets or, in the case of major retailers, through direct connections between their ECR systems and our processing centers. In markets where we operate e-pay technology (the U.K., Australia, Poland, Ireland, New Zealand, Spain and the U.S.), we generally own and maintain the POS terminals. In Germany, Austria and Romania, the terminals are sold to the retailers or to distributors who service the retailer. In all cases, we have contracts with the retailers. Our agreements with major retailers for the POS services typically have one to three-year terms. These agreements include terms regarding the connection of our networks to the respective retailer’s registers or payment terminals or the maintenance of POS terminals, and obligations concerning settlement and liability for transactions processed. Generally, our agreements with individual or small retailers have shorter terms and provide that either party can terminate the agreement upon three to six months’ notice.

In Germany, distributors have historically controlled the sale of mobile phone scratch cards, and they now are key intermediaries in the sale of e-top-up. Our business in Germany is substantially concentrated in and dependent upon relationships with our major distributors. The termination of any of our agreements with major distributors could materially and adversely affect our business in Germany. However, we have been establishing agreements with independent retailers in order to diversify our exposure to such distributors.

Money Transfer and Bill Payment Transaction Processing

Our patented card-based money transfer and bill payment system allows transactions to be initiated primarily through POS terminals and ECRs at retail locations. We currently provide money transfer services from the U.S. to destinations in Latin America, China, India and the Philippines, and most recently, from the U.K. to India, and bill payment services within the U.S., where we process POS and ECR transactions through retail stores. Both types of transaction services start with a consumer in a retail store. The retailer uses the consumer’s card or accepts cash to process a money transfer or bill payment transaction. The retailer swipes the card on a specially programmed POS terminal in the shop or the retailer’s ECR system that is connected to our network, enters the beneficiary number available on the back of the card, dollar amount of the transaction and finally the retailer’s PIN number. The POS device or ECR system then transmits the selected transaction to our processing center and we approve the transaction using the electronic connection we maintain with the retailer, which enables the retailer to generate two receipts. The retailer returns the consumer’s card and the first receipt and keeps the second one for his records to show the transaction was completed. It takes approximately 30 seconds to originate a money transfer or bill payment transaction with our patented card-based system.

We also offer bill payment services to our Prepaid merchant base in Poland and the U.K., where we process POS transactions through retail stores.

Other Products and Services

Our POS network can be used for the distribution of other products and services. Although prepaid mobile airtime, money transfer and bill payment are the primary products distributed through our Prepaid Processing Segment, additional products include prepaid long distance calling card plans, prepaid Internet plans, prepaid debit cards, prepaid gift cards and prepaid mobile content such as ring tones and games. In certain locations, the terminals used for prepaid services can also be used for electronic funds transfer (“EFT”) to process credit and debit card payments for retail merchandise.

Prepaid Processing Segment Strategy

We plan to expand our prepaid processing business in our existing markets and new markets by taking advantage of our existing relationships with mobile phone operators and retailers. Although all of these markets present opportunities for expanding the sales of our services, we believe opportunities for transaction growth in the Prepaid Processing Segment are greater in Poland, Germany and the U.S., where there is significant organic growth in the prepaid markets or a shift is occurring from scratch cards to electronic top-up.

Growth in our money transfer and bill payment services business will be driven by the continuation of global worker migration patterns; our ability to manage rapid growth; our ability to maximize the opportunity to sell our card-based product over our existing POS terminals in the U.S. and internationally; and our ability to obtain licenses to operate in many of the states within the U.S. as well as other countries. Currently, we are primarily focused on the U.S. to Latin America market and mostly recently, we expanded our money transfer services to China, India and the Philippines from the U.S and to India from the U.K. We also have plans to expand our money transfer services to other markets internationally. Within the U.S., we are focusing on increasing our sending locations in existing licensed states by leveraging our access to over 20,000 terminals, and obtaining licenses to operate in certain key states. Expansion of our money transfer business internationally will require resolution of numerous licensing and regulatory issues in each of the sending markets we intend to develop.

Additionally, we expect the potential completion of the acquisition of RIA to enable us to significantly expand our money transfer sending and receiving locations worldwide. RIA has established high-potential money transfer corridors from the U.S. and internationally beyond the traditional U.S. to Mexico corridor. We see this as a strong advantage to growing our market share in other key regions.

Seasonality

Our business is significantly impacted by seasonality. We normally experience our highest revenue level during the fourth quarter of each year, followed in order by the second quarter, third quarter and first quarter. We have estimated that, absent unusual circumstances (such as the impact of new acquisitions or unusually high levels of growth due to market factors), the overall revenue realized from our three business segments is likely to be approximately 5% to 10% lower during the first quarter of each year than in the fourth quarter of the year. We have historically experienced a less than 5% difference between the second and third quarters of each year. The impact of seasonality has been masked for the last two years due to significant growth rates resulting from continued shifts from scratch cards to electronic top-up and acquisitions. There can be no assurance that this will be the case for future years.

Significant Customers and Government Contracts

No individual customer makes up greater than 10% of consolidated total revenue and we do not have any government contracts in any country within the Prepaid Processing Segment.

Competition

We face competition in the prepaid business in all of our markets. We compete with a few multinational companies that operate in several of our markets. In other markets, our competition is from smaller, local companies. None of these companies is dominant in any of the markets where we do business.

We believe, however, that we currently have a competitive advantage due to various factors. First, in the U.K., Germany and Australia, our acquired subsidiaries have been concentrating on the sale of electronic prepaid mobile airtime for longer than most of our competitors and have significant market presence in those markets. In addition, we offer complementary ATM and mobile recharge solutions through our EFT processing centers. We believe this improves our ability to solicit the use of networks of devices owned by third parties (for example, banks and switching networks) to deliver recharge services. In selected developing markets, we expect to establish a first to market advantage by rolling out terminals rapidly before competition is established. We also have an extremely flexible technical platform that enables us to tailor POS solutions to individual merchant and mobile operator requirements where appropriate. The GPRS (wireless) technology, designed by our Transact subsidiary, will also give us an advantage in remote areas where landline phone lines are of lesser quality or nonexistent.

The principal competitive factors in this area include price (that is, the level of commission paid to retailers for each recharge transaction), breadth of mobile operator product and up-time offered on the system. Major retailers with high volumes are in a position to demand a larger share of the commission, which increases the amount of competition among service providers. Recently, we are seeing signs that mobile operators may wish to take over and expand their own distribution networks of prepaid time, and in doing so, they may become our competitors.

Our primary competitors in the money transfer and bill payment business include other independent processors and electronic money transmitters, as well as certain major national and regional financial institutions and independent sales organizations.

SOFTWARE SOLUTIONS SEGMENT

Overview

Through our Software Solutions Segment, we offer an integrated suite of card and retail transaction delivery applications for the IBM iSeries platform and a mainframe suite of applications serving card issuing and merchant acquiring needs. These applications are generally referred to as Euronet Software.

“Integrated Transaction Management” (“ITM”), our core system i-Series solution, provides for transaction identification, transaction routing, security, transaction detail logging, network connections, authorization interfaces and settlement. Front-end systems in this product support ATM and POS management, telephone banking, internet banking, mobile banking and event messaging. These systems provide a comprehensive solution for ATM, debit or credit card management and bill payment facilities. We also offer increased functionality to authorize, switch and settle transactions for multiple financial institutions through our GoldNet module. We use GoldNet for our own EFT requirements to process transactions across multiple countries in Europe and the Asia-Pacific.

In January 2006, we added a world-class back-office credit and debit card issuing and merchant acquiring system to our existing portfolio of software solutions through the acquisition of Essentis. The Euronet Essentis solution is designed specifically to meet the specialized needs of large or complex multinational card issuers and acquirers. A modern layered architecture with full XML connectivity, this solution also allows the integration with multiple delivery channels, such as the Internet, mobile devices and voice recognition systems. The Euronet Essentis solution is compliant with international payment scheme regulations, supports EMV (Europay/MasterCard and Visa), offers clearing and settlement interfaces and has the capability to maintain regional compliance.

Although our Software Solutions Segment is headquartered in the U.S., the majority of our software customer base is international and, in particular, located in developing markets. This international customer mix is largely because our ITM software products consist of relatively small and inexpensive solutions that are appropriate for smaller financial institutions with up to $10 billion in assets and various transaction processing needs. Euronet ITM Software is the preferred transaction-processing software for institutions that operate their back office using the IBM iSeries platform, which is also a relatively inexpensive, expandable hardware platform. Our Essentis product line is targeted to large financial institutions operating in a mainframe environment. We believe demand will continue for our software from financial institutions in many markets and throughout the developing world as new financial institutions are established. Once a customer purchases our ITM or Essentis software and installs the core system, we provide a series of modules, upgrades and maintenance services that often result in recurring revenues.

Our customer services support “follow-the-sun” initiatives, which represent the Company’s commitment to providing same time zone support for our customers worldwide. We have one center covering Europe, the Middle East and Africa (“EMEA”); one center covering the Americas; and one center covering the Asia-Pacific region. This coverage presents several benefits to our customers, including immediate access to live technical support, infrastructure expansion to aid in faster problem resolution and in-depth knowledge of the uniqueness of conducting business in the various regions.

Software Solutions Segment Strategy

Software products are an integral part of our product lines, and our investment in research, development, delivery and customer support reflects our ongoing commitment to an expanded customer base. We have identified opportunities to provide processing services to our software solutions customers and our ability to develop, adapt and control our own software gains us credibility with our processing services customers. We have been able to enter into agreements under which we use our ITM software in lieu of cash as our initial capital contributions to new transaction processing joint ventures. Such contribution permits us to enter new markets without significant cash outlay. Our ITM software is used by our Budapest, Mumbai, Athens, Beijing and Belgrade operations centers in our EFT Processing Segment, including our Euronet Middle East JV processing center in Bahrain, resulting in cost savings and added value compared to third-party license and maintenance options.

Additionally, since the acquisition of Essentis in January 2006, our market position has strengthened significantly. The Essentis product range allows us to offer the mainframe as an additional processing platform to provide an end-to-end solution to both card issuers and merchant acquirers.

Our strategy in the Software Solutions Segment in 2006 continued to include improvement of the application functionality for our core debit and credit solutions, prepaid solutions and our user interfaces to our product solutions. Additionally, we continued to focus on expanding our point release process with significant adoption from our customer base. This process allows existing customers to annually upgrade their systems to current versions of software components, adding new features and functionality and improving the process of installing new products. Our software continues to be upgraded as new compliance mandates are announced by international card organizations involving initiatives such as EMV chip card support. In 2006, we added several new customers including one leading financial institution for Essentis software.

During the last six years, we have continued our strategy of signing customers to extended long-term software maintenance agreements. We continue to invest in emerging markets and technologies that complement our processing and software solutions.

Seasonality

The Software Solutions Segment is not materially affected by seasonality.

Significant Customers and Government Contracts

No individual consumer makes up greater than 10% of consolidated total revenue and there are no government contracts with any country within the Software Solutions Segment.

Backlog

We define “software sales backlog” as fees specified in contracts, which have been executed by us and for which we expect recognition of the related revenue within one year. At December 31, 2006, the revenue backlog was $9.2 million, compared to $4.2 million at December 31, 2005. The average backlog was $8.7 million in 2006 and $4.0 million for 2005. We intend to continue expediting the delivery and implementation of software in an effort to maintain backlog sales, while simultaneously replenishing the backlog through continuing product sales growth.

Competition

For our ITM product line, we are the leading supplier of electronic financial transaction processing software for the IBM iSeries platform in a largely fragmented market, which is made up of competitors that offer a variety of solutions that compete with our products, ranging from single applications to fully integrated electronic financial processing software. Additionally, for ITM, other industry suppliers service the software requirements of large mainframe systems and UNIX-based platforms, and accordingly are not considered competitors. We have specifically targeted customers consisting of financial institutions that operate their back office systems with the IBM iSeries. For Essentis, we are a strong supplier of electronic payment processing software for card issuers and merchant acquirers on a mainframe platform. Our competition includes products owned and marketed by other software companies as well as large well-financed companies that offer outsourcing and credit card services to financial institutions. We believe our Essentis offering is one of the few software solutions in this product area that has been developed as a completely new system, as opposed to a re-engineered legacy system, taking full advantage of the latest technology and business strategies available.

The Software Solutions Segment has different types of competitors that compete across all EFT software components in the following areas: (i) ATM, network and POS software systems; (ii) Internet banking software systems; (iii) credit card software systems; (iv) mobile banking systems; (v) mobile operator solutions; (vi) telephone banking; and (vii) full EFT software.

Competitive factors in the Software Solutions business include price, technology development and the ability of software systems to interact with other leading products.

PRODUCT RESEARCH, DEVELOPMENT AND ENHANCEMENT

We have made an ongoing commitment to the maintenance and improvement of our products and services. We regularly engage in product development and enhancement activities in each of our business segments aimed at the development and delivery of new products, services and processes to our customers.

For ITM, these include:

	•		prepaid,
	•		bill payment and presentment,
	•		ATM monitoring,
	•		applications for mobile devices,
	•		wireless banking software products, and
	•		user interfaces.

For Essentis, these include:

	•		SEPA (Single European Payments Area),
	•		prepaid,
	•		service oriented architecture, and
	•		user interfaces.

We also engage in research and development activities in our Software Solutions Segment to continually improve our core software products.

Our research and development costs for software products to be sold, leased or otherwise marketed totaled $7.3 million in 2006 and $2.7 million in 2005 and 2004. Amounts capitalized were $3.2 million, $0.8 million and $0.7 million in the years ended December 31, 2006, 2005 and 2004, respectively. The increase for 2006 as compared to 2005 is primarily a result of our acquisition of Essentis in January 2006 as discussed in Note 4 — Acquisitions to the Consolidated Financial Statements. Amounts capitalized are included on our Consolidated Balance Sheets in other long-term assets. These costs were capitalized under our accounting policy requiring the capitalization of development costs on a product-by-product basis once technological feasibility is established through the completion of a detailed program design or the creation of a working model of the product. Technological feasibility of computer software products is established when we have completed all planning, designing, coding, and testing activities necessary to establish that the product can be produced to meet its design specifications including functions, features and technical performance requirements. See Note 17 — Research and Development to the Consolidated Financial Statements for a more detailed summary of the prior three years research and development capitalized costs and related amortization expense.

FINANCIAL INFORMATION BY GEOGRAPHIC AREA

For a discussion of results from operations, property and equipment, and total assets by geographic location, please see Note 15 — Business Segment Information to the Consolidated Financial Statements.

EMPLOYEES

Our business is highly automated and we outsource many specialized, repetitive functions such as ATM maintenance and installation, cash delivery and security. As a result, our labor requirements for ongoing operation of our EFT and prepaid networks are relatively small and are centered on monitoring activities to ensure service quality and cash reconciliation and control. We also have customer service departments in all divisions to investigate and resolve reported problems in processing transactions. We have technical service departments to implement new connections with financial institutions and mobile operators and adapt POS terminals to our central processing centers.

We had 1,098, 926 and 651 employees as of December 31, 2006, 2005 and 2004, respectively. We believe our future success will depend in part on our ability to continue to recruit, retain and motivate qualified management, technical and administrative employees. Currently, no union represents any of our employees and we have never experienced any work stoppages or strikes by our workforce.

GOVERNMENT REGULATION

With the exception of our money transfer business, our business activities do not constitute “financial activities” subject to licensing in any of our current markets. Our money transfer business is subject to licensing in all U.S. states and foreign markets where we operate. Any expansion of our activity into areas that are qualified as “financial activity” under local legislation may subject us to licensing and we may be required to comply with various conditions to obtain such licenses. Moreover, the interpretations of bank regulatory authorities as to the activity we currently conduct might change in the future. We monitor our business for compliance with applicable laws or regulations regarding financial activities.

Under German law, only licensed financial institutions may operate ATMs in Germany. Therefore, we may not operate our own ATM network in Germany without a sponsor. In that market, we act only as a subcontractor providing certain ATM-related services to a sponsor financial institution. As a result, our activities in the German market currently are entirely dependent upon the continuance of our agreement with our sponsor institution, or the ability to enter into a similar agreement with another institution in the event of the termination of such agreement. In January 2004, we entered into a new sponsorship agreement with Bankhaus August Lenz (“BAL”) canceling an agreement with DiBa Bank, our previous sponsor. While we believe, based on our experience, we should be able to find a replacement for BAL if the agreement with BAL is terminated for any reason, the inability to maintain the BAL agreement or to enter into a similar agreement with another institution upon a termination of the BAL agreement could have a material adverse effect on our operations in Germany. For further information, see Item 1A — Risk Factors.

INTELLECTUAL PROPERTY

We have registered or applied for registration of our trademarks including the names “Euronet” and “Bankomat” and/or the blue diamond logo in most markets in which we use those trademarks. Certain trademark authorities have notified us that they consider these trademarks to be generic and therefore not protected by trademark laws. This determination does not affect our ability to use the Euronet trademark in those markets but it would prevent us from stopping other parties from using it in competition with Euronet. We have purchased a registration of the “Euronet” trademark in the class of ATM machines in Germany, the U.K. and certain other Western European countries. We have registered the “e-pay” logo trademark in the U.K. and Australia and will be extending such registration as we expand that business to new markets. We cannot be sure that we will be entitled to use the e-pay trademark in any markets other than those in which we have registered the trademark. Other trademarks Euronet has registered or has registrations pending in various countries include Integrated Transaction Management; ITM; PaySpot; Arksys; Cashnet; Bank24 and Bank Access 24.

During 2000 and 2001, we filed patent applications for a number of our new software products and our new processing technology, including our recharge services and a browser-based ATM operating system. In 2003, we filed a patent application with the U.S. Patent Office for our POS recharge products in support of e-pay and PaySpot technology. As of the date of this report, these patents are still pending. Our wholly-owned subsidiary, Euronet Payments & Remittance, has a patent on a card-based money transfer and bill payment system that allows transactions to be initiated primarily through POS terminals and integrated cash register systems. Technology in the areas in which we operate is developing very rapidly and we are aware that many other companies have filed patent applications for similar products. The procedures of the U.S. patent office make it impossible for us to predict whether our patent applications will be approved or will be granted priority dates that are earlier than other patents that have been filed for similar products or services. Moreover, the Prepaid Processing business is an area in which many “process patents” have been filed in the U.S. over recent years covering processes that are in wide used in the industry. If their patents are considered to cover technology that has been incorporated into our systems, we may be required to obtain licenses and pay royalties to the holders of such patents to continue to use the affected technology or be prohibited from continuing the offering of such services if licenses are not obtained. This could materially and adversely affect our business.

EXECUTIVE OFFICERS OF THE REGISTRANT

The name, age, period of service and position held by each of our Executive Officers as of February 28, 2007 are as follows:

Name		Age				Served Since		Position Held
Michael J. Brown			50			July 1994		Chairman, Chief Executive Officer and President
Jeffrey B. Newman			52			December 1996		Executive Vice President — General Counsel
Rick L. Weller			49			November 2002		Executive Vice President — Chief Financial Officer
Miro I. Bergman			44			January 2001		Executive Vice President — Chief Operations Officer, Prepaid Processing Segment
John Romney			40			April 2005		Executive Vice President — Managing Director, EMEA EFT Division

MICHAEL J. BROWN is one of the founders of Euronet and has served as our Chairman of the Board and Chief Executive Officer since 1996. He also founded our predecessor in 1994 with Daniel R. Henry. Mr. Brown has been a Director of Euronet since our incorporation in December 1996 and previously served on the boards of Euronet’s predecessor companies. In 1979, Mr. Brown founded Innovative Software, Inc., a computer software company that was merged in 1988 with Informix. Mr. Brown served as President and Chief Operating Officer of Informix from February 1988 to January 1989. He served as President of the Workstation Products Division of Informix from January 1989 until April 1990. In 1993, Mr. Brown was a founding investor of Visual Tools, Inc. Visual Tools, Inc. was acquired by Sybase Software in 1996. Mr. Brown received a B.S. in Electrical Engineering from the University of Missouri — Columbia in 1979 and a M.S. in Molecular and Cellular Biology at the University of Missouri — Kansas City in 1997. Mr. Brown is married to the sister of the wife of Daniel R. Henry.

JEFFREY B. NEWMAN, Executive Vice President, General Counsel. Mr. Newman has been Executive Vice President and General Counsel of Euronet since January 2000. He joined Euronet in December 1996 as Vice President and General Counsel. Prior to this, he

practiced law with the Washington D.C. based law firm of Arent Fox Kintner Plotkin & Kahn and the Paris based law firm of Salans Hertzfeld & Heilbronn. He is a member of District of Columbia and Paris bars. He received a B.A. in Political Science and French from Ohio University in 1976 and law degrees from Ohio State University and the University of Paris.

RICK L. WELLER, Executive Vice President, Chief Financial Officer. Mr. Weller has been Executive Vice President and Chief Financial Officer of Euronet since he joined Euronet in November 2002, when he joined the company. From January 2002 to October 2002 he was the sole proprietor of Pivotal Associates, a business development firm. From November 1999 to December 2001, Mr. Weller held the position of Chief Operating Officer of ionex telecommunications, inc., a local exchange company. He is a certified public accountant and received his B.S. in Accounting from University of Central Missouri.

MIRO I. BERGMAN, Executive Vice President, Chief Operating Officer — Prepaid Processing Segment. Mr. Bergman joined the company in March 1997 and has been Executive Vice President and Chief Operating Officer — Prepaid Processing Division since April 2005. He has been an Executive Vice President since January 2001. He served as Country Manager for the Czech Republic from 1997 to 1999 and then became area manager responsible for our operations in Central Europe. From 2000 until 2005, he served as Managing Director of the EFT Division for the Europe, Middle East, and Africa (EMEA) region. Mr. Bergman received his B.S. in Business Administration from the University of New York at Albany and an M.B.A. from Cornell University.

JOHN ROMNEY, Executive Vice President, Managing Director, EMEA EFT Division. Mr. Romney has been Executive Vice President and Managing Director of the EMEA EFT Division since April 2005. Mr. Romney joined Euronet in February of 1997. He served in various positions in the EFT Division, including Senior Vice President and Regional Director for Central EMEA (from 2002 to 2004), Regional Manager: Southern Europe and Middle East (from 2000 to 2002) and Managing Director of our Croatian subsidiary (from 1997 to 1999). Mr. Romney received a B.S. degree in Finance from the University of Notre Dame.

Resignation of Executive Officer

DANIEL R. HENRY, one of the founders of Euronet, resigned his role as Chief Operating Officer and President with the Company effective December 31, 2006. Mr. Henry co-founded our predecessor in 1994 with Michael J. Brown, who serves as the Company’s Chairman and Chief Executive Officer. Mr. Henry has played a key role in shaping Euronet’s strategy and success over the years and served as the Company’s COO since 1996 and as President since 2001. Mr. Henry will continue to serve as a director of the Company for at least the remainder of his three-year term ending in 2009. We do not plan to replace Mr. Henry immediately and will divide his day-to-day responsibilities among CEO Mike Brown and other key executives. Our Board of Directors elected Michael J. Brown to the additional position of President, effective December 31, 2006. Mr. Henry will continue to work closely with the Company and support it in an advisory role as needed on special projects. Mr. Henry is married to the sister of the wife of Michael J. Brown.

AVAILABILITY OF REPORTS, CERTAIN COMMITTEE CHARTERS AND OTHER INFORMATION

Our website addresses are www.euronetworldwide.com and www.eeft.com. We make all Securities and Exchange Commission (“SEC”) public filings, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act available on our website free of charge as soon as reasonably practicable after these documents are electronically filed with, or furnished to, the SEC. The information on our website is not, and shall not be deemed to be a part of this report or incorporated into any other filings we make with the SEC. In addition, the SEC maintains an internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding Euronet.

The charters for our Audit, Compensation, and Corporate Governance and Nominating Committees, as well as the Code of Business Conduct & Ethics for our employees, including our Chief Executive Officer and Chief Financial Officer, are available on our website at www.euronetworldwide.com in the “Investors” section.

We will also provide printed copies of these materials to any stockholders, upon request to Euronet Worldwide, Inc., 4601 College Boulevard, Suite 300, Leawood, Kansas, U.S.A. 66211, Attention: Investor Relations.

ITEM 1A. RISK FACTORS

You should carefully consider the risks described below before making an investment decision. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

If any of the following risks actually occurs, our business, financial condition or results of operations could be materially adversely affected. In that case, the trading price of our common stock could decline substantially.

This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below and elsewhere in this Annual Report.

Risks Related to Our Business

We have a substantial amount of debt and other contractual commitments, and the cost of servicing those obligations could adversely affect our business, and such risk could increase if we incur more debt.

We have a substantial amount of indebtedness. As of December 31, 2006, our total liabilities were $819.8 million and our total assets were $1,108.1 million. Of the total liabilities, $315.0 million is comprised of contingently convertible debentures that may be settled in stock. Additionally, subject to regulatory approvals and other customary closing conditions, we have agreed to acquire RIA Envia, Inc. (“RIA”), for which we expect to incur approximately $180 million in additional long-term debt. See “Item 7: Management’s Discussion and Analysis of Financial Conditions and Results of Operations — Liquidity — Other trends and uncertainties.” We may not have sufficient funds to satisfy all such obligations as a result of a variety of factors, some of which may be beyond our control. If the opportunity of a strategic acquisition arises or if we enter into new contracts that require the installation or servicing of infrastructure, such as processing centers, ATM machines or POS terminals on a faster pace than anticipated, we may be required to incur additional debt for these purposes and to fund our working capital needs, which we may not be able to obtain. The level of our indebtedness could have important consequences to investors, including the following:

	•		our ability to obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements or other purposes may be limited or financing may be unavailable;
	•		a substantial portion of our cash flows must be dedicated to the payment of principal and interest on our indebtedness and other obligations and will not be available for use in our business;
	•		our level of indebtedness could limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate;
	•		our high degree of indebtedness will make us more vulnerable to changes in general economic conditions and/or a downturn in our business, thereby making it more difficult for us to satisfy our obligations; and
	•		because a portion of our indebtedness and other obligations are denominated in foreign currencies, and because a portion of our debt bears interest at a variable rate of interest, our actual debt service obligations could increase as a result of adverse changes in foreign currency exchange rates and/or interest rates.

Restrictive covenants in our credit facilities may adversely affect us.

If we fail to make required debt payments, or if we fail to comply with other covenants in our debt service agreements, we would be in default under the terms of these agreements. This default would permit the holders of the indebtedness to accelerate repayment of this debt and could cause defaults under other indebtedness that we have.

Our credit facilities contain a variety of restrictive covenants that limit our ability to incur debt, make investments, pay dividends and sell assets. In addition, these facilities require us to maintain specified financial ratios (as defined), including Debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) and earnings before interest, taxes, depreciation, amortization and rent (“EBITDAR”) to fixed charges, and satisfy other financial condition tests, including a minimum EBITDA test. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will meet those tests. A breach of any of these covenants could result in a default under our credit facilities. Upon the occurrence of an event of default under our credit facilities, the lenders could elect to declare all amounts outstanding under the credit facilities to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that indebtedness. We have pledged a substantial portion of our assets as security under the credit facilities. If the lenders under either credit facility accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay our credit facilities and our other indebtedness.

Our business may suffer from risks related to our recent acquisitions and potential future acquisitions, including our agreement to acquire RIA, and subsequent to December 31, 2006, our agreement to acquire La Nacional.

A substantial portion of our recent growth is due to acquisitions, and we continue to evaluate and engage in discussions concerning potential acquisition opportunities, some of which could be material. During the fourth quarter 2006, subject to regulatory approvals and customary closing conditions, we agreed to acquire RIA. If completed, this will be our largest acquisition to date. Also, during January 2007, subject to regulatory approvals and customary closing conditions, we agreed to acquire La Nacional. No assurance can be given that these acquisitions will close. See "Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Other trends and uncertainties." We cannot assure you that we will be able to successfully integrate, or otherwise realize anticipated benefits from, our recent acquisitions or any future acquisitions. Failure to close, successfully integrate or otherwise realize the anticipated benefits of those acquisitions could adversely impact our long-term competitiveness and profitability. The integration of our recent acquisitions

and any future acquisitions will involve a number of risks that could harm our financial condition, results of operations and competitive position. In particular:

	•		The integration plan for our acquisitions are based on benefits that involve assumptions as to future events, including leveraging our existing relationships with mobile phone operators and retailers as well as general business and industry conditions, many of which are beyond our control and may not materialize. Unforeseen factors may offset components of our integration plan in whole or in part. As a result, our actual results may vary considerably, or be considerably delayed, compared to our estimates;
	•		The integration process could disrupt the activities of the businesses that are being combined. The combination of companies requires, among other things, coordination of administrative and other functions. In addition, the loss of key employees, customers or vendors of acquired businesses could materially and adversely impact the integration of the acquired business;
	•		The execution of our integration plans may divert the attention of our management from other key responsibilities;
	•		We may assume unanticipated liabilities and contingencies; or
	•		Our acquisition targets could fail to perform in accordance with our expectations at the time of purchase.

Future acquisitions may be affected through the issuance of our Common Stock, or securities convertible into our Common Stock, which could substantially dilute the ownership percentage of our current stockholders. In addition, shares issued in connection with future acquisitions could be publicly tradable, which could result in a material decrease in the market price of our Common Stock.

We may be required to recognize impairment charges related to long-lived assets and goodwill recorded in connection with our acquisitions.

Our total assets include approximately $326.3 million, or 29% of total assets, in goodwill and acquired intangible assets recorded as a result of acquisitions. We assess our goodwill, intangible assets and other long-lived assets as and when required by accounting principles generally accepted in the U.S. to determine whether they are impaired. If operating results in any of our key markets, including the U.K., Germany, Spain, Australia, New Zealand or the U.S. deteriorate or our plans do not progress as expected when we acquired these entities, we may be required to record an impairment write-down of goodwill, intangible assets or other long-lived assets. As previously disclosed, we have experienced a loss of revenues and profits in Spain due to a reduction of certain exclusive commission arrangements that were in effect until May 2006. Also, during the second quarter 2006, we entered into distribution agreements for additional products and prepaid airtime from the two other primary mobile operators in Spain. The projections that support goodwill from our Spanish acquisitions include growth in profitability that is dependent on a number of factors. These factors include: our ability to maintain or increase the level of gross margin that we earn with each transaction; our ability to increase transaction levels through sale of the prepaid mobile airtime of the two other major mobile operators; our ability to increase the quantity of product offerings included on our network of POS terminals, including money transfer, bill payment and other prepaid products; and our ability to avoid additional investments. If operating results do not progress as expected, or if we are required to make additional investments, we may be required to record an impairment write-down of goodwill, intangible assets or other long-lived assets associated with our Spanish business. Impairment charges would reduce reported earnings for the periods in which they are recorded. This could have a material adverse effect on our results of operations and financial condition.

A lack of business opportunities or financial or other resources may impede our ability to continue to expand at desired levels, and our failure to expand operations could have an adverse impact on our financial condition.

Our expansion plans and opportunities are focused on four separate areas: (i) our network of owned and operated ATMs; (ii) outsourced ATM management contracts; (iii) our prepaid mobile airtime services; and (iv) our money transfer and bill payment services. The continued expansion and development of our ATM business will depend on various factors including the following:

	•		the demand for our ATM services in our current target markets;
	•		the ability to locate appropriate ATM sites and obtain necessary approvals for the installation of ATMs;
	•		the ability to install ATMs in an efficient and timely manner;
	•		the expansion of our business into new countries as currently planned;
	•		entering into additional card acceptance and ATM outsourcing agreements with banks;
	•		the ability to obtain sufficient numbers of ATMs on a timely basis; and
	•		the availability of financing for the expansion.

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 or maintain outsourcing contracts with us. Banks are very deliberate in negotiating these agreements and the process of negotiating and signing outsourcing agreements typically takes six to twelve months or longer. Moreover, banks evaluate a wide range of matters when deciding to choose an outsource vendor and generally this decision is subject to extensive management analysis and approvals. The process is also affected by the legal and regulatory considerations of local countries, as well as local language complexities. These agreements tend to cover large numbers of ATMs, so significant increases and

decreases in our pool of managed ATMs could result from entry into or termination of these management contracts. In this regard, the timing of both current and new contract revenues is uncertain and unpredictable. Increasing consolidation in the banking industry could make this process less predictable.

We currently offer prepaid mobile airtime top-up services in the U.S., Europe, Africa and Asia Pacific and we currently offer money transfer services from the U.S. to Latin America and from the U.K. to India, and bill payment services within the U.S. We plan to expand in these and other markets by taking advantage of our existing relationships with mobile phone operators, banks and retailers. This expansion will depend on various factors, including the following:

	•		the ability to negotiate new agreements in these markets with mobile phone operators, banks and retailers;
	•		the continuation of the trend of increased use of electronic prepaid mobile airtime among mobile phone users;
	•		the continuation of the trend of increased use of electronic money transfer and bill payment among immigrant workers;
	•		the increase in the number of prepaid mobile phone users; and
	•		the availability of financing for the expansion.

In addition, our continued expansion may involve acquisitions that could divert our resources and management time and require integration of new assets with our existing networks and services and could require financing that we may not be able to obtain. Our ability to manage our rapid expansion effectively will require us eventually to expand our operating systems and employee base. An inability to do this could have a material adverse effect on our business, growth, financial condition or results of operations.

We are subject to business cycles and other outside factors that may negatively affect our business.

A recessionary economic environment or other outside factors could have a negative impact on mobile phone operators, retailers and our customers and could reduce the level of transactions, which could, in turn, negatively impact our financial results. If mobile phone operators experience decreased demand for their prepaid products and services (including due to increasing usage of postpaid services) or if the retail locations where we provide POS top-up services decrease in number, we will process fewer transactions, resulting in lower revenue. In addition, a recessionary economic environment could result in a higher rate of bankruptcy filings by mobile phone operators, retailers and our customers and could reduce the level of ATM transactions, which will have a negative impact on our business.

The growth and profitability of our prepaid business is dependent on certain factors that vary from market to market.

Our Prepaid Processing Segment derives revenues based on processing fees and commissions from mobile and other telecommunication operators and distributors of prepaid wireless products. Growth in our prepaid business in any given market is driven by a number of factors, including the extent to which conversion from scratch cards to electronic distribution solutions is occurring or has been completed, the overall pace of growth in the prepaid mobile phone market, our market share of the retail distribution capacity and the level of commission that is paid to the various intermediaries in the prepaid mobile airtime distribution chain. In mature markets, such as the U.K., Australia, Spain and Ireland, the conversion from scratch cards to electronic forms of distribution is either complete or nearing completion. Therefore, these factors will cease to provide the organic increases in the number of transactions per terminal that we have experienced historically. Also, competition among prepaid distributors results in retailer churn and the reduction of commissions paid by mobile operators, although a portion of such reductions can be passed along to retailers. In the last year, processing fees and commissions per transaction have declined in most markets, and we expect that trend to continue. We have been able to improve our results despite that trend due to substantial growth in transactions, driven by acquisitions and organic growth. We do not expect to continue this rate of growth. If we cannot continue to increase our transaction levels and per-transaction fees and commissions continue to decline, the combined impact of these factors could adversely impact our financial results.

Our prepaid mobile airtime top-up business may be susceptible to fraud occurring at the retailer level.

In our Prepaid Processing Segment, we contract with retailers that accept payment on our behalf, which we then transfer to a trust or other operating account for payment to mobile phone operators. In the event a retailer does not transfer to us payments that it receives for mobile airtime, we are responsible to the mobile phone operator for the cost of the airtime credited to the customer’s mobile phone. We can provide no assurance that retailer fraud will not increase in the future or that any proceeds we receive under our credit enhancement insurance policies will be adequate to cover losses resulting from retailer fraud, which could have a material adverse effect on our business, financial condition and results of operations.

Because we typically enter into short-term contracts with mobile phone operators and retailers, our top-up business is subject to the risk of non-renewal of those contracts, or renewal under less favorable terms.

Our contracts with mobile phone operators to process prepaid mobile airtime recharge services typically have terms of less than three years. Many of those contracts may be canceled by either party upon three months’ notice. Our contracts with mobile phone operators

are not exclusive, so these operators may enter into top-up contracts with other service providers. In addition, our top-up service contracts with major retailers typically have terms of one to three years and our contracts with smaller retailers typically may be canceled by either party upon three to six months’ notice. The cancellation or non-renewal of one or more of our significant mobile phone operator or retail contracts, or of a large enough group of our contracts with smaller retailers, could have a material adverse effect on our business, financial condition and results of operations. The renewal of contracts under less favorable payment terms, commission terms or other terms could have a material adverse impact on our working capital requirements and/or results from operations. In addition, our contracts generally permit operators to reduce our fees at any time. Commission revenue or fee reductions by any of the mobile phone operators could also have a material adverse effect on our business, financial condition or results of operations.

The processes and systems we employ may be subject to patent protection by other parties.

In certain countries, including the U.S., patent protection legislation permits the protection of processes and systems. We employ processes and systems in various markets that have been used in the industry by other parties for many years, and which we or other companies that use the same or similar processes and systems consider to be in the public domain. However, we are aware that certain parties believe they hold patents that cover some of the processes and systems employed in the prepaid processing industry in the U.S. and elsewhere. We believe the processes and systems we use have been in the public domain prior to patents we are aware of. The question of whether a process or system is in the public domain is a legal determination, and if this issue is litigated we cannot be certain of the outcome of any such litigation. If a person were to assert that it holds a patent covering any of the processes or systems we use, we would be required to defend ourselves against such claim. If unsuccessful, we may be required to pay damages for past infringement which could be trebled if the infringement was found to be willful. We may also be required to seek a license to continue to use the processes or systems. Such a license may require either a single payment or an ongoing license fee. No assurance can be given that we will be able to obtain a license which is reasonable in fee and scope. If a patent owner is unwilling to grant such a license, or we decide not to obtain such a license, we may be required to modify our processes and systems to avoid future infringement. Any such occurrences could materially and adversely affect our prepaid processing business in any affected markets and could result in our reconsidering the rate of expansion of this business in those markets.

The level of transactions on our ATM and prepaid processing networks is subject to substantial seasonal variation, which may cause our quarterly results to fluctuate materially and create volatility in the price of our shares.

Our experience is that the level of transactions on our networks is subject to substantial seasonal variation. Transaction levels have consistently been much higher in the fourth quarter of the fiscal year due to increased use of ATMs and prepaid mobile airtime top-ups during the holiday season. The level of transactions drops in the first quarter, during which transaction levels are generally the lowest we experience during the year. Since revenues of the EFT Processing and Prepaid Processing Segments have transaction-based components, these segments are directly affected by this seasonality. As a result of these seasonal variations, our quarterly operating results may fluctuate materially and could lead to volatility in the price of our shares.

The stability and growth of our EFT Processing Segment depend on maintaining our current card acceptance and ATM management agreements with banks and international card organizations, and on securing new arrangements for card acceptance and ATM management.

The stability and future growth of our EFT Processing Segment depend in part on our ability to sign card acceptance and ATM management agreements with banks and international card organizations. Card acceptance agreements allow our ATMs to accept credit and debit cards issued by banks and international card organizations. ATM management agreements generate service income from our management of ATMs for banks. These agreements are the primary source of our ATM business.

These agreements have expiration dates and banks and international card organizations are generally not obligated to renew them. In some cases, banks may terminate their contracts prior to the expiration of their terms. We cannot assure you that we will be able to continue to sign or maintain these agreements on terms and conditions acceptable to us or whether those international card organizations will continue to permit our ATMs to accept their credit and debit cards. The inability to continue to sign or maintain these agreements, or to continue to accept the credit and debit cards of local banks and international card organizations at our ATMs in the future, could have a material adverse effect on our business, growth, financial condition or results of operations.

Retaining the founder and key executives of our company, and of companies that we acquire, and finding and retaining qualified personnel is important to our continued success.

The development and implementation of our strategy through December 31, 2006 has depended in large part on the founders of our company, Michael J. Brown and Daniel R. Henry. The retention of Mr. Brown is important to our continued success. In addition, the success of the expansion of businesses that we acquire may depend in large part upon the retention of the founders of those businesses. Our success also depends in part on our ability to hire and retain highly skilled and qualified management, operating, marketing,

financial and technical personnel. The competition for qualified personnel in the markets where we conduct our business is intense and, accordingly, we cannot assure you that we will be able to continue to hire or retain the required personnel.

Our officers and some of our key personnel have entered into service or employment agreements containing non-competition, non-disclosure and non-solicitation covenants, which grant incentive stock options and/or restricted stock with long-term vesting requirements. However, most of these contracts do not guarantee that these individuals will continue their employment with us. The loss of our key personnel could have a material adverse effect on our business, growth, financial condition or results of operations.

Our operating results depend in part on the volume of transactions on ATMs in our network and the fees we can collect from processing these transactions.

Transaction fees from banks and international card organizations for transactions processed on our ATMs have historically accounted for a substantial majority of our revenues. These fees are set by agreement among all banks in a particular market. The future operating results of our ATM business depend on the following factors:

	•		the increased issuance of credit and debit cards;
	•		the increased acceptance of our ATM processing and management services in our target markets;
	•		the maintenance of the level of transaction fees we receive;
	•		the installation of larger numbers of ATMs; and
	•		the continued use of our ATMs by credit and debit cardholders.

Although we believe that the volume of transactions in developing countries may increase due to growth in the number of cards being issued by banks in these markets, we anticipate that transaction levels on any given ATM in developing markets will not increase significantly. We can attempt to improve the levels of transactions on our ATM network overall by acquiring good sites for our ATMs, eliminating poor locations, entering new less-developed markets and adding new transactions to the sets of transactions that are available on our ATMs. However, we may not be successful in materially increasing transaction levels through these measures. Per-transaction fees have declined in certain markets in recent years. If we cannot continue to increase our transaction levels and per-transaction fees generally decline, our results would be adversely affected.

Our operating results in the money transfer business depend in part on continued worker immigration patterns, our ability to expand our share of the existing electronic market and to expand into new markets and our ability to continue complying with regulations issued by the Office of Foreign Assets Control (“OFAC”), Bank Secrecy Act (“BSA”), Financial Crimes Enforcement Network (“FINCEN”) and Patriot Act regulations.

Our money transfer business primarily focuses on customers who immigrate to the United States from Latin American countries in search of employment and then send a portion of their earnings to family members in Latin America. Our ability to continue complying with the requirements of OFAC, BSA, FINCEN and the Patriot Act will be important to our success in achieving growth and an inability to do this could have an adverse impact on our revenue and earnings. Changes in government policies or enforcement toward immigration may have a negative affect on immigration in the U.S. and other countries, which could also have an adverse impact on our money transfer revenues.

Future growth and profitability depend upon expansion within the markets in which we currently operate and the development of new markets for our money transfer services through the expected RIA acquisition. In addition, to achieve this expansion, we plan to initially focus on growth in the U.S. and Latin America market by increasing our sending locations in existing states and then expanding into other states by leveraging our prepaid processing terminal base. Expansion of our money transfer business to other states in the U.S. and internationally will require resolution of numerous licensing and regulatory issues in each of the sending markets we intend to develop. If we are unable to successfully apply the money transfer product to our existing terminal base or obtain the necessary licensing and other regulatory approvals, we may not realize expected results.

Our expansion into new markets is dependent upon our ability to apply our existing technology or to develop new applications to satisfy market demand or, following closing of the RIA acquisition, adapting RIA’s technology to ours. We may not have adequate financial and technological resources to expand our distribution channels and product applications to satisfy these demands, which may have an adverse impact on our ability to achieve expected growth in revenues and earnings.

Changes in state, federal or foreign laws, rules and regulations could impact the money transfer industry making it more difficult for our customers to initiate money transfers.

We are subject to regulation by the states in which we operate, by the federal government and by the governments of the countries in which we operate. Changes in the laws, rules and regulations or these governmental entities could have a material adverse impact on our results of operations, financial condition and cash flow.

Changes in banking industry regulation and practice could make it more difficult for us and our agents to maintain depository accounts with banks.

The banking industry, in light of increased regulatory oversight, is continually examining its business relationships with companies who offer money transfer services and with retail agents who collect and remit cash collected from end consumers. Should banks decide to not offer depository services to companies engaged in processing money transfer transactions, or to retail agents who collect and remit cash from end customers, our ability to administer and collect fees from money transfer transactions could be adversely impacted.

Developments in electronic financial transactions, such as the increased use of debit cards by customers and pass-through of ATM transaction fees by banks to customers or developments in the mobile phone industry, could materially reduce ATM transaction levels and our revenues.

Certain developments in the field of electronic financial transactions may reduce the amount of cash that individuals need on a daily basis, including the promotion by international card organizations and banks of the use of bank debit cards for transactions of small amounts. These developments may reduce the transaction levels that we experience on our ATMs in the markets where they occur. Banks also could elect to pass through to their customers all, or a large part of, the fees we charge for transactions on our ATMs. This would increase the cost of using our ATM machines to the banks’ customers, which may cause a decline in the use of our ATM machines and, thus, have an adverse effect on our revenues. If transaction levels over our existing ATM network do not increase, growth in our revenues from the ATMs we own will depend primarily on rolling out ATMs at new sites and developing new markets, which requires capital investment and resources and reduces the margin we realize from our revenues.

The mobile phone industry is a rapidly evolving area, in which technological developments, in particular the development of new methods or services, may affect the demand for other services in a dramatic way. The development of any new technology that reduces the need or demand for prepaid mobile phone time could materially and adversely affect our business.

We generally have little control over the ATM transaction fees established in the markets where we operate, and therefore cannot control any potential reductions in these fees.

The amount of fees we receive per transaction is set in various ways in the markets in which we do business. We have card acceptance agreements or ATM management agreements with some banks under which fees are set. However, we derive the bulk of our revenues in most markets from ‘‘interchange fees’’ that are set by the central ATM processing switch. The banks that participate in these switches set the interchange fee, and we are not in a position in any market to greatly influence these fees, which may increase or decrease over time. A significant decrease in the interchange fee in any market could adversely affect our results in that market.

In some cases, we are dependent upon international card organizations and national transaction processing switches to provide assistance in obtaining settlement from card issuers of funds relating to transactions on our ATMs.

Our ATMs dispense cash relating to transactions on credit and debit cards issued by banks. We have in place arrangements for the settlement to us of all of those transactions, but in some cases we do not have a direct relationship with the card-issuing bank and rely for settlement on the application of rules that are administered by international card associations (such as Visa or MasterCard) or national transaction processing switching networks. If a bankcard association fails to settle transactions in accordance with those rules, we are dependent upon cooperation from such organizations or switching networks to enforce our right of settlement against such banks or card associations. Failure by such organizations or switches to provide the required cooperation could result in our inability to obtain settlement of funds relating to transactions and adversely affect our business.

We derive a significant amount of revenue in our business from service agreements signed with financial institutions to own and/or operate their ATM machines.

Certain contracts have been and, in the future, may be terminated by the financial institution resulting in a substantial reduction in revenue. Contract termination payments, if any, may be inadequate to replace revenues and operating income associated with these contracts.

Because our business is highly dependent on the proper operation of our computer network and telecommunications connections, significant technical disruptions to these systems would adversely affect our revenues and financial results.

Our business involves the operation and maintenance of a sophisticated computer network and telecommunications connections with banks, financial institutions, mobile operators and retailers. This, in turn, requires the maintenance of computer equipment and infrastructure, including telecommunications and electrical systems, and the integration and enhancement of complex software applications. Our ATM segment also uses a satellite-based system that is susceptible to the risk of satellite failure. There are operational risks inherent in this type of business that can result in the temporary shutdown of part or all of our processing systems, such as failure of electrical supply, failure of computer hardware and software errors. Excluding Germany, transactions in the EFT Processing Segment are processed through our Budapest, Belgrade, Athens, Beijing and Mumbai operations centers. Our e-top-up transactions are processed through our Basildon, Martinsried, Madrid and Leawood, Kansas operations centers. Our U.S. money transfer and bill payment transactions are contracted through a Charlotte, North Carolina third party processing center. Any operational problem in these centers may have a significant adverse impact on the operation of our networks. Even with disaster recovery procedures in place, these risks cannot be eliminated entirely and any technical failure that prevents operation of our systems for a significant period of time will prevent us from processing transactions during that period of time and will directly and adversely affect our revenues and financial results.

We have the risk of liability for fraudulent bankcard and other card transactions involving a breach in our security systems, as well as for ATM theft and vandalism.

We capture, transmit, handle and store sensitive information in conducting and managing electronic, financial and mobile transactions, such as card information and PIN numbers. These businesses involve certain inherent security risks, in particular the risk of electronic interception and theft of the information for use in fraudulent or other card transactions, by persons outside the Company or by our own employees. We incorporate industry-standard encryption technology and processing methodology into our systems and software, and maintain controls and procedures regarding access to our computer systems by employees and others, to maintain high levels of security. Although this technology and methodology decrease security risks, they cannot be eliminated entirely, as criminal elements apply increasingly sophisticated technology to attempt to obtain unauthorized access to the information handled by ATM and electronic financial transaction networks.

Any breach in our security systems could result in the perpetration of fraudulent financial transactions for which we may be found liable. We are insured against various risks, including theft and negligence, but such insurance coverage is subject to deductibles, exclusions and limitations that may leave us bearing some or all of any losses arising from security breaches.

In addition to electronic fraud issues, the possible theft and vandalism of ATMs present risks for our ATM business. We install ATMs at high-traffic sites and consequently our ATMs are exposed to theft and vandalism. Although we are insured against such risks, deductibles, exclusions or limitations in such insurance may leave us bearing some or all of any losses arising from theft or vandalism of ATMs. In addition, we have experienced increases in claims under our insurance, which has increased our insurance premiums.

We are required under German law and the rules of financial transaction switching networks in all of our markets to have ‘‘sponsors’’ to operate ATMs and switch ATM transactions. Our failure to secure ‘‘sponsor’’ arrangements in Germany or any other market could prevent us from doing business in that market.

Under German law, only a licensed financial institution may operate ATMs. Because we are not a licensed financial institution we are required to have a ‘‘sponsor’’ bank to conduct our German ATM operations. In addition, in all of our markets, our ATMs are connected to national financial transaction switching networks owned or operated by banks, and to other international financial transaction switching networks operated by organizations such as Citibank, Visa and MasterCard. The rules governing these switching networks require any company sending transactions through these switches to be a bank or a technical service processor that is approved and monitored by a bank. As a result, the operation of our ATM network in all of our markets depends on our ability to secure these ‘‘sponsor’’ arrangements with financial institutions.

To date, we have been successful in reaching contractual arrangements that have permitted us to operate in all of our target markets. However, we cannot assure you that we will continue to be successful in reaching these arrangements, and it is possible that our current arrangements will not continue to be renewed. If we are unable to secure “sponsor” arrangements in Germany or any other market, we could be prevented from doing business in the applicable market.

Our competition in the EFT Processing Segment and Prepaid Processing Segment include large, well financed companies and banks and, in the Software Solutions Segment, companies larger than us with earlier entry into the market. As a result, we may lack the financial resources and access needed to capture increased market share.

EFT Processing Segment— Our principal EFT Processing competitors include ATM networks owned by banks and national switches consisting of consortiums of local banks that provide outsourcing and transaction services only to banks and independent ATM deployers in that country. Large, well-financed companies offer ATM network and outsourcing services that compete with us in various markets. In some cases, these companies also sell a broader range of card and processing services than we, and are in some cases, willing to discount ATM services to obtain large contracts covering a broad range of services. Competitive factors in our EFT Processing Segment include network availability and response time, breadth of service offering, price to both the bank and to its customers, ATM location and access to other networks.

Prepaid Processing Segment— We face competition in the prepaid business in all of our markets. A few multinational companies operate in several of our markets, and we therefore compete with them in a number of countries. In other markets, our competition is from smaller, local companies. Major retailers with high volumes are in a position to demand a larger share of the commission, may compress our margins.

Our primary competitors in the money transfer and bill payment business include other independent processors and electronic money transmitters, as well as certain major national and regional banks, financial institutions and independent sales organizations. Our competitors include Western Union, Global Payments, MoneyGram and others who are larger than we are and have greater resources than we have. This may allow them to offer better pricing terms to customers, which may result in a loss of our potential or current customers or could force us to lower our prices. Either of these actions could have an adverse impact on our revenues. In addition, our competitors may have the ability to devote more financial and operational resources than we can to the development of new technologies that provide improved functionality and features to their product and service offerings. If successful, their development efforts could render our product and services offerings less desirable, resulting in the loss of customers or a reduction in the price we could demand for our services.

Software Solutions Segment— For our ITM product line, we are a leading supplier of electronic financial transaction processing software for the IBM iSeries platform in a largely fragmented market, which is made up of competitors that offer a variety of solutions that compete with our products, ranging from single applications to fully integrated electronic financial processing software. Additionally, for ITM, other industry suppliers service the software requirements of large mainframe systems and UNIX-based platforms, and accordingly are not considered competitors. We have specifically targeted customers consisting of financial institutions that operate their back office systems with the IBM iSeries. For Essentis, we are a strong supplier of electronic payment processing software for card issuers and merchant acquirers on a mainframe platform. Our competition includes products owned and marketed by other software companies as well as large-well financed companies that offer outsourcing and credit card services to financial institutions. We believe our Essentis offering is one of the few software solutions in this product area that has been developed as a completely new system, as opposed to a re-engineered legacy system, taking full advantage of the latest technology and business strategies available.

The Software Solutions Segment has multiple types of competitors that compete across all EFT software components in the following areas: (i) ATM, network and POS software systems, (ii) Internet banking software systems, (iii) credit card software systems, (iv) mobile banking systems, (v) mobile operator solutions, (vi) telephone banking, and (vii) full EFT software.

Competitive factors in the Software Solutions business include price, technology development and the ability of software systems to interact with other leading products.

We conduct a significant portion of our business in Central and Eastern European countries, and we have subsidiaries in the Middle East and Asia, where the risk of continued political, economic and regulatory change that could impact our operating results is greater than in the U.S. or Western Europe.

We have subsidiaries in Hungary, Poland, the Czech Republic, Romania, Slovakia, Spain, Greece, Croatia, India, Serbia, Bulgaria, Russia, Egypt and China, and have operations in other countries in Central Europe, the Middle East and Asia. We expect to continue to expand our operations to other countries in these areas. We sell software in many other markets in the developing world. Some of these countries have undergone significant political, economic and social change in recent years and the risk of new, unforeseen changes in these countries remains greater than in the U.S. or Western Europe. In particular, changes in laws or regulations or in the interpretation of existing laws or regulations, whether caused by a change in government or otherwise, could materially adversely affect our business, growth, financial condition or results of operations.

For example, currently there are no limitations on the repatriation of profits from any of the countries in which we have subsidiaries (although U.S. tax laws discourage repatriation), but foreign currency exchange control restrictions, taxes or limitations may be imposed or increased in the future with regard to repatriation of earnings and investments from these countries. If exchange control

restrictions, taxes or limitations are imposed, our ability to receive dividends or other payments from affected subsidiaries could be reduced, which may have a material adverse effect on us.

In addition, corporate, contract, property, insolvency, competition, securities and other laws and regulations in Hungary, Poland, the Czech Republic, Romania, Slovakia, Croatia, Bulgaria and other countries in Central Europe have been, and continue to be, substantially revised during the completion of their transition to the European Union. Therefore, the interpretation and procedural safeguards of the new legal and regulatory systems are in the process of being developed and defined, and existing laws and regulations may be applied inconsistently. Also, in some circumstances, it may not be possible to obtain the legal remedies provided for under these laws and regulations in a reasonably timely manner, if at all.

Transmittal of data by electronic means and telecommunications is subject to specific regulation in most Central European countries. Although these regulations have not had a material impact on our business to date, changes in these regulations, including taxation or limitations on transfers of data across national borders, could have a material adverse effect on our business, growth, financial condition or results of operations.

We conduct business in many international markets with complex and evolving tax rules, including value added tax rules, which subjects us to international tax compliance risks.

While we obtain advice from legal and tax advisors as necessary to help assure compliance with tax and regulatory matters, most tax jurisdictions that we operate in have complex and subjective rules regarding the valuation of intercompany services, cross-border payments between affiliated companies and the related effects on income tax, value-added tax (“VAT”), transfer tax and share registration tax. Our foreign subsidiaries frequently undergo VAT reviews, and from time to time undergo comprehensive tax reviews and may be required to make additional tax payments should the review result in different interpretations, allocations or valuations of our services.

As allowable under the Internal Revenue Code (the “Code”), the interest deduction from our convertible debentures are based on a comparable interest rate for a traditional, nonconvertible, fixed rate debt instrument with similar terms. This allowable deduction is in excess of the stated interest rate. This deduction may be deferred, limited or eliminated under certain conditions.

The U.S Treasury regulations contain an anti-abuse regulation, set forth in Section 1.1275-2(g), that grants the Commissioner of the Internal Revenue Service authority to depart from the regulations if a result is achieved which is unreasonable in light of the original issue discount provisions of the Code, including Section 163(e). The anti-abuse regulation further provides that the Commissioner may, under this authority, treat a contingent payment feature of a debt instrument as if it were a separate position. If such an analysis were applied to our convertible debentures and ultimately sustained, our deductions attributable to the convertible debentures could be limited to the stated interest thereon. The scope of application of the anti-abuse regulations is unclear. However, we are of the view that application of the contingent payment debt instrument regulations to our convertible debentures is a reasonable result such that the anti-abuse regulation should not apply. If a contrary position were asserted and ultimately sustained, our tax deductions would be severely diminished with a resulting adverse effect on our cash flow and ability to service the convertible debentures.

Under the Code, no deduction is allowed for interest expense in excess of $5 million on convertible subordinated indebtedness incurred to acquire stock or assets of another corporation reduced by any interest paid on other obligations which have provided consideration for an acquisition of stock in another corporation. If a significant portion of the proceeds from the issuance of the convertible debentures, either alone or together with other debt proceeds, were used for a domestic acquisition and the convertible debentures and other debt, if any, were deemed to be corporate acquisition indebtedness as defined in Section 279, interest deductions for tax purposes in excess of $5 million on such debt reduced by any interest paid on other obligations which have provided consideration for an acquisition of stock in another corporation would be disallowed. This would adversely impact our cash flow and our ability to pay down the convertible debentures. We previously applied a significant portion of the proceeds from our December 2004 issuance of 1.625% Convertible Senior Debentures Due 2024 to acquisitions of foreign corporations. The interest expense attributable to these acquisitions exhausted all of the $5 million annual interest expense deduction permitted under the Code for certain convertible subordinated debt incurred for corporation acquisitions. Accordingly, if this limitation were to apply, no interest deductions would be allowed with respect to our October 2005 3.50% Convertible Debentures Due 2025. We do not currently anticipate that this limitation will apply but there can be no assurance of that fact. As a result of our U.S. Federal and state net operating loss carryforwards, we have not recognized the benefit of the comparable interest deduction. However, if the comparable interest deduction were eliminated our future payment of U.S. Federal and state income taxes, if any, could be accelerated.

In the past, the U.S. Senate has drafted proposed tax relief legislation that contained a provision that would eliminate the comparable interest rate deduction on future issuances of convertible debentures such as ours. Legislation containing this provision has not been passed, however, we cannot predict if there will be future tax legislation proposed and approved that would eliminate the comparable interest rate deduction.

Because we are an international company conducting a complex business in many markets worldwide, we are subject to legal and operational risks related to staffing and management, as well as a broad array of local legal and regulatory requirements.

Operating outside of the U.S. creates difficulties associated with staffing and managing our international operations, complying with local legal and regulatory requirements. Because we operate financial transaction processing networks that offer new products and services to customers, the laws and regulations in the markets in which operate are subject to rapid change. Although we have local staff in countries in which we deem it appropriate, we cannot assure you that we will continue to be found to be operating in compliance with all applicable customs, currency exchange control regulations, data protection, transfer pricing regulations or any other laws or regulations to which we may be subject. We also cannot assure you that these laws will not be modified in ways that may adversely affect our business.

Because we derive our revenue from a multitude of countries with different currencies, our business is affected by local inflation and foreign currency exchange rates and policies.

We attempt to match any assets denominated in a currency with liabilities denominated in the same currency. Nonetheless, substantially all of our indebtedness is denominated in U.S. dollars, euros and British pounds. While a significant amount of our expenditures, including the acquisition of ATMs, executive salaries and certain long-term telecommunication contracts, are made in U.S. dollars, most of our revenues are denominated in other currencies. As exchange rates among the U.S. dollar, the euro, and other currencies fluctuate, the translation effect of these fluctuations may have a material adverse effect on our results of operations or financial condition as reported in U.S. dollars. Moreover, exchange rate policies have not always allowed for the free conversion of currencies at the market rate. Future fluctuations in the value of the dollar could continue to have an adverse effect on our results.

Our consumer money transfer operations subject us to foreign currency exchange risks as our customers deposit U.S. dollars at our retail locations in the United States and we typically deliver funds denominated in the destination country currencies to beneficiaries in Mexico and other Latin American countries.

We have various mechanisms in place to discourage takeover attempts, which may reduce or eliminate our stockholders’ ability to sell their shares for a premium in a change of control transaction.

Various provisions of our certificate of incorporation and bylaws and of Delaware corporate law may discourage, delay or prevent a change in control or takeover attempt of our company by a third party that is opposed to by our management and board of directors. Public stockholders who might desire to participate in such a transaction may not have the opportunity to do so. These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change of control or change in our management and board of directors. These provisions include:

	•		preferred stock that could be issued by our board of directors to make it more difficult for a third party to acquire, or to discourage a third party from acquiring, a majority of our outstanding voting stock;
	•		classification of our directors into three classes with respect to the time for which they hold office;
	•		supermajority voting requirements to amend the provision in our certificate of incorporation providing for the classification of our directors into three such classes;
	•		non-cumulative voting for directors;
	•		control by our board of directors of the size of our board of directors;
	•		limitations on the ability of stockholders to call special meetings of stockholders; and
	•		advance notice requirements for nominations of candidates for election to our board of directors or for proposing matters that can be acted upon by our stockholders at stockholder meetings.

We have also approved a stockholders’ rights agreement (the ‘‘Rights Agreement’’) between Euronet and EquiServe Trust Company, N.A., (subsequently renamed Computershare Limited) as Rights Agent. Pursuant to the Rights Agreement, holders of our common stock are entitled to purchase one one-thousandth (1/1,000) of a share (a ‘‘Unit’’) of Junior Preferred Stock at a price of $57.00 per Unit upon certain events. The purchase price is subject to appropriate adjustment for stock splits and other similar events. Generally, in the event a person or entity acquires, or initiates a tender offer to acquire, at least 15% of Euronet’s then outstanding common stock, the Rights will become exercisable for common stock having a value equal to two times the exercise price of the Right, or effectively at one-half of Euronet’s then-current stock price. The existence of the Rights Plan may discourage, delay or prevent a change of control or takeover attempt of our company by a third party that is opposed to by our management and board of directors.

Our directors and officers, together with the entities with which they are associated, owned approximately 16% of our Common Stock as of December 31, 2006, giving them significant control over decisions related to our Company.

This control includes the ability to influence the election of other directors of our Company and to cast a large block of votes with respect to virtually all matters submitted to a vote of our stockholders. This concentration of control may have the effect of delaying or preventing transactions or a potential change of control of our Company.

An additional 30 million shares of Common Stock was authorized for issuance by stockholders, which could result in additional shares of our Common Stock being issued, potentially diluting equity ownership of current holders and the share price of our Common Stock.

At the May 18, 2006 annual meeting of stockholders, stockholders approved an amendment to our Certificate of Incorporation to increase the aggregate number of shares of Common Stock that we have the authority to issue from sixty million (60,000,000) shares of Common Stock to ninety million (90,000,000) shares of Common Stock. Further, stockholders approved a new equity compensation plan (“2006 Stock Incentive Program”) under which an additional four million (4,000,000) shares would be reserved.

Of the additional 30 million shares, a portion may be issued if the acquisition of RIA is consummated, in which we have committed to issue $110 million in shares at closing, as well as potential additional shares that depend on the price of Euronet common stock during the 18 month period following closing.

Our Board of Directors believed that it was necessary to increase the number of shares of our authorized Common Stock in order to provide us with the flexibility to issue Common Stock for business purposes that may arise as deemed advisable by our Board. These purposes could include, among other things, (i) to declare future stock dividends or stock splits, which may increase the liquidity of our shares; (ii) the sale of stock to obtain additional capital or to acquire other companies or businesses, which could enhance our growth strategy or allow us to reduce debt if needed; (iii) for use in additional stock incentive programs and (iv) for other bona fide purposes. Our Board of Directors may issue the additional authorized shares of Common Stock without notice to, or further action by, our stockholders, unless stockholder approval is required by law or the rules of the NASDAQ Stock Market. The issuance of additional shares of Common Stock may significantly dilute the equity ownership of the current holders of our Common Stock. Further, over the course of time, all of the issued shares have the potential to be publicly traded, perhaps in large blocks. This may result in dilution of the market price of the Common Stock.

An additional 16.0 million shares of Common Stock, representing 43% of the shares outstanding as of December 31, 2006, could be added to our total Common Stock outstanding through the exercise of options or the issuance of additional shares of our Common Stock pursuant to existing convertible debt and other agreements. Once issued, these shares of Common Stock could be traded into the market and result in a decrease in the market price of our Common Stock.

As of December 31, 2006, we had an aggregate of 3.3 million options and restricted stock awards outstanding held by our directors, officers and employees, which entitles these holders to acquire an equal number of shares of our Common Stock upon exercise. Of this amount, 1.3 million options are vested and exercisable as of December 31, 2006. Approximately 0.3 million additional shares of our Common Stock may be issued in connection with our employee stock purchase plan. Another 8.5 million shares of Common Stock could be issued upon conversion of the Company’s Convertible Debentures issued in December 2004 and October 2005. Additionally, based on current trading prices for our common stock, we expect to issue approximately 3.9 million shares of our Common Stock to the sellers of RIA, excluding any potential shares to be issued in settlement of the contingent value and stock appreciation rights.

Accordingly, approximately 16.0 million shares (based on current prices and estimated earn-out payments) could potentially be added to our total current Common Stock outstanding through the exercise of options or the issuance of additional shares, which could adversely impact the trading price for our stock. The actual number of shares issuable could be higher depending upon the actual amounts of the earn-outs and our stock price at the time of payment (i.e. more shares could be issuable if our share price declines).

Of the 3.3 million total options and restricted stock awards outstanding, an aggregate of 1.4 million options and restricted shares are held by persons who may be deemed to be our affiliates and who would be subject to Rule 144. Thus, upon exercise of their options, these affiliates’ shares would be subject to the trading restrictions imposed by Rule 144. The remainder of the common shares issuable under options or as earn-outs described above would be freely tradable in the public market. Over the course of time, all of the issued shares have the potential to be publicly traded, perhaps in large blocks.

ITEM 2. PROPERTIES

Our executive offices are located in Leawood, Kansas, U.S.A. As of December 31, 2006, we also maintain principal operational offices in Little Rock, Arkansas, U.S.A.; Budapest, Hungary; Warsaw, Poland; Zagreb, Croatia; Prague, Czech Republic; Berlin and Martinsried, Germany; Bucharest, Romania; Bratislava, Slovakia; Athens, Greece; Cairo, Egypt; Sydney, Australia; Auckland, New

Zealand; Madrid, Spain; Belgrade, Serbia; Moscow, Russia; Sofia, Bulgaria; Basildon and Watford, U.K.; Kiev, Ukraine; Beijing, China; Mumbai, India; and Charlotte, North Carolina, U.S.A. Our office leases provide for initial terms of two to twelve years.

Our processing centers for the EFT Processing Segment are located in Budapest, Hungary; Belgrade, Serbia; Athens, Greece; Beijing, China; and Mumbai, India. Our processing centers for the Prepaid Processing Segment are located in Basildon, U.K.; Martinsried, Germany; Madrid, Spain; and Leawood, Kansas, U.S.A.

Our significant processing centers in Budapest, Basildon and Martinsried have off-site real time backup processing centers that are capable of providing availability in the event of failure of the primary processing centers. Our processing centers in Madrid and Belgrade have on-site real time backup processing centers that are expected to be relocated offsite during 2007. Our processing centers in Mumbai, Athens and the U.S. have on-site backup systems designed to prevent the loss of transaction records due to power and/or equipment failure.

ITEM 3. LEGAL PROCEEDINGS

The Company is from time to time a party to litigation arising in the ordinary course of its business.

During 2005, a former cash supply contractor in Central Europe (the “Contractor”) claimed that the Company owed it approximately $2.0 million for the provision of cash during the fourth quarter 1999 and first quarter 2000 that has not been returned. This claim, based on events that purportedly occurred over five years ago, was made more than a year after the Company had terminated its business with the Contractor and established a cash supply agreement with another supplier. In the first quarter 2006, the Contractor initiated legal action in Budapest, Hungary regarding the claim. Management expects the Company to prevail in defending itself in this matter and, accordingly has not recorded any liability or expense related to this claim. The Company will continue to monitor and assess this claim until ultimate resolution.

Currently, there are no other legal proceedings that management believes, either individually or in the aggregate, would have a material adverse effect upon the consolidated results of operations or financial condition of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted during the fourth quarter ended December 31, 2006, to a vote of security holders, through the solicitation of proxies or otherwise.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER                 PURCHASE OF EQUITY SECURITIES

MARKET INFORMATION

From March 1997 to November 1999, our common stock, $0.02 par value per share, (“Common Stock”) was quoted on the Nasdaq National Market under the symbol EEFT. On November 8, 1999, our listing was shifted to the Nasdaq SmallCap Market. On July 3, 2002, our listing was again transferred to the Nasdaq National Market, now known as the Nasdaq Global Market. The following table sets forth the high and low daily closing prices during the quarter for our Common Stock for the quarters ended:

		2006								2005
For the three months ended		High				Low				High				Low
December 31		$	35.00			$	24.22			$	29.63			$	25.31
September 30		$	37.97			$	23.70			$	31.87			$	26.70
June 30		$	38.37			$	32.68			$	30.49			$	24.97
March 31		$	39.48			$	27.95			$	28.55			$	23.02

Common Stock — 90,000,000 shares authorized and 37,440,027 shares outstanding as of December 31, 2006; and 60,000,000 million shares authorized and 35,776,431 shares outstanding as of December 31 2005.

Preferred Stock, $0.02 par value per share (“Preferred Stock”) — 10,000,000 voting shares authorized, but none have been issued.

DIVIDENDS

Since our inception, no dividends have been paid on our Common Stock or Preferred Stock. We do not intend to distribute dividends for the foreseeable future. Certain of our credit facilities contain restrictions on the payment of dividends.

HOLDERS

At December 31, 2006, we had 80 stockholders of record of our Common Stock and none of our Preferred Stock.

PRIVATE PLACEMENTS AND ISSUANCES OF EQUITY

During August 2006, we entered into a purchase agreement with the former shareholders of Brodos SRL (“Brodos”) for the acquisition of all of the share capital of Brodos, which includes $2.5 million in contingent consideration. The acquisition closed in January 2007. The issuance of our Common Stock in connection with the Brodos acquisition is contingent upon Brodos achieving certain performance criteria during the years 2007 through 2010. If contingent consideration becomes payable, the sellers of Brodos have the right to elect payment in the form of cash or our Common Stock. If the sellers of Brodos select payment of the contingent consideration in Common Stock, then we will be required to issue 75,489 shares. When the shares of our Common Stock are issued, they will not be registered under the Securities Act of 1933 (the “Act”). Because the offer was, and potential future issuance of our Common Stock will be, made in an “offshore transaction” as contemplated by Regulation S promulgated under of the Act (“Regulation S”), the issuance of our Common Stock is exempt from registration pursuant to the exemption provided by Rule 903 of Regulation S. However, we have obligations under the purchase agreement to register for resale any shares of our Common Stock that may be issued as contingent consideration.

During November 2006, we entered a purchase agreement to acquire all of the outstanding stock of RIA Envia, Inc. (“RIA”). As part of the consideration for the acquisition, we agreed to: issue to Sellers that number of shares of Euronet Common Stock equal to $110 million (valued based upon the average high and low prices of the Common Stock each trading day for the 30 trading days ending three trading days prior to the date of Closing); to grant to Sellers that number of stock appreciation rights (described below) with 18-month maturities as equal the number of shares of Common Stock issued at Closing having a value of $100 million and, upon exercise of such rights, to issue Common Stock in payment for such rights; and to grant to Sellers that number of contingent value rights (described below) with 18-month maturities as equal the number of shares of Common Stock issued at Closing having a value of $100 million and, upon settlement of such rights, to pay cash or issue Common Stock in payment for such rights. The delivery of the Common Stock (less certain hold backs), the stock appreciation rights and the contingent value rights will take place upon the Closing. The issuance of shares of Common Stock, stock appreciation rights and contingent value rights will not be registered under the Securities Act of 1933, as amended, in reliance upon Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder, as a transaction by an issuer not involving a public offering. The securities will be issued to the two Sellers in a private transaction in which the Sellers have agreed to customary restrictions on resale. Under the Stock Purchase Agreement, Euronet has obligations to register for resale the shares of Common Stock issued under the Stock Purchase Agreement and the shares of Common Stock which may be issued upon exercise or settlement of the contingent value rights and stock appreciation rights.

Conversion Features of Stock Appreciation Rights – The stock appreciation rights will be exercisable at any time and from time to time during the 18 months after Closing, subject to earlier termination in the event of a transaction involving a sale of Euronet. Each stock appreciation right entitles the holder to additional shares of Common Stock with a value equal to the increase in the value of one share of Euronet Common Stock from the Closing until the date of exercise of the stock appreciation right. The value of the Common Stock on the date of exercise (and the value of the Common Stock issued upon exercise of the stock appreciation right) is based upon the average high and low prices of the Common Stock each trading day for the 30 trading days ending three trading days prior to the exercise date. The Stock Purchase Agreement and the Stock Appreciation Agreement provide that in no event may the number of shares of Common Stock issued under the Stock Purchase Agreement, upon exercise of the stock appreciation rights and upon settlement of the contingent value rights, exceed 19.9% of the outstanding Common Stock of Euronet as of November 21, 2006.

Conversion Features of the Contingent Value Rights – The contingent value rights mature 18 months after Closing, or earlier in the event of a transaction involving a sale of Euronet. At maturity, for each contingent value right, (a) if the value of the Common Stock has not changed or has declined from the Closing to the maturity date, Euronet will be required to pay to the Sellers an amount equal to 20% of the value of the Common Stock as of Closing, (b) if the value of the Common Stock at the maturity date exceeds the value at Closing but is less than 120% of the value at Closing, Euronet will be required to pay to the Sellers an amount equal to 120% of the value at Closing minus the value at the maturity date, and (c) if the value of the Common Stock at the maturity date exceeds 120% of the value at Closing, no payment will be made. Any amounts payable under (a) or (b) will be reduced by any proceeds received by the holders from the exercise of the stock appreciation right relating to the same underlying share of Common Stock for which the contingent value right was granted. Such payments may be made by Euronet, in its sole discretion, in cash or in Common Stock and will not exceed $20 million. The value of the Common Stock on the date of exercise (and the value of the Common Stock, if any, issued upon settlement of the contingent value rights) is based upon the average high and low prices of the Common Stock each trading day for the 30 trading days ending three trading days prior to the exercise date. The Contingent Value Rights Agreement contains restrictions on certain transactions by the holders of contingent value rights in Common Stock and in certain securities and instruments relating to the Common Stock.

During February 2007, we issued 275,429 shares of our Common Stock, valued at approximately $7.6 million, to the former shareholders of Omega Logic, Ltd. (“Omega Logic”), as a portion of the consideration for all the share capital of Omega Logic. The shares of our Common Stock were not registered under the Act at the time of issuance. Because both the offer and issuance of our Common Stock was made in an “offshore transaction” as contemplated by Regulation S, the issuance of our Common Stock in this transaction was exempt from registration pursuant to the exemption provided by Rule 903 of Regulation S. However, in accordance with our obligations under the Omega Logic purchase agreement, we have committed to file a registration statement with the SEC to enable the public resale of the Common Stock received by the sellers of Omega Logic by April 30, 2007. If we do not meet this deadline, we may be required to pay to the sellers of Omega Logic an additional amount if the average closing trading price for our Common Stock for the 30 calendar days ending on the actual date of registration is lower than the lower of (i) the average closing trading price for our Common Stock for the 30 calendar days ending on the day 2 days before the closing date or (ii) the average closing trading price for our Common Stock for the 30 calendar days ending on April 30, 2007. This additional amount, if any, shall be payable at our option either in cash or shares of our Common Stock.

STOCK PERFORMANCE GRAPH

Set forth below is a graph comparing the total cumulative return on the Common Stock from December 31, 2001 through December 29, 2006 with the Center for Research in Security Prices (“CRSP”) Total Returns Index for U.S. companies traded on the Nasdaq Stock Market (the “Market Group”) and an index group of peer companies, the CRSP Total Returns Index for U.S. Nasdaq Financial Stocks (the “Peer Group”). The companies in each of the Market Group and the Peer Group were weighted by market capitalization. Returns are based on monthly changes in price and assume reinvested dividends. These calculations assume the value of an investment in the Common Stock, the Market Group and the Peer Group was $100 on December 31, 2001. Our Common Stock is traded on the Nasdaq Global Market under the symbol EEFT.

Comparsion of Five-Year Cumulative Total Returns
Performance Graph for
Euronet Worldwide, Inc.

Produced on 02/01/2007 including data to 12/29/2006

Prepared by CRSP (www.crsp.uchicago.edu), Center for Research in Security Prices, Graduate School of Business, The University of Chicago. Used with permissin. All right reserved.

13850		Copyright 2007

EQUITY COMPENSATION PLAN INFORMATION

The table below sets forth information with respect to shares of Common Stock that may be issued under our equity compensation plans as of December 31, 2006.

Number of

securities

remaining

available for

future issuance

Number of

under equity

securities to be

compensation

issued upon

Weighted average

plans (excluding

exercise of

exercise price of

securities

outstanding

outstanding

reflected in

options and rights

options and rights

column (a))

Plan category

(a)

(b)

(c)

Equity compensation plans approved by security holders:

Stock option awards

2,213,889

$

13.66

Restricted share awards

1,038,675

—

Equity compensation plans not approved by security holders

—

—

Total

3,252,564

9.30

3,693,011

ITEM 6. SELECTED FINANCIAL DATA

The summary consolidated financial data set forth below has been derived from, and is qualified by reference to, our audited Consolidated Financial Statements and the notes thereto, prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”), which have been audited by KPMG LLP in the U.S. for the years ended 2003 through 2006, and KPMG Polska Sp. z o.o. in Poland for the year ended 2002, and should not be relied upon as an indication of future performance. We believe that the period-to-period comparisons of our financial results are not necessarily meaningful due to certain significant transactions, including numerous acquisitions (See Note 4 – Acquisitions to the Consolidated Financial Statements) and the 2003 sale of our U.K. subsidiary. The following information should be read in conjunction with Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

		As of December 31,
(in thousands, except for summary network data)		2006				2005				2004				2003				2002
Consolidated balance sheet data:
Assets
Cash and cash equivalents		$	321,058			$	219,932			$	124,198			$	19,245			$	12,021
Restricted cash			80,703				73,942				69,300				58,280				4,401
Inventory — PINs and other			49,511				25,595				18,949				2,833				—
Trade accounts receivable, net			212,631				166,451				118,360				77,192				8,380
Other current assets			24,568				23,023				13,959				9,494				15,064
Total current assets			688,471				508,943				344,766				167,044				39,866
Property and equipment, net			55,174				44,852				39,907				20,658				21,394
Goodwill			278,743				267,195				183,668				88,512				1,834
Intangible assets, net			47,539				50,724				28,930				22,772				—
Other assets, net			38,212				22,638				21,204				4,787				3,465
Total assets		$	1,108,139			$	894,352			$	618,475			$	303,773			$	66,559
Liabilities and stockholders’ equity
Total current liabilities		$	404,110			$	327,323			$	293,183			$	151,926			$	19,769
Debt obligations, net of current portion			349,073				315,000				140,000				55,792				36,318
Capital lease obligations, excluding current installments			13,409				12,229				16,894				3,240				4,301
Non-current deferred income taxes			43,071				25,157				17,520				7,828				—
Other non-current liabilities			1,811				1,161				3,093				3,118				—
Minority interest			8,350				7,129				5,871				—				—
Total liabilities			819,824				687,999				476,561				221,904				60,388
Total stockholders’ equity			288,315				206,353				141,914				81,869				6,171
Total liabilities and stockholders’ equity		$	1,108,139			$	894,352			$	618,475			$	303,773			$	66,559
Summary network data:
Number of operational ATMs at end of period			8,885				7,211				5,742				3,350				3,005
EFT processing transactions during the period (millions)			463.6				361.5				232.5				114.7				79.2
Number of operational prepaid processing POS at end of period (rounded)			296,000				237,000				175,000				126,000				—
Prepaid processing transactions during the period (millions)			458.1				348.1				228.6				102.1				—

		Year Ended December 31,
(in thousands, except for share and per share data)		2006				2005 (1)				2004 (1)				2003 (1)				2002 (1)
Consolidated statements of operations data:
Revenues:
EFT Processing Segment		$	130,748			$	105,551			$	77,600			$	52,752			$	53,918
Prepaid Processing Segment			470,861				411,279				289,810				136,185				—
Software Solutions Segment			27,572				14,329				13,670				15,470				17,130
Total revenues			629,181				531,159				381,080				204,407				71,048
Operating expenses:
Direct operating costs			435,476				370,758				264,602				132,357				27,482
Salaries and benefits			74,256				58,760				47,370				36,373				28,852
Selling, general and administrative			38,101				31,489				23,578				15,489				11,255
Depreciation and amortization			29,050				22,375				15,801				12,062				9,718
Total operating expenses			576,883				483,382				351,351				196,281				77,307
Operating income (loss)			52,298				47,777				29,729				8,126				(6,259	)
Other income (expenses):
Interest income			13,750				5,874				3,022				1,257				247
Interest expense			(14,747	)			(8,459	)			(7,300	)			(7,216	)			(6,253	)
Loss on facility sublease			—				—				—				—				(249	)
Gain on sale assets			—				—				—				18,045				—
Income (loss) from unconsolidated affiliates			660				1,185				345				518				(183	)
Loss on early retirement of debt			—				—				(920	)			—				(955	)
Foreign currency exchange gain (loss), net			10,166				(7,495	)			(448	)			(9,690	)			(4,233	)
Total other income (expense)			9,829				(8,895	)			(5,301	)			2,914				(11,626	)
Income (loss) from continuing operations before income taxes and minority interest			62,127				38,882				24,428				11,040				(17,885	)
Income tax benefit (expense)			(14,843	)			(14,976	)			(11,518	)			(4,246	)			2,312
Minority interest			(977	)			(916	)			(58	)			—				100
Income (loss) from continuing operations			46,307				22,990				12,852				6,794				(15,473	)
Discontinued operations:
Income (loss) from operations of discontinued U.S. and France components			—				(635	)			—				(201	)			5,054
Income tax benefit			—				—				—				—				(1,935	)
Income (loss) from discontinued operations			—				(635	)			—				(201	)			3,119
Net income (loss)		$	46,307			$	22,355			$	12,852			$	6,593			$	(12,354	)
Earnings (loss) per share — basic:
Continuing operations		$	1.25			$	0.66			$	0.41			$	0.26			$	(0.67	)
Discontinued operations			—				(0.02	)			—				(0.01	)			0.14
Total		$	1.25			$	0.64			$	0.41			$	0.25			$	(0.53	)
Basic weighted average shares outstanding			37,037,435				35,020,499				31,267,617				26,463,831				23,156,129
Income (loss) per share — diluted:
Continuing operations		$	1.17			$	0.62			$	0.39			$	0.24			$	(0.67	)
Discontinued operations			—				(0.01	)			—				(0.01	)			0.14
Total		$	1.17			$	0.61			$	0.39			$	0.23			$	(0.53	)
Diluted weighted average shares outstanding			42,456,137				36,831,320				33,351,648				28,400,895				23,156,129

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

COMPANY OVERVIEW, GEOGRAPHIC LOCATIONS AND PRINCIPAL PRODUCTS AND SERVICES

Euronet Worldwide, Inc. (“Euronet” or the “Company”) is a leading electronic transaction processor, offering ATM and POS outsourcing services, integrated electronic financial transaction (“EFT”) software, network gateways and electronic prepaid top-up services to financial institutions, mobile operators and retailers, as well as electronic consumer money transfer and bill payment services. We operate the largest independent pan-European ATM network, the largest national shared ATM network in India, and we are one of the largest providers of prepaid mobile airtime processing.

We operate in three principal business segments:

	•		An EFT Processing Segment, in which we process transactions for a network of 8,885 ATMs and more than 44,000 POS terminals across Europe, Asia and Africa. We provide comprehensive electronic payment solutions consisting of ATM network participation, outsourced ATM and POS management solutions, credit card outsourcing and electronic recharge services (for prepaid mobile airtime via an ATM or directly from the handset).
	•		A Prepaid Processing Segment, through which we provide distribution of prepaid mobile airtime and other prepaid products and collections services for various prepaid products, cards and services. Including terminals owned by unconsolidated subsidiaries, we operate a network of more than 296,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services in the U.S., Europe, Africa and Asia Pacific. This segment also includes Euronet Payments & Remittance, Inc. (“Euronet Payments & Remittance”), which provides money transfer services to customers from the U.S. to destinations primarily in Latin America, and bill payment services to customers within the U.S.
	•		A Software Solutions Segment, through which we offer a suite of integrated EFT software solutions for electronic payment and transaction delivery systems.

We have seven processing centers in Europe, two in Asia and one in the U.S., and we have 17 principal offices in Europe, four in the Asia-Pacific region, four in the U.S. and one in the Middle East. Our executive offices are located in Leawood, Kansas, USA. With approximately 84% of our revenues denominated in currencies other than the U.S. dollar, any significant changes in currency exchange rates will likely have a significant impact on our growth in revenues, operating income and diluted earnings per share (for more discussion, see Item 1A – Risk Factors and Item 7A – Quantitative and Qualitative Disclosure About Market Risk).

SOURCES OF REVENUES AND CASH FLOW

Euronet earns revenues and income based on ATM management fees, transaction fees and commissions, professional services, software licensing fees and software maintenance agreements. Each business segment’s sources of revenue are described below.

EFT Processing Segment – Revenue in the EFT Processing Segment, which represents approximately 21% of total consolidated revenue for year ended December 31, 2006, is derived from fees charged for transactions effected by cardholders on our proprietary network of ATMs, as well as fixed management fees and transaction fees we charge to banks for operating ATMs and processing credit cards under outsourcing agreements.

Through our proprietary network, we generally charge fees for four types of ATM transactions: i) cash withdrawals, ii) balance inquiries, iii) transactions not completed because the relevant card issuer does not give authorization, and iv) prepaid telecommunication recharges.

For the year ended December 31, 2006, approximately 26% of total segment revenue was derived from ATMs we owned (excluding those leased by us in connection with outsourcing agreements, as discussed below) and the remainder was primarily derived from ATMs that we operate for banks on an outsourced basis. The percentage of revenues we generate from our proprietary network of ATMs continues to fall as we shift from a largely proprietary, Euronet-owned ATM network, to a greater focus on ATMs operated under outsourcing agreements. This shift will continue to provide lower total revenues, but higher marginal returns on investment. This is because we bear all costs of owning and operating ATMs on our proprietary network, including the capital investment represented by the cost of the ATMs themselves, whereas customer-owned ATMs operated under outsource service agreements require a nominal up-front capital investment because we do not purchase the ATMs. Additionally, in many instances operating costs are the responsibility of the owner and, therefore, recurring operating expenses per ATM are lower. In connection with certain long-term outsourcing agreements, we lease many of our ATMs under capital lease arrangements where, generally, we purchase a bank’s ATMs, and simultaneously sell the ATMs (often to an entity related to the bank). We then lease back the ATMs for purposes of fulfilling the ATM outsourcing agreement with the bank. We fully recover the related lease costs from the bank under the outsourcing agreements.

Prepaid Processing Segment - Revenue in the Prepaid Processing Segment, which represents approximately 75% of total consolidated revenue for the year ended December 31, 2006, is primarily derived from commissions and processing fees received from mobile and other telecommunication operators, or from distributors of prepaid wireless products for the distribution and/or processing of prepaid mobile airtime and other telecommunication products. Due to certain provisions in our mobile phone operator agreements, the operators have the ability to reduce the overall commission paid on each top-up transaction. However, by virtue of our agreements with retailers (distributors where POS terminals are located) in certain markets, not all of these reductions are absorbed by us because we are able to pass a significant portion of the reductions to retailers. Accordingly, under certain retailer agreements, the effect is to reduce revenues and reduce our direct operating costs resulting in only a small impact on gross margin and operating income. In some markets, reductions in commissions can significantly impact our results as it may not be possible, either contractually or commercially in the concerned market, to pass a reduction in commissions to the retailers. In Australia, certain retailers negotiate directly with the mobile phone operators for their own commission rates, which also limits our ability to pass through reductions in commissions.

Agreements with mobile operators are important to the success of our business. These agreements permit us to distribute prepaid mobile airtime to the mobile operators’ customers. The loss of any agreements with mobile operators in any market could materially and adversely affect our results.

Software Solutions Segment – Revenue in the Software Solutions Segment, which represents approximately 4% of total consolidated revenue for the year ended December 31, 2006, is derived from licensing, professional services and maintenance fees for software and sales of related hardware. Software license fees are the initial fees we charge to license our proprietary application software to customers. Professional fees consist of charges for customization, installation and consulting services to customers. Software maintenance revenue represents the ongoing fees charged for maintenance and support for customers’ software products. Hardware sales are derived from the sale of computer equipment necessary for the respective software solution.

OPPORTUNITIES AND CHALLENGES

Our expansion plans and opportunities are focused on five primary areas:

	•		outsourced ATM and POS terminal management contracts;
	•		transactions processed on our network of owned and operated ATMs;
	•		our prepaid mobile airtime top-up processing services;
	•		our money transfer and bill payment services, including completing the acquisition of RIA discussed below and under “—Liquidity – Other trends and uncertainties;” and
	•		development of our credit and debit card outsourcing business.

EFT Processing Segment – The continued expansion and development of our ATM business will depend on various factors including the following:

	•		the impact of competition by banks and other ATM operators and service providers in our current target markets;
	•		the demand for our ATM outsourcing services in our current target markets;
	•		the ability to develop products or services to drive increases in transactions;
	•		the expansion of our various business lines in markets where we operate and in new markets;
	•		entering into additional card acceptance and ATM management agreements with banks;
	•		the ability to obtain required licenses in markets we intend to enter or expand services;
	•		the availability of financing for expansion; and
	•		the ability to efficiently install ATMs contracted under newly awarded outsourcing agreements.

We carefully monitor the revenue and transactional growth of our ATM networks in each of our markets, and we adjust our plans depending on local market conditions, such as variations in the transaction fees we receive, competition, overall trends in ATM-transaction levels and performance of individual 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 approximately six to twelve months or longer. 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 acquisition or termination of these management contracts. Therefore, the timing of both current and new contract revenues is uncertain and unpredictable.

In January 2006, through Jiayintong (Beijing) Technology Development Co. Ltd., our 75% owned joint venture with Ray Holdings in China, we entered into an ATM outsourcing pilot agreement with Postal Savings and Remittance Bureau (“PSRB”), a financial institution located and organized in China. Under the pilot agreement we deployed and are providing all of the day-to-day outsourcing services for a total of 87 ATMs in Beijing, Shanghai and Guangdong, the three largest commercial centers in China. Additionally, during the third quarter 2006, we signed an ATM outsourcing agreement with a leading multinational bank to deploy 50 ATMs in China beginning in January 2007. Our future success in China will depend on the willingness of PSRB or other financial institutions to outsource additional ATMs to us and our ability to take over, install and operate additional ATMs. We are the first, and currently the only, provider of end-to-end ATM outsourcing services in China and we have established a technical processing and operations center in Beijing to operate these ATMs. While we believe that we have the proper resources and skills in place to be successful, there can be no assurance that we will be successful in our ability to take over existing ATMs or install new ATMs as expected by PSRB or others. All start up costs for this joint venture have been expensed as incurred.

We are also in the process of evaluating potential opportunities in cross-border merchant processing and acquiring and intend to enter this business either through the development of the necessary processing systems or through acquisition of a company or companies that conduct this business. Merchant acquiring involves processing credit and debit card transactions that are made on POS terminals, including authorization, settlement, and processing of settlement files. It may involve the assumption of credit risk, as the principal amount of transactions may be settled to merchants before settlements are received from card associations. The entry into this business by Euronet will involve investment into infrastructure, including hardware, software and hiring of staff with specialized skills.

Prepaid Processing Segment – We currently offer prepaid mobile phone top-up services in the U.S., Europe, Africa and Asia Pacific; money transfer services to customers from the U.S. to destinations primarily in Latin America, and bill payment services to customers in the U.S., U.K. and Poland. We plan to expand our top-up business in these and other markets by taking advantage of our existing expertise together with relationships with mobile phone operators and retailers. We plan to expand our card-based money transfer and bill payment services by offering the product on many of our existing POS terminals in the U.S. and internationally.

Expansion will depend on various factors, including, but not necessarily limited to, the following:

	•		the ability to negotiate new agreements for other markets with mobile phone operators, agent banks and retailers;
	•		the continuation of the trend towards conversion from scratch card solutions to electronic processing solutions for prepaid mobile airtime among mobile phone users and the continued use of third party providers such as ourselves to supply this service;
	•		the development of mobile phone networks in these markets and the increase in the number of mobile phone users;
	•		the continuation of the trend of increased use of electronic money transfer and bill payment among immigrant workers and the unbanked population in our markets;
	•		the overall pace of growth in the prepaid mobile phone market;
	•		our market share of the retail distribution capacity;
	•		the level of commission that is paid to the various intermediaries in the prepaid mobile airtime distribution chain;
	•		our ability to obtain money transfer licenses to operate in many of the states within the U.S. and internationally;
	•		the ability to rapidly maximize the number of agents and retailers who sell our card-based money transfer and bill payment product in the U.S. and internationally; and
	•		the availability of financing for further expansion.

In mature markets, such as the U.K., Australia, Spain and Ireland, the conversion from scratch cards to electronic forms of distribution is either complete or nearing completion. Because of this factor, we are likely to cease experiencing the organic increases in the number of transactions per terminal that we have experienced historically. Also in mature markets, competition among prepaid distributors results in the increase of commissions paid to retailers and increases in retailer attrition rates. The combined impact of these factors in developed markets is a flattening of growth in the revenues and profits that we earn. In other markets in which we operate, such as Poland, Germany and the U.S., many of the factors that may contribute to rapid growth (conversion from scratch cards to electronic distribution, growth in the prepaid market, expansion of our network of retailers and access to all mobile operators’ products) remain present.

To expand our money transfer and bill payment services business, during the fourth quarter 2006 we agreed to acquire the stock of RIA Envia, Inc. (“RIA”), subject to regulatory approvals and other customary closing conditions. The purchase price is comprised of $380 million in cash, $110 million in Euronet Common Stock and certain contingent value and stock appreciation rights. RIA is the third largest global money transfer company and processes approximately $4.5 billion in money transfers annually. RIA originates transactions through a network of 10,000 sending agents and 98 company-owned stores located throughout 13 countries in North America, the Caribbean, Europe and Asia and terminating transactions through a payer network of over 32,000 locations across 82 countries. The acquisition is expected to create significant cross-selling opportunities on our network of more than 161,000 prepaid top up locations and to provide prepaid services through RIA’s stores and agents worldwide. Additionally, we expect to leverage our

banking and merchant/retailer relationships to expand money transfer services to corridors across Europe and Asia, including high growth corridors to central and eastern European countries. We expect this acquisition to close during the first half of 2007.

Additionally, growth in our existing Euronet Payments & Remittance business will be driven by the continuation of global worker migration patterns, our ability to manage rapid growth, our ability to maximize the opportunity to sell our card-based product over our existing POS terminals in the U.S. and internationally, and our ability to obtain licenses to operate in many of the states within the U.S. as well as other countries. While we are currently focused on the U.S. and Latin America market, we plan to expand our money transfer services to other markets. We are focusing on increasing our sending locations in existing licensed states and obtaining licenses to operate in other key states. We have expanded these operations from the original three states into nineteen additional states. We also have three other states where we are preparing to introduce these services and three additional states where licenses are pending approval. Expansion of our money transfer business internationally will require resolution of numerous licensing and regulatory issues in each market we intend to develop and no assurance can be given that these issues will be resolved.

Agreement to acquire La Nacional — During January 2007, we signed a stock purchase agreement to acquire La Nacional, subject to regulatory approvals and other customary closing conditions. La Nacional is a money transfer company originating transactions through a network of sending agents and company-owned stores, located primarily in the Northeastern U.S., and terminating transactions through a worldwide payer network, primarily in the Dominican Republic. In addition to gaining a significant share of the U.S. to Dominican Republic money transfer corridor, the La Nacional acquisition will strengthen our retail presence in the Northeastern U.S. In connection with signing the agreement, we deposited funds in an escrow account created for the proposed acquisition. The escrowed funds can only be released by mutual agreement of the Company and La Nacional or through legal remedies available in the agreement.

We have become aware that on February 6, 2007, two employees of La Nacional working in different La Nacional stores were arrested for allegedly violating federal money laundering laws and certain state statutes. We are currently gathering additional information to assess the impact of these arrests on La Nacional and on our potential acquisition of that company. The outcome of our analysis is currently uncertain. No assurance can be given that we will close the La Nacional acquisition. See “Management Discussion and Analysis — Liquidity and Capital Resources — Other trends and uncertainties.”

During February 2007, we completed the acquisition of the stock of Omega Logic, Ltd. (“Omega Logic”). Omega Logic is a prepaid top-up company based, and primarily operating, in the U.K. This acquisition will enhance our Prepaid Processing Segment business in the U.K.

Software Solutions Segment – Software products are an integral part of our product lines, and our investment in research, development, delivery and customer support reflects our ongoing commitment to an expanded customer base. We have been able to enter into agreements under which we use our software in lieu of cash as our initial capital contributions to new transaction processing joint ventures. Such contribution sometimes permits us to enter new markets without significant capital investment. Additionally, this segment supports our EFT Processing Segment and is a valuable element of our overall business strategy. The competitive factors in the Software Solutions business include price, technology development and the ability of software systems to interact with other leading products. Our success is dependent on our ability to design and implement software applications. Technical disruptions or errors in these systems could have a material adverse impact on our revenue and financial results. We also expanded the Software Solutions Segment through the January 2006 acquisition of Essentis. This acquisition allows us to offer additional outsourcing and software products to financial institutions.

Corporate Services, Eliminations and Other – In addition to operating in our principal business segments described above, our division, “Corporate Services, Elimination and Other” includes non-operating results, certain inter-segment eliminations and the cost of providing corporate and other administrative services to the business segments, including share-based compensation expense related to most option and restricted stock grants. These services are not directly identifiable with our business segments.

We evaluate performance of our segments based on income or loss from continuing operations before income taxes, foreign currency exchange gain (loss), minority interest and other nonrecurring gains and losses. The impact of share-based compensation is recorded as an expense of the Corporate Services division, with certain limited exceptions related to grants of restricted stock to key members of management that vest based on the achievement of performance criteria by our subsidiaries.

The accounting policies of each segment are the same as those referenced in the summary of significant accounting policies (see Note 3 – Summary of Significant Accounting Policies and Practices to the Consolidated Financial Statements). We evaluate performance of our segments based on income or loss from continuing operations before income taxes, foreign currency exchange gain (loss), minority interest and other nonrecurring gains and losses.

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 rapid 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.

SEGMENT REVENUES AND OPERATING INCOME FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

		Revenues												Operating Income
(in thousands)		2006				2005				2004				2006				2005 (1)				2004 (1)
EFT Processing		$	130,748			$	105,551			$	77,600			$	31,846			$	25,569			$	15,047
Prepaid Processing			470,861				411,279				289,810				34,771				34,711				28,273
Software Solutions			28,188				14,898				13,670				3,985				3,515				1,791
Total			629,797				531,728				381,080				70,602				63,795				45,111
Corporate services			—				—				—				(17,833	)			(16,018	)			(15,387	)
Eliminations and other			(616	)			(569	)			—				(471	)			—				5
Total		$	629,181			$	531,159			$	381,080			$	52,298			$	47,777			$	29,729

SUMMARY

Our annual consolidated revenues increased 18% for 2006 over 2005, and 39% for 2005 over 2004. These increases reflect growth in both the EFT Processing and the Prepaid Processing Segments due to increases in the number of ATMs managed and transactions processed. Increases in transactions were due to growth from our existing business as well as from acquisitions completed during these years (See Note 4 – Acquisitions to the Consolidated Financial Statements).

Our operating income increased 9% for 2006 over 2005, and 61%⁽¹⁾ for 2005 over 2004. These increases were the result of growth in revenues generated by existing business and newly acquired businesses, the impact of acquisitions and leveraging the Company’s cost structure, particularly in the EFT Processing Segment.

Net income for 2006 was $46.3 million, or $1.17 per diluted share, compared to net income of $22.4 million⁽¹⁾, or $0.61⁽¹⁾ per diluted share for 2005, and net income of $12.9 million⁽¹⁾, or $0.39⁽¹⁾ per diluted share for 2004. Net income for 2006 included foreign currency exchange translation gains of $10.2 million. Net income for 2005 included foreign currency exchange translation losses of $7.5 million and losses from discontinued operations of $0.6 million. Net income for 2004 included foreign currency exchange translation losses of $0.4 million and a loss on early retirement of debt of $0.9 million.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 – BY BUSINESS SEGMENT

EFT PROCESSING SEGMENT

2006 Compared to 2005

The following table summarizes the results of operations for the EFT Processing Segment for the years ended December 31, 2006 and 2005:

		Year Ended December 31,								Year-over-Year Change
										Increase				Increase
(dollar amounts in thousands)		2006				2005				Amount				Percent
Total revenues		$	130,748			$	105,551			$	25,197				24%
Operating expenses:
Direct operating costs			55,614				44,118				11,496				26%
Salaries and benefits			19,312				17,063				2,249				13%
Selling, general and administrative			11,219				9,333				1,886				20%
Depreciation and amortization			12,757				9,468				3,289				35%
Total operating expenses			98,902				79,982				18,920				24%
Operating income		$	31,846			$	25,569			$	6,277				25%
Transactions processed (millions)			463.6				361.5				102.1				28%
ATMs as of December 31			8,885				7,211				1,674				23%
Average ATMs			8,066				6,585				1,481				22%

Revenues

Our revenue for 2006 increased when compared to 2005 primarily due to increases in the number of ATMs operated and, for owned ATMs, the number of transactions processed, primarily in Poland and India. Additionally, 2006 results include the results of Instreamline (now Euronet Card Services Greece) and Europlanet. Instreamline, acquired in October 2005, provides credit card and POS outsourcing services and transaction gateway switching services in Greece and the Balkan region. Our ownership in Europlanet was increased through two transactions; one in April 2005, in which we increased our ownership from 36% to 66%; and one in December 2005, in which we acquired the final 34% ownership. We began consolidating Europlanet after acquiring a controlling interest in April 2005. Europlanet provides debit card processing services and manages a network of ATMs and POS terminals in Serbia. Partially offsetting these increases was a reduction in revenue associated with the extension of certain customer contracts for several years beyond their original terms. In exchange for these extensions, we paid or received an up-front payment, and agreed on a gradually declining fee structure. Revenue under these contracts is recognized based on proportional performance of services over the term of the contract, which generally results in “straight-line” (i.e. consistent value per period) revenue recognition of the contracts’ total cash flows, including any up-front payment. This straight-line revenue recognition results in revenue recognized in an amount less than contractual cash receipts in the early periods of the agreement and revenue recognized in an amount greater than the contractual cash receipts in the later years of the agreement. We may decide to enter into similar arrangements with other EFT Processing Segment customers during 2007 and beyond.

Average monthly revenue per ATM was $1,351 for 2006, compared to $1,336 for 2005 and revenue per transaction was $0.28 for 2006, compared to $0.29 for 2005. The increase in average monthly revenue per ATM is, in part, due to increases in non-ATM revenues, primarily associated with Euronet Card Services Greece, which provides POS and credit card outsourcing services and debit card transaction gateway switching services and acquired in October 2005. The slight decrease in revenue per transaction is mainly the result of operating increasing numbers of ATMs under outsourcing agreements, as well as revenues earned from non-ATM services. Under outsourcing agreements, we primarily earn revenue based on fixed recurring monthly management fee, with less dependence on transaction-based fees because incremental transactions have little impact on the fixed or variable costs of managing ATMs. Therefore, an overall increase in the number of transactions processed on ATMs that are managed under outsourcing agreements generally does not generate commensurate increases in revenues. We believe this shift from a largely proprietary, Euronet-owned ATM network to operating ATMs under outsourcing arrangements has provided, and will continue to provide, higher marginal returns on investment. While expansion of our network of owned ATMs is not one of our strategic initiatives, if opportunities were available to us, we would consider increasing future capital expenditures to expand this network in new or existing markets.

Of total segment revenue for 2006, 26% was from ATMs we owned and 74% was from outsourcing services, compared to 30% and 70%, respectively, for 2005.

Direct operating costs

Direct operating costs consist primarily of site rental fees, cash delivery costs, cash supply costs, maintenance, insurance, telecommunications and the cost of data center operations-related personnel, as well as the processing centers’ facility related costs and other processing center related expenses. The increase in direct operating cost for 2006, compared to 2005, is attributed to the increase in the number of ATMs under operation. Direct operating costs as a percentage of revenues was relatively flat at 43% for 2006, compared to 42% for 2005.

Gross margin

Gross margin, which is revenue less direct operating costs, increased to $75.1 million for 2006 from $61.4 million for 2005. This increase was a result of the increase in revenues described above. Of total segment gross margin for 2006, approximately 23% was from ATMs we owned and 77% was from outsourcing services, compared to 28% and 72%, respectively, for 2005. Average monthly gross margin per ATM was flat at $776 for 2006, compared to $777 for 2005 and gross margin per transaction was $0.16 for 2006, compared to $0.17 for 2005.

Salaries and benefits

The increase in salaries and benefits for 2006, compared to 2005 is due to the acquisition of Instreamline and Europlanet, staffing costs to expand in emerging markets, such as India, China and new European markets, and additional products, such as POS and card processing. Salaries and benefits also increased as a result of general merit increases awarded to employees and certain additional staffing requirements due to the larger number of ATMs under operation and transactions processed. As a percentage of revenue, however, these costs continued to trend downward, decreasing to 15% for 2006, compared to 16% for 2005. This decrease as a percentage of revenue reflects the impact of leverage and scalability of continued growth in the segment.

Selling, general and administrative

Similar to the increase in salaries and benefits, the increase in selling, general and administrative expenses for 2006, compared to 2005 is also due primarily to the acquisitions of Instreamline and Europlanet and costs incurred to expand in emerging markets and additional products. As a percentage of revenue, these costs were 9% of revenue for both 2006 and 2005. Offsetting these costs for 2005 was $0.5 million for an insurance recovery that related to a loss recorded in the fourth quarter 2003 on certain ATM disbursements resulting from a card association’s change in their data exchange format.

Depreciation and amortization

The increase in depreciation and amortization expense for 2006, compared to 2005 is due primarily to depreciation and intangible amortization related to the acquisitions of Instreamline and, to a lesser extent, Europlanet, as well as depreciation on additional ATMs under capital lease arrangements related to outsourcing agreements in India. As a percentage of revenue, these expenses were 10% of revenue for 2006, compared to 9% of revenue for 2005. Approximately $1.2 million of depreciation and amortization for 2006 represents amortization of acquired intangible assets related to the acquisitions of Instreamline and Europlanet, compared to $0.3 million recorded during 2005.

Operating income

The increase in operating income for the segment is generally the result of increased revenue and the related gross margins described above, combined with leveraging certain management cost structures. Operating income as a percentage of revenue was 24% for both 2006 and 2005 and operating income per transaction was $0.07 for both 2006 and 2005.

Average monthly operating income per ATM was $329 for 2006, compared to $324 for 2005. This slight increase in average monthly operating income per ATM is due to increased leverage and scalability in our markets, as well as the continuing migration toward operating ATMs under outsourcing agreements rather than ownership arrangements. Operating income is partially offset by losses related to our 75% owned joint venture in China of $1.3 million for 2006 and $1.2 million in 2005. We expect to incur a similar loss in China during 2007 as we continue to focus on expansion in this market.

2005 Compared to 2004

The following table summarizes the results of operations for the EFT Processing Segment for the years ended December 31, 2005 and 2004:

		Year Ended December 31,								Year-over-Year Change
										Increase				Increase
(dollar amounts in thousands)		2005				2004				Amount				Percent
Total revenues		$	105,551			$	77,600			$	27,951				36%
Operating expenses:
Direct operating costs			44,118				34,129				9,989				29%
Salaries and benefits			17,063				13,470				3,593				27%
Selling, general and administrative			9,333				6,625				2,708				41%
Depreciation and amortization			9,468				8,329				1,139				14%
Total operating expenses			79,982				62,553				17,429				28%
Operating income		$	25,569			$	15,047			$	10,522				70%
Transactions processed (millions)			361.5				232.5				129.0				55%
ATMs as of December 31			7,211				5,742				1,469				26%
Average ATMs			6,585				4,751				1,834				39%

Revenues

Our revenue for 2005 increased over 2004 due to increases in the number of ATMs operated and in the number of transactions processed, together with the full year effects of ATM management agreements initially implemented in 2004 in Poland, Romania and India. Additionally, revenue growth for 2005 over 2004 was due to the acquisitions of Instreamline and Europlanet discussed under “2006 Compared to 2005” above.

Average monthly revenue per ATM was $1,336 for 2005 compared to $1,361 for 2004 and revenue per transaction was $0.29 for 2005 compared to $0.33 for 2004. As discussed under “2006 Compared to 2005” above, the decrease in revenue per transaction is mainly the result of a continued shift from owning ATMs to managing them under outsourcing agreements. Of total segment revenue for 2005, 30% was from ATMs we owned and 70% was from outsourcing services, compared to 37% and 63%, respectively, for 2004.

Direct operating costs

The increase in direct operating cost for 2005 compared to 2004 is attributed to the increase in the number of ATMs under operation. Direct operating costs decreased to 42% of revenues for 2005, compared to 44% of revenues for 2004. This reduction resulted from operating a greater percentage of outsourced ATMs, for which direct costs per ATM, and on an average per transaction basis, are lower than the existing installed base of ATMs, together with leveraging the fixed or semi-fixed data center costs.

Gross margin

Gross margin increased to $61.4 million for 2005 from $43.5 million for 2004. Average monthly gross margin per ATM was $777 for 2005, an increase compared to $763 for 2004. The increase in average monthly gross margin per ATM is largely the result of increasing transactions and related fees from the installed ATM base, together with the leveraged effect of adding additional ATM outsourcing revenues and profits to a direct cost structure that is more fixed than variable with volume. Of 2005 total segment gross margin, approximately 28% was from ATMs we owned and 72% was from outsourcing services, compared to 34% and 66%, respectively, for 2004.

Gross margin per transaction decreased to $0.17 for 2005, compared to $0.19 for 2004. Under certain outsourcing agreements, revenue and gross margin are derived increasingly from fixed charges based upon ATMs under management and other charges and not from incremental transactions. Accordingly, in such arrangements increased transaction volumes do not drive commensurate increases in total revenue and gross margin dollars. Further, because we realize the benefit of certain economies of scale within our ATM network, increased transaction volumes do not drive commensurate increases the amount of indirect costs or direct costs on a per transaction basis.

Salaries and benefits

The increase in salaries and benefits for 2005 compared to 2004 was due to our growing business in India and Romania, the acquisitions of Instreamline and Europlanet, staffing costs to expand in emerging markets such as China, and general merit increases awarded to employees. Certain staffing increases were also necessary due to the larger number of ATMs under operation and transactions processed. These expenses as a percentage of revenue, however, continued to trend downward during 2005 decreasing to 16%, compared to 17% for the 2004. This decrease as a percentage of revenue reflects increased leverage and scalability in our markets.

Selling, general and administrative

Similar to the increase in salaries and benefits, the increase in selling, general and administrative expenses over 2004 is also due to our growing businesses in India and Romania, the acquisitions of Instreamline and Europlanet and costs incurred to expand into emerging markets, including China. However, these costs remained flat at 9% of revenue for both 2005 and 2004. Offsetting these costs for 2005 was $0.5 million for an insurance recovery recorded during the first quarter 2005. This insurance recovery related to a loss recorded in the fourth quarter 2003 on certain ATM disbursements resulting from a card association’s change in their data exchange format.

Depreciation and amortization

The increase in depreciation and amortization expense from 2004 to 2005 is due to depreciation on additional ATMs under capital lease arrangements related to outsourcing agreements in Poland and India, depreciation and intangible amortization related to the acquisitions of Instreamline and Europlanet, additional processing center computer equipment necessary to handle increased transaction volumes and technology upgrades to certain of our owned ATMs throughout 2004 and 2005. As a percentage of revenue, these expenses continued to trend downward to 9% of revenue for 2005 from 11% of revenue for 2004 as a result of our shift from owned ATMs to outsourced ATMs discussed above.

Operating income

The increase in operating income for the segment is generally the result of increased revenue, and the related gross margins, from new ATM outsourcing and network participation agreements combined with leveraging certain management cost structures. Operating income as a percentage of revenue was 24% for 2005, compared to 19% for 2004. Operating income per transaction was $0.07 for 2005, compared to $0.06 for 2004. Average monthly operating income per ATM was $324 for 2005, compared to $264 for 2004. The continuing increases in operating income as a percentage of revenue, per transaction and per ATM is due to increased leverage and scalability in our markets, as well as the continuing migration toward operating ATMs under management through outsourcing agreements rather than ownership arrangements. Additionally, operating income for 2005 includes a net operating loss of $1.2 million related to our 75% owned joint venture in China.

PREPAID PROCESSING SEGMENT

2006 Compared to 2005

The following table summarizes the results of operations for the Prepaid Processing Segment for the years ended December 31, 2006 and 2005:

		Year Ended December 31,								Year-over-Year Change
										Increase				Increase
(dollar amounts in thousands)		2006				2005				Amount				Percent
Total revenues		$	470,861			$	411,279			$	59,582				14%
Operating expenses:
Direct operating costs			378,261				325,594				52,667				16%
Salaries and benefits			24,914				22,834				2,080				9%
Selling, general and administrative			18,874				16,400				2,474				15%
Depreciation and amortization			14,041				11,740				2,301				20%
Total operating expenses			436,090				376,568				59,522				16%
Operating income		$	34,771			$	34,711			$	60				—
Transactions processed (millions)			458.1				348.1				110.0				32%

Revenues

The increase in revenues for 2006 compared to 2005 was generally attributable to the increase in total transactions processed across all of our Prepaid Processing operations and the full year impact of 2005 acquisitions. Revenue growth was offset by reduced revenue in Spain resulting from the expiration of preferential commission arrangements with a Spanish mobile operator. When we acquired our Spanish prepaid subsidiaries, we entered into agreements with a major mobile operator under which the subsidiaries received a preferred, exclusive distributor commission on sales of prepaid mobile airtime. This arrangement expired in May 2006 and was not renewed. Additionally, in mature markets, such as the U.K. and Australia, our revenue growth has slowed substantially and, in some cases, revenues have decreased because conversion from scratch cards to electronic top-up is substantially complete and certain mobile operators and retailers are driving competitive reductions in pricing and margins. We expect most of our revenue growth for 2007 and beyond to be derived from developing markets or markets in which there is organic growth in the prepaid sector overall, from continued conversion from scratch cards to electronic top-up, from additional products sold over the base of prepaid processing terminals and, possibly, from acquisitions.

Revenue per transaction decreased to $1.03 for 2006 from $1.18 for 2005 due primarily to the growth in revenues and transactions recorded by our ATX subsidiary, which was acquired at the end of the first quarter 2005. ATX provides only transaction processing services without direct costs and other operating costs generally associated with installing and managing terminals; therefore, the revenue we recognize from these transactions is a fraction of that recognized on average transactions, but with very low cost. Transaction volumes at ATX have increased by approximately 300% for 2006, compared to 2005. For 2006, ATX transaction volumes accounted for approximately 18% of all transaction volume for the Prepaid Processing Segment, compared to 6% for 2005. The expiration of preferential commission arrangements in Spain discussed above also contributed to the decrease in revenue per transaction.

Partially offsetting the decreases described above for 2006, compared to 2005, were the growth in both volumes and revenues related to our US subsidiary, PaySpot, Inc. (“PaySpot”). Revenue per transaction for PaySpot is generally higher than most of our other Prepaid Processing subsidiaries.

Direct operating costs

Direct operating costs in the Prepaid Processing Segment include the commissions we pay to retail merchants for the distribution and sale of prepaid mobile airtime and other prepaid products, as well as communication and paper expenses required to operate POS terminals. Because of their nature, these expenditures generally fluctuate directly with revenues and processed transactions. The increase in direct operating costs is generally attributable to the increase in total transactions processed over the prior year. Direct costs as a percentage of revenue are slightly higher in our mature markets, such as the U.K. and Spain. These higher costs have been partially offset during 2006 by lower direct costs as a percentage of revenue in other markets and by ATX. As discussed above, ATX is a transaction processor, with very few direct costs and, accordingly, a high gross margin percentage.

Gross margin

Gross margin, which represents revenue less direct costs, was $92.6 million for 2006, compared to $85.7 million for 2005. Gross margin as a percentage of revenue was 20% for 2006, compared to 21% for 2005 and gross margin per transaction was $0.20 for 2006, compared to $0.25 per transaction for 2005. Most of the reduction in gross margin per transaction is due to the growth of revenues and transactions at our ATX subsidiary and the expiration of preferential commission arrangements in Spain discussed above. Although we were able to pass through our reduction in commission in Spain to the retailers under our contracts with them by paying a lower distribution commission, we chose to pass through only a portion of the reduction to guard against the loss of retailers. Also during 2006, we commenced distribution of additional products and prepaid airtime from the two other mobile operators in Spain. As a result of the expiration of preferential commission arrangements in Spain, partially offset by the distribution of products from the other mobile operators in Spain, gross margin for 2006 was approximately $2.6 million lower than 2005. This reduction would have been larger, except for the completion of a significant acquisition in Spain during March 2005. Additional decreases in gross margin per transaction were experienced across most of our other countries and were partially offset by increased transaction volumes in markets with higher margins, such as Australia, New Zealand and the U.S.

Salaries and benefits

The increase in salaries and benefits for 2006, compared to 2005 is the result of increased investments in Euronet Payments & Remittance, our money transfer and bill payment subsidiary established during the second quarter 2005, and the full year effects of 2005 acquisitions. Salaries and benefits expense for 2006 includes an increase of approximately $2.4 million, or 0.6% of revenues, incurred in connection with Euronet Payments & Remittance. As a percentage of revenue, salaries and benefits have decreased slightly to 5.3% for 2006, from 5.6% for 2005. The decrease in salaries and benefits as a percentage of revenue reflects our growing leverage and scalability in our markets.

Selling, general and administrative

The increase in selling, general and administrative expenses generally is the result of increased investments in Euronet Payments & Remittance and the full year effects of 2005 acquisitions. Selling, general and administrative expenses for 2006 includes an increase of approximately $1.9 million incurred in connection with Euronet Payments & Remittance. As a percentage of revenue these selling, general and administrative expenses have remained flat at 4.0% of revenue for both 2006 and 2005.

Depreciation and amortization

Depreciation and amortization expense primarily represents amortization of acquired intangibles and the depreciation of POS terminals we install in retail stores. The increase for 2006, compared to 2005, is due to the full year effects of amortization of intangible assets recorded in connection with 2005 acquisitions. As a percentage of revenues, depreciation and amortization was relatively flat at 3.0% for 2006, compared to 2.9% for 2005.

Operating income

Operating income for 2006 increased slightly compared to 2005 and includes increased operating losses of $2.3 million, compared to 2005, related to Euronet Payments & Remittance. Also, as a result of the developments in Spain discussed above, operating income for 2006 was approximately $2.6 million lower than 2005. Exclusive of the reductions related to Euronet Payments & Remittance and Spain, the improvement in operating income for 2006 was due to the growth in revenues and transactions processed, contributions from our 2005 acquisitions and increased leverage and scalability in our markets.

Operating income as a percentage of revenues decreased to 7.4% for 2006 from 8.4% for 2005. Operating income per transaction decreased to $0.08 for 2006, from $0.10 for 2005. As discussed above, these decreases in operating income as a percentage of revenue and per transaction are the result of losses incurred by Euronet Payments & Remittance, the developments in Spain, the growth in revenues and transactions associated with ATX and gross margin declines across several of our other countries. These decreases were partially offset by increased transactions in markets with higher operating margins, such as Australia, New Zealand and the U.S.

2005 Compared to 2004

Due to the rapid growth of this segment of our operations, the following discussion and analysis will focus on comparisons of both actual results for the years ended December 31, 2005 and 2004 and, as appropriate, pro forma results prepared as if all acquisitions had taken place as of January 1, 2004. Our pro forma data is only adjusted for the timing of acquisitions and does not include adjustments for costs related to integration activities, cost savings or synergies that have or may be achieved by the combined businesses. In the opinion of management, this information is neither indicative of what our results would have been had we operated these businesses since January 1, 2004, nor is it indicative of our future results.

		Year Ended December 31,								Year-over-Year Change
										Increase				Increase
(dollar amounts in thousands)		2005				2004				Amount				Percent
Total revenues		$	411,279			$	289,810			$	121,469				42%
Operating expenses:
Direct operating costs			325,594				229,908				95,686				42%
Salaries and benefits			22,834				15,226				7,608				50%
Selling, general and administrative			16,400				10,048				6,352				63%
Depreciation and amortization			11,740				6,355				5,385				85%
Total operating expenses			376,568				261,537				115,031				44%
Operating income		$	34,711			$	28,273			$	6,438				23%
Transactions processed (millions)			348.1				228.6				119.5				52%

		Pro Forma
		Year Ended December 31,								Year-over-Year Change
										Increase				Increase
		2005				2004				(Decrease)				(Decrease)
(dollar amounts in thousands)		(unaudited)				(unaudited)				Amount				Percent
Total revenues		$	420,348			$	350,935			$	69,413				20%
Operating expenses:
Direct operating costs			331,588				269,803				61,785				23%
Salaries and benefits			23,770				19,635				4,135				21%
Selling, general and administrative			17,186				13,601				3,585				26%
Depreciation and amortization			12,489				11,108				1,381				12%
Total operating expenses			385,033				314,147				70,886				23%
Operating income		$	35,315			$	36,788			$	(1,473	)			(4%)

Revenues

The increase in revenues for 2005 compared to 2004 was generally attributable to the increase in total transactions processed. Transaction growth reflects growth from existing operations, the full year effects of all our 2004 acquisitions and additional revenue from our current year acquisitions. Since the date of acquisition, 2004 acquisitions contributed increased revenues of $23.0 million for 2005 and our 2005 acquisitions contributed revenues of $36.7 million. Additionally, revenues have grown from the effects of retailer agreements implemented during 2004 and revenue growth from all of our subsidiaries subsequent to the date of acquisition. On a pro forma basis, 2005 revenues increased over 2004 by $69.4 million as a result of the addition of POS terminals throughout all of our markets, and increased volumes driven by mobile operators shifting from scratch card distribution to electronic distribution.

Revenue per transaction was $1.18 for 2005, compared to $1.27 for 2004. This decrease is due to our expansion into markets such as Spain, Germany and Poland where we earn less revenue per transaction, but are able to keep a greater percentage of the commission, thus having little if any impact on gross margin. Additionally, our ATX subsidiary, which was acquired at the end of the first quarter 2005, provides only transaction processing services without direct costs and other operating costs associated with installing and

managing terminals; therefore, the revenue we recognize from these transactions is less than one-tenth of that recognized on average transactions, but with virtually no costs.

Direct operating costs

The increase in direct operating costs generally corresponds to increases in revenues and transactions processed. However, direct costs as a percentage of revenue are slightly higher in our mature markets, such as the U.K. and Australia. These higher costs were mostly offset in 2005 by lower direct costs as a percentage of revenue in other markets and by ATX. As discussed above, ATX is a transaction processor, with very few direct costs and, accordingly, a high gross margin percentage.

Gross margin

Gross margin increased by $25.8 million, or 43%, to $85.7 million for 2005, compared to $59.9 million for 2004. This increase is generally correlated to the increase in transactions processed. Gross margin per transaction was $0.25 for 2005, compared to $0.26 per transaction for 2004. Gross margin as a percentage of revenue was 21% for both periods presented. As discussed under “direct operating costs” above, reduced margins in our mature markets, such as the U.K. and Australia, have been largely offset by improved margins in other markets as well as the effects of ATX.

Salaries and benefits

Salaries and benefits increased to 5.6% of revenue for 2005 from 5.3% of revenue for 2004. This increase was related to costs of approximately $0.9 million incurred in connection with our money transfer and bill payment product and additional sales resources in the U.S. and Australian markets added in the last quarter of 2004 and first half of 2005.

Selling, general and administrative

Selling, general and administrative expense for 2005 increased to 4.0% of revenue compared to 3.5% of revenue for 2004. Similar to the increase in salaries and benefits, this increase is due to our continued focus on expanding operations in the U.S. and costs incurred to grow our money transfer and bill payment product.

Depreciation and amortization

As a percentage of revenue, depreciation and amortization was 2.9% for 2005 and 2.2% for 2004. This increase is due to higher depreciation and amortization expense as a percentage of revenue related to our subsidiaries in the U.S., Spain and Poland, many of which were acquired or established during 2004 and 2005, because each of these entities owns a majority of its POS terminals. Additionally, we recorded higher amortization expense of approximately $0.3 million for our Transact subsidiary during 2005, as compared to 2004 due to an adjustment to our preliminary purchase price allocation increasing intangible assets, such as customer relationships, which are amortized, and decreasing goodwill, which is not amortized.

Operating income

The improvement in operating income for 2005 over 2004 was due to the significant growth in revenues and transactions processed, together with contributions from our 2004 and 2005 acquisitions. Operating income for 2005 includes approximately $1.0 million in operating losses related to our money transfer and bill payment business acquired in the second quarter 2005. Operating income as a percentage of revenues decreased to 8.4% for 2005, from 9.8% for 2004 and per transaction decreased to $0.10 for 2005, from $0.12 in 2004. This decrease is due to our focus on expansion in the U.S., Poland and Australia, and costs incurred in connection with our new money transfer and bill payment business.

Pro forma operating margin percentage decreased to 8.4% for 2005, compared to 10.5% for 2004 as a result of the inclusion of our acquisitions in the U.S. and Spain in the pro forma results for 2004, which included the positive impact of margin-rich, opportunistic, wholesale pricing advantages that were not ongoing in nature.

SOFTWARE SOLUTIONS SEGMENT

The following table summarizes the results of operations for the Software Solutions Segment, which includes Essentis for the year ended December 31, 2006, and Euronet USA, for the years ended December 31, 2006, 2005 and 2004.

														Year-over-Year Change
																		2005
														2006				Increase
		Year Ended December 31,												Increase				(Decrease)
(dollar amounts in thousands)		2006				2005				2004				Percent				Percent
Total revenues		$	28,188			$	14,898			$	13,670				89	%			9	%
Operating expenses:
Direct operating costs			1,601				1,046				566				53	%			85	%
Salaries and benefits			16,745				8,336				8,456				101	%			(1	%)
Selling, general and administrative			3,810				944				1,882				304	%			(50	%)
Depreciation and amortization			2,047				1,057				975				94	%			8	%
Total operating expenses			24,203				11,383				11,879				113	%			(4	%)
Operating income		$	3,985			$	3,515			$	1,791				13	%			96	%

The Software Solutions Segment recognizes revenue from license fees, professional services and maintenance fees for software and sales of related hardware. Software license fees are the fees we charge to license our proprietary application software to customers. Professional service fees consist of charges for customization, installation and consulting services to customers. Software maintenance revenue represents the ongoing fees charged for maintenance and support for customers’ software products. Hardware sales are derived from the sale of computer equipment necessary for the respective software solution. The components of Software Solutions revenue are summarized in the following table:

		Year Ended December 31,
(in thousands)		2006				2005				2004
Software license fees		$	3,737			$	3,565			$	2,426
Professional service fees			12,469				4,647				5,035
Maintenance fees			10,638				6,083				5,927
Hardware and other sales			1,344				603				282
Total Revenue		$	28,188			$	14,898			$	13,670

Revenues

In January 2006, we acquired the assets of Essentis, a U.K. company that owns a leading card issuing and merchant acquiring software package. The assets, primarily consisting of the software source code, were purchased out of an administrative proceeding for approximately $3.0 million, including the assumption of certain liabilities. The Essentis software product allows us to add additional outsourcing and software offerings to financial institutions. For further discussion, see Note 4 – Acquisitions to the Consolidated Financial Statements. Essentis recorded $13.8 million in revenues for 2006, while Euronet USA accounted for the remaining $14.4 million in revenues. This decrease in revenue recorded by Euronet USA is due primarily to fewer customers achieving higher tiered user billing rates during 2006 than we experienced during 2005. The increase in revenue of $1.2 million for 2005, compared to 2004, was primarily due to an increase in the sales of software licenses.

Operating expenses

Essentis recorded total operating expenses of $12.7 million for 2006 and Euronet USA recorded operating expenses of $11.5 million, relatively flat compared to $11.4 million in operating expenses for 2005. The decrease in total operating expenses for 2005, compared to 2004 are primarily the result of efforts to reduce bad debt expense, rental expense, professional fees and travel related expenses.

We capitalize software development costs on a product-by-product basis once technological feasibility is established. Technological feasibility is established after the completion of all planning, designing, coding and testing activities necessary to establish that the

product can be produced to meet its design specifications, including functions, features and technical performance requirements. Amounts capitalized were $3.2 million, $0.8 million and $0.7 million for the years ended December 31, 2006, 2005 and 2004, respectively. We are continuing the development, maintenance and enhancement of our products, and total research and development costs for software products to be sold, leased or otherwise marketed, including amounts capitalized were $7.3 million, $2.7 million and $2.7 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Operating Income

Operating income increased by $0.5 million for 2006, compared to 2005. This increase is the result of $1.1 million in operating income recorded by Essentis, which was acquired in January 2006, partially offset by a decrease in operating income recorded by Euronet USA of $0.6 million. The decrease in operating income recorded by Euronet USA during 2006, compared to 2005, is due to the decrease in revenues discussed above. The increase in operating income for 2005, compared to 2004, was due largely to increased license fees together with cost management efforts.

CORPORATE SERVICES

The components of Corporate Services operating expenses were:

														Year-over-Year Change
														2006				2005
														Increase				Increase
		Year Ended December 31,												(Decrease)				(Decrease)
(dollar amounts in thousands)		2006				2005 (1)				2004 (1)				Percent				Percent
Salaries and benefits		$	13,285			$	10,527			$	10,217				26%				3%
Selling, general and administrative			4,343				5,381				5,021				(19%	)			7%
Depreciation and amortization			205				110				149				86%				(26%	)
Total operating expenses		$	17,833			$	16,018			$	15,387				11%				4%