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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                                                          For the transition period from

to
Commission File Number: 001-31648
EURONET WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
Delaware
74-2806888
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
11400 Tomahawk Creek Parkway, Suite 300
 
Leawood,
Kansas
66211
(Address of principal executive offices)
(Zip Code)
(913) 327-4200
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
EEFT
Nasdaq Global Select Market
1.375% Senior Notes due 2026
EEFT26
Nasdaq Global Market
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 whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
þ

Accelerated filer 
o
Non-accelerated filer 
o

Smaller reporting company


Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No þ
On May 3, 2022, Euronet Worldwide, Inc. had 50,550,498 shares of common stock outstanding.
 

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Table of Contents

 

Page



PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited) 1

Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 1

Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021 2

Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021 3

Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2022 and 2021 4

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 6

Notes to the Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 23
Item 3. Quantitative and Qualitative Disclosures About Market Risk 38
Item 4.
Controls and Procedures 39
PART II—OTHER INFORMATION

Item 1. Legal Proceedings 39
Item 1A. Risk Factors 40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 40
Item 6. Exhibits 41

Signatures 42

 

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(In thousands, except share and per share data)
 
As of
 
March 31,
2022
 
December 31,
2021
 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
986,534

 
$
1,260,466

ATM cash
644,436

 
543,422

Restricted cash
5,884

 
3,693

Settlement assets
1,037,367

 
1,102,389

Trade accounts receivable, net of credit losses of $4,274 and $4,469
180,070

 
203,010

Prepaid expenses and other current assets
271,538

 
195,443

Total current assets
3,125,829

 
3,308,423

Operating right of use lease assets
161,407

 
161,494

Property and equipment, net of accumulated depreciation of $536,675 and $532,631
344,429

 
345,381

Goodwill
846,241

 
641,605

Acquired intangible assets, net of accumulated amortization of $187,609 and $185,054
214,490

 
97,793

Other assets, net of accumulated amortization of $63,858 and $62,349
205,917

 
189,580

Total assets
$
4,898,313

 
$
4,744,276

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Settlement obligations
$
1,037,367

 
$
1,102,389

Trade accounts payable
157,738

 
193,529

Accrued expenses and other current liabilities
404,096

 
367,692

Current portion of operating lease liabilities
51,795

 
52,136

Short-term debt obligations and current maturities of long-term debt obligations
298

 
821

Income taxes payable
48,054

 
59,037

Deferred revenue
71,606

 
77,037

Total current liabilities
1,770,954

 
1,852,641

Debt obligations, net of current portion
1,762,278

 
1,420,085

Operating lease obligations, net of current portion
110,848

 
111,355

Deferred income taxes
37,136

 
46,505

Other long-term liabilities
73,503

 
58,166

Total liabilities
3,754,719

 
3,488,752

Equity:
 
 
 
Euronet Worldwide, Inc. stockholders’ equity:
 
 
 
Preferred Stock, $0.02 par value. 10,000,000 shares authorized; none issued

 

Common Stock, $0.02 par value. 90,000,000 shares authorized;  shares issued 63,818,035 and 63,779,009
1,276

 
1,275

Additional paid-in-capital
1,211,830

 
1,274,118

Treasury stock, at cost, shares issued 13,269,513 and 12,631,125
(1,001,421
)
 
(931,212
)
Retained earnings
1,125,569

 
1,083,882

Accumulated other comprehensive loss
(193,659
)
 
(172,582
)
Total Euronet Worldwide, Inc. stockholders’ equity
1,143,595

 
1,255,481

Noncontrolling interests
(1
)
 
43

Total equity
1,143,594

 
1,255,524

Total liabilities and equity
$
4,898,313

 
$
4,744,276

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(Unaudited, in thousands, except share and per share data)

 
Three Months Ended
March 31,

 
2022
 
2021

Revenues 
$
718,467

 
$
652,670


Operating expenses:
 
 
 

Direct operating costs, exclusive of depreciation
458,153

 
434,516


Salaries and benefits
126,765

 
115,668


Selling, general and administrative
63,856

 
58,776


Depreciation and amortization
32,990

 
33,261


Total operating expenses
681,764

 
642,221


Operating income
36,703

 
10,449


Other income (expense):
 
 
 

Interest income
145

 
182


Interest expense
(6,134
)
 
(9,189
)

Foreign currency exchange loss, net
(5,462
)
 
(4,032
)

Other gains, net
192

 
31

Other expense, net
(11,259
)
 
(13,008
)

Income (loss) before income taxes
25,444
 
(2,559
)

Income tax expense
(17,154
)
 
(6,062
)

Net income (loss)
8,290
 
(8,621
)

Net loss (income) attributable to noncontrolling interests
7
 
(44
)
Net income (loss) attributable to Euronet Worldwide, Inc.
$
8,297
 
$
(8,665)


 
 
 
 

Earnings (loss) per share attributable to Euronet Worldwide, Inc. stockholders:
 
 
 

Basic
$
0.16
 
$
(0.16)


Diluted
$
0.16
 
$
(0.16)


 
 
 
 

Weighted average shares outstanding:
 
 
 

Basic
51,057,951

 
52,762,845


Diluted
51,716,045

 
52,762,845



See accompanying notes to the unaudited consolidated financial statements.


EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(Unaudited, in thousands)

 
Three Months Ended
March 31,

 
2022
 
2021

Net income (loss)
$
8,290
 
$
(8,621
)

Translation adjustment
(21,114
)
 
(42,901
)

Comprehensive loss
(12,824
)
 
(51,522
)

Comprehensive loss attributable to noncontrolling interests
44
 
12


Comprehensive loss attributable to Euronet Worldwide, Inc.
$
(12,780
)
 
$
(51,510
)

See accompanying notes to the unaudited consolidated financial statements.


EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(Unaudited, in thousands, except share data)

 
 
Number of
Shares Outstanding
 

Common
Stock
 
Additional
Paid-in Capital
 
Treasury
Stock
Balance as of December 31, 2020
 
52,734,049

 
$
1,267

 
$
1,228,446

 
$
(703,032
)
Net (loss) income
 
 

 

 

 
 


 
 


Other comprehensive loss
 
 

 

 

 
 


 
 


Stock issued under employee stock plans
 
62,436

 

1

 
3,335

 

(482
)
Share-based compensation
 
 

 

 

 

8,492

 
 


Balance as of March 31, 2021
 
52,796,485

 

1,268

 

1,240,273

 

(703,514
)

 
 
Number of
Shares Outstanding
 
Common
Stock
 
Additional
Paid-in Capital
 
Treasury
Stock
Balance as of December 31, 2021
 
51,147,884

 
$
1,275

 
$
1,274,118

 
$
(931,212
)
Net income (loss)
 
 

 
 


 
 


 
 


Other comprehensive loss
 
 

 
 


 
 


 
 


Stock issued under employee stock plans
 
40,173

 

1

 

1,989

 

142
Share-based compensation
 
 

 
 


 

9,803

 
 


Repurchase of shares

(639,535)











(70,351
)
Adoption of ASU 2020-06









(74,080)





Balance as of March 31, 2022
 
50,548,522

 

1,276

 

1,211,830

 

(1,001,421
)

See accompanying notes to the unaudited consolidated financial statements.


EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
(Unaudited, in thousands)

 
 
 Retained Earnings
 
Accumulated Other
Comprehensive Loss
 
Noncontrolling
Interests
 
Total
Balance as of December 31, 2020
 
$
1,013,155

 
$
(94,214
)
 
$
281

 
$
1,445,903

Net (loss) income
 

(8,665)

 
 


 

44
 

(8,621
)
Other comprehensive loss
 
 


 

(42,845
)
 

(56
)
 

(42,901
)
Stock issued under employee stock plans
 
 


 
 


 
 


 

2,854

Share-based compensation
 
 


 
 


 
 


 

8,492

 Balance as of March 31, 2021
 

1,004,490

 

(137,059
)
 

269
 

1,405,727


 
 
 Retained Earnings
 
Accumulated Other
Comprehensive Loss
 
Noncontrolling
Interests
 
Total
Balance as of December 31, 2021
 
$
1,083,882

 
$
(172,582
)
 
$
43

 
$
1,255,524

Net income (loss)
 

8,297
 
 


 

(7)
 
8,290
Other comprehensive loss
 
 


 

(21,077)
 

(37)
 
(21,114)
Stock issued under employee stock plans
 
 


 
 


 
 


 
2,132

Share-based compensation
 
 


 
 


 
 


 
9,803

Repurchase of shares













(70,351
)
Adoption of ASU 2020-06


33,390










(40,690)

 Balance as of March 31, 2022
 

1,125,569

 

(193,659
)
 

(1)
 

1,143,594


See accompanying notes to the unaudited consolidated financial statements.


EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(Unaudited, in thousands)
 
Three Months Ended
March 31,
 
2022
 
2021
Net income (loss)
$
8,290
 
$
(8,621
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
32,990

 
33,261

Share-based compensation
9,803

 
8,492

Unrealized foreign exchange loss, net
5,462

 
4,032
Deferred income taxes
5,391
 
2,374
Accretion of convertible debt discount and amortization of debt issuance costs
1,175

 
4,979

Changes in working capital, net of amounts acquired:

 

Income taxes payable, net
(10,013
)
 
(5,534
)
Trade accounts receivable, including amounts in settlement assets
120,196

 
148,697
Prepaid expenses and other current assets, including amounts in settlement assets
(25,448
)
 
29,551
Trade accounts payable, including amounts in settlement obligations
(174,749
)
 
(220,439
)
Deferred revenue
(4,508
)
 
3,738

Accrued expenses and other current liabilities, including amounts in settlement obligations
57,565

 
11,234

Changes in noncurrent assets and liabilities
(20,483
)
 
(14,409
)
Net cash provided by (used in) operating activities
5,671
 
(2,645
)
Cash flows from investing activities:
 
 

Acquisitions, net of cash acquired
(330,960
)
 

Purchases of property and equipment
(23,785
)
 
(16,393
)
Purchases of other long-term assets
(1,977
)
 
(2,212
)
Other, net
(126
)
 
380

Net cash used in investing activities
(356,848
)
 
(18,225
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of shares
2,316

 
3,670

Repurchase of shares
(70,529
)
 
(808
)
Borrowings from revolving credit agreements
1,873,800

 
707,100

Repayments of revolving credit agreements
(1,570,300
)
 
(977,500
)
Net borrowings (repayments) from short-term debt obligations
1,308
 
(32
)
Other, net
(1,283
)
 
(1,641
)
Net cash provided by (used in) financing activities
235,312
 
(269,211
)
Effect of exchange rate changes on cash and cash equivalents and restricted cash
(37,542
)
 
(53,188
)
Decrease in cash and cash equivalents and restricted cash
(153,407
)
 
(343,269
)
Cash and cash equivalents and restricted cash at beginning of period
2,086,102

 
2,099,508

 
 
 
 
Cash and cash equivalents and restricted cash at end of period
$
1,932,695

 
$
1,756,239

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Interest paid during the period
$
3,617

 
$
2,703

Income taxes paid during the period
$
23,827

 
$
11,160

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES

(1) GENERAL


Organization

Euronet Worldwide, Inc. (the "Company", "Euronet", "we" and "us") was established as a Delaware corporation on December 13, 1996 and succeeded Euronet Holding N.V. as the group holding company, which was founded and established in 1994. Euronet is a leading electronic payments provider. Euronet offers payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers. Euronet's primary product offerings include comprehensive ATM, POS, card outsourcing, card issuing and merchant acquiring services, electronic distribution of prepaid mobile airtime and other electronic payment products, and international payment services.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared from the records of the Company, in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, such unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly present the consolidated financial position and the results of operations, comprehensive income, changes in equity and cash flows for the interim periods. The unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2021, including the notes thereto, set forth in our 2021 Annual Report on Form 10-K.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include computing income taxes, estimating the useful lives and potential impairment of long-lived assets and goodwill, as well as allocating the purchase price to assets acquired and liabilities assumed in acquisitions and revenue recognition. Actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, 2022.

Seasonality

Euronet’s EFT Processing Segment normally experiences its heaviest demand for DCC services during the third quarter of the fiscal year, normally coinciding with the tourism season. Additionally, the EFT Processing and epay Segments are normally impacted by seasonality during the fourth quarter and first quarter of each year due to higher transaction levels during the holiday season and lower levels following the holiday season. Seasonality in the Money Transfer Segment varies by region of the world. In most markets, Euronet usually experiences increased demand for money transfer services from the month of May through the fourth quarter of each year, coinciding with the increase in worker migration patterns and various holidays, and its lowest transaction levels during the first quarter of the year.

7



(2) RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS

In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" which simplifies the accounting for convertible instruments by eliminating certain accounting models when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in-capital. Under this ASU, certain debt instruments with embedded conversion features will be accounted for as a single liability measured at its amortized cost. Additionally, this ASU eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments. We adopted this standard on January 1, 2022 using the modified retrospective approach, which resulted in our Convertible Senior Notes Due 2049 being recognized as a single liability. As a result of the adoption of this standard we recorded a $99.7 million decrease to additional paid-in capital, a $56.8 million decrease in debt discounts and a $42.9 million increase in retained earnings. The adoption of this standard also impacted our deferred tax liability by decreasing our deferred tax liability by $15.0 million, decreasing retained earnings by $10.6 million, and increasing additional paid-in capital by $25.6 million. Additionally, the elimination of the treasury stock method will increase the number of dilutive shares used in the diluted earnings per share calculation, if dilutive, by 2.8 million shares.

(3) ACQUISITIONS


On March 15, 2022 we completed the acquisition of the Merchant Acquiring Business of Piraeus Bank ("PBMA"). The acquisition includes 205,000 POS terminals at 170,000 merchants throughout Greece, as well as Piraeus Bank’s online merchant acquiring business and expands our omnichannel payments strategy where we use our proprietary technology to provide cash, card-based acquiring solutions, alternative payment acquiring, online acquiring, tokenized payment services and other payment products. Additionally, the acquisition includes a long-term commercial framework agreement between Piraeus Bank and Euronet which includes collaborative product distribution, processing and customer referrals. 

 

The purchase price was €313.8 million, or approximately $346.2 million, which includes $331.0 million cash paid at closing plus $15.2 million of estimated contingent consideration for a ten-year earnout contingent on performance targets outlined in the commercial framework agreement. The contingent consideration is related to a percentage of the net fee income received during the ten-year period of the commercial framework agreement and there is no contractual maximum amount of consideration under this agreement.


The initial accounting for this acquisition is not complete as of March 31, 2022. The purchase price was preliminarily allocated to the assets acquired and liabilities assumed, including identifiable intangible assets, based on their respective provisional fair values at the date of acquisition. Additional time is needed particularly to refine and review the results of the valuation of assets and liabilities. The acquisition has been accounted for as a business combination in accordance with U.S. GAAP and the results of operations have been included from the date of acquisition in the EFT Processing Segment.  


8


 


The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date.


(in thousands)
As of March 15, 2022
Other current assets
$
1,707
Settlement assets

78,718
Property and equipment

6,095
Acquired intangible assets

122,455
     Total assets acquired
$
208,975



Trade accounts payable
$
1,499
Settlement liabilities

66,925
Accrued expenses and other current liabilities

5,929
Deferred revenue

500
Other long-term liabilities

99
     Total liabilities assumed
$
74,952



Goodwill

212,183


Net assets acquired
$
346,206


Assets acquired, liabilities assumed, and consideration transferred were recorded at their estimated fair values on the acquisition date. The fair value measurements of intangible assets were based on significant inputs not observable in the market and represent Level 3 measurements within the fair value hierarchy. Level 3 inputs include discount rates that would be used by a market participant in valuing these assets, projections of revenues and cash flows, and customer attrition rates, among others.   


We acquired a customer relationship intangible asset with a preliminary fair value of $112.2 million that is being amortized on a straight-line basis over 15 years and a contract related intangible asset of $10.3 million that is being amortized on a straight-line basis over 10 years.

 

Goodwill, with a preliminary value of $212.2 million, arising from the acquisition was included in the EFT Processing Segment. The factors that make up goodwill include synergies from combining PBMA operations and intangible assets that do not qualify for separate recognition. Goodwill and intangible assets associated with this acquisition are deductible for tax purposes.

 

Revenues and expenses related to the acquisition and pro forma results of operations have not been presented for the three months ended March 31, 2022 as the results were not material to our overall operations.


(4) SETTLEMENT ASSETS AND OBLIGATIONS

Settlement assets represent funds received or to be received from agents for unsettled money transfers and from merchants for unsettled prepaid transactions. We record corresponding settlement obligations relating to accounts payable. Settlement assets consist of cash and cash equivalents, restricted cash, accounts receivable and prepaid expenses and other current assets. The settlement cash held at the Company is primarily generated from the monies remitted by consumers through Company agents and financial institutions in payment of the face value of the payment service or foreign currency purchased and the related fees charged to purchase the currency. We use our cash and cash equivalents to pay the face value of the payment service product upon presentation by the recipient. Cash received by Company agents and merchants generally becomes available to us within two weeks after initial receipt by the business partner. Receivables from business partners represent funds collected by such business partners that are in transit to us.
9


Settlement obligations consist of accrued expenses for money transfers, content providers, and EFT customer deposits and accounts payable to agents and content providers. Money transfer accrued expenses represent amounts to be paid to transferees when they request funds. Most agents typically settle with transferees first then obtain reimbursement from us. Money order accrued expenses represent amounts not yet presented for payment. Due to the agent funding and settlement process, accrued expenses to agents represent amounts due to agents for money transfers that have not been settled with transferees.   

 

As of

(in thousands)

March 31,
2022


December 31,
2021

Settlement assets:

 


 

Settlement cash and cash equivalents

$
245,415


$
203,624

Settlement restricted cash

50,426


74,897

Accounts receivable, net of credit losses of $29,015 and $27,341

588,984


619,738

Prepaid expenses and other current assets

152,542


204,130

Total settlement assets

$
1,037,367


$
1,102,389

Settlement obligations:

 


 

Trade account payables

$
384,119


$
461,135

Accrued expenses and other current liabilities

653,248


641,254

Total settlement obligations

$
1,037,367


$
1,102,389


The table below reconciles cash and cash equivalents, restricted cash, ATM cash, settlement cash and cash equivalents, and settlement restricted cash as presented within "Cash and cash equivalents and restricted cash" in the Consolidated Statement of Cash Flows.

 
 
As of
(in thousands)
 
March 31,
2022
 
December 31,
2021
 
March 31,
2021
 
December 31,
2020
Cash and cash equivalents
 
$
986,534

 
$
1,260,466

 
$
1,145,406

 
$
1,420,255

Restricted cash
 
5,884

 
3,693

 
2,897

 
3,334

ATM cash
 
644,436

 
543,422

 
339,883

 
411,054

Settlement cash and cash equivalents
 
245,415

 
203,624

 
209,853

 
188,191

Settlement restricted cash
 
50,426

 
74,897

 
58,200

 
76,674

Cash and cash equivalents and restricted cash at end of period
 
$
1,932,695

 
$
2,086,102

 
$
1,756,239

 
$
2,099,508


(5) STOCKHOLDERS' EQUITY

Earnings (Loss) Per Share

Basic earnings (loss) per share has been computed by dividing earnings (loss) available to common stockholders by the weighted average number of common shares outstanding during the respective period. Diluted earnings (loss) per share has been computed by dividing earnings (loss) available to common stockholders by the weighted average shares outstanding during the respective period, after adjusting for the potential dilution of options to purchase our common stock, assumed vesting of restricted stock and the assumed conversion of our convertible debt, if such conversion would be dilutive.

10


The following table provides the computation of diluted earnings and diluted weighted average number of common shares outstanding:



Three Months Ended
March 31,

 

2022


2021

Computation of diluted weighted average shares outstanding:






Basic weighted average shares outstanding

51,057,951


52,762,845

Incremental shares from assumed exercise of stock options and vesting of restricted stock

658,094



Diluted weighted average shares outstanding

51,716,045


52,762,845


The table includes all stock options and restricted stock that are dilutive to our weighted average common shares outstanding during the period. The calculation of diluted earnings (loss) per share excludes stock options or shares of restricted stock that are anti-dilutive to our weighted average common shares outstanding of approximately 2,237,000 and 2,437,000 for the three months ended March 31, 2022 and 2021, respectively.

We issued Convertible Senior Notes ("Convertible Notes") due March 2049 on March 18, 2019. Our Convertible Notes currently have a settlement feature requiring us upon conversion to settle the principal amount of the debt and any conversion value in excess of the principal value ("conversion premium"), for cash or shares of our common stock or a combination thereof, at our option. We have stated our intent to settle any conversion of these notes by paying cash for the principal value and issuing common stock for any conversion premium; however, after adopting ASU 2020-06, 2.8 million incremental shares assumed for conversion of convertible notes shall be included in the dilutive earnings per share calculation, if dilutive, regardless of whether the market price trigger has been met. For the three months ended March 31, 2022, the assumed conversion resulted in an anti-dilutive impact, therefore our Convertible Notes were not included in the calculation of diluted earnings (loss) per share. The dilutive effect increases the more the market price exceeds the conversion price of $188.73 per share. See Note 9, Debt Obligations, to the consolidated financial statements for more information about the Convertible Notes.

Share repurchases

On February 26, 2020, we put a repurchase program in place to repurchase up to $250 million in value, but not more than 5.0 million shares of common stock through February 28, 2022. On December 8, 2021, we put a repurchase program in place to repurchase up to $300 million in value, but not more than 5.0 million shares of common stock through December 8, 2023. For the three months ended March 31, 2022, we repurchased $70.4 million of stock under the repurchase programs. Repurchases under the current program may take place in the open market or in privately negotiated transactions, including derivative transactions, and may be made under a Rule 10b5-1 plan.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists entirely of foreign currency translation adjustments. We recorded foreign currency translation losses of $21.1 million and $42.9 million for the three months ended March 31, 2022 and 2021, respectively. There were no reclassifications of foreign currency translation into the consolidated statements of income for the three months ended March 31, 2022 and 2021.
11



(6) GOODWILL AND ACQUIRED INTANGIBLE ASSETS, NET

A summary of acquired intangible assets and goodwill activity for the three months ended March 31, 2022 is presented below:



(in thousands)
 
Acquired
Intangible
Assets

 
Goodwill

 
Total
Intangible
Assets

Balance as of December 31, 2021
 
$
97,793

 
$
641,605

 
$
739,398

Increases (decreases):
 
 

 
 

 
 

Acquisition
 
122,455

 
212,183

 
334,638

Amortization
 
(5,617
)
 

 
(5,617
)
Foreign currency exchange rate changes
 
(141)

 
(7,547
)
 
(7,688
)
Balance as of March 31, 2022
 
$
214,490

 
$
846,241

 
$
1,060,731

Of the total goodwill balance of $846.2 million as of March 31, 2022$388.1 million relates to the Money Transfer Segment, $331.5 million relates to the EFT Processing Segment and the remaining $126.6 million relates to the epay SegmentEstimated amortization expense on acquired intangible assets with finite lives as of March 31, 2022, is expected to total $22.3 million for the remainder of 2022, $25.1 million for 2023, $18.4 million for 2024, $15.0 million for 2025, $14.7 million for 2026 and $13.4 million for 2027.


(7) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:


 
 
As of

(in thousands)
 
March 31, 2022

 
December 31, 2021

Accrued expenses
 
$
327,596

 
$
285,098

Derivative liabilities
 
28,741

 
23,285

Accrued payroll expenses

44,223


55,162

Current portion of finance lease obligations
 
3,536

 
4,147

Total
 
$
404,096

 
$
367,692


(8) UNEARNED REVENUES

We record deferred revenues when cash payments are received or due in advance of our performance. The decrease in the deferred revenue balance for the three months ended March 31, 2022 is the result of $16.3 million of cash payments received in the current year for which we have not yet satisfied the performance obligations, offset by $21.7 million of revenues recognized that were included in the deferred revenue balance as of December 31, 2021.

12



(9) DEBT OBLIGATIONS


Debt obligations consist of the following: 

 
 
As of
(in thousands)
 
March 31, 2022
 
December 31, 2021
Credit Facility:
 
 
 
 
Revolving credit agreement
 
$
586,900

 
$
283,400

Convertible Debt:
 
 
 
 
0.75% convertible notes, unsecured, due 2049
 
525,000

 
468,235

 
 
 
 
 
1.375% Senior Notes, due 2026
 
663,900

 
682,080

 
 
 
 
 
Other obligations
 
386

 
920

 
 
 
 
 
Total debt obligations
 
1,776,186

 
1,434,635

Unamortized debt issuance costs
 
(13,610
)
 
(13,729
)
Carrying value of debt
 
1,762,576

 
1,420,906

Short-term debt obligations and current maturities of long-term debt obligations
 
(298
)
 
(821
)
Long-term debt obligations
 
$
1,762,278

 
$
1,420,085


Credit Facility

On October 17, 2018, the Company entered into an unsecured revolving credit agreement (the "Credit Facility") for $1.0 billion that expires on October 17, 2023. Fees and interest on borrowings are based upon the Company's corporate credit rating and are based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over London Inter-Bank Offered Rate (“LIBOR”) or a margin over the base rate, as selected by the Company, with the applicable margin ranging from 1.125% to 2.0% (or 0.175% to 1.0% for base rate loans). The Credit Facility allows for borrowings in Australian dollars, British pounds sterling, Canadian dollars, Czech koruna, Danish krone, euro, Hungarian forints, Japanese yen, New Zealand dollars, Norwegian krone, Polish zlotys, Swedish krona, Swiss francs and U.S. dollars. The Credit Facility contains a $200 million sublimit for the issuance of letters of credit, a $50 million sublimit for U.S. dollar swingline loans, and a $90 million sublimit for certain foreign currencies swingline loans. The Credit Facility contains customary affirmative and negative covenants, events of default and financial covenants. The Company was in compliance with all debt covenants as of March 31, 2022.

Convertible Debt

On March 18, 2019, the Company completed the sale of $525.0 million of Convertible Senior Notes ("Convertible Notes"). The Convertible Notes mature in March 2049 unless redeemed or converted prior to such date, and are convertible into shares of Euronet common stock at a conversion price of approximately $188.73 per share if certain conditions are met (relating to the closing price of Euronet common stock exceeding certain thresholds for specified periods). Holders of the Convertible Notes have the option to require the Company to purchase their notes on each of March 15, 2025, March 15, 2029, March 15, 2034, March 15, 2039 and March 15, 2044 at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date.

13



Prior to the adoption of ASU 2020-06 as of January 1, 2022, in accordance with ASC 470-20-30-27, proceeds from the issuance of convertible debt was allocated between debt and equity components so that debt was discounted to reflect our nonconvertible debt borrowing rate. ASC 470-20-35-13 required the debt discount to be amortized over the period the convertible debt was expected to be outstanding as additional non-cash interest expense. The allocation resulted in an increase to additional paid-in capital of $99.7 million for the Convertible Notes. Contractual interest expense for the Convertible Notes was $1.0 million for the three months ended March 31, 2021. Accretion expense for the Convertible Notes was $3.9 million for the three months ended March 31, 2021. See Footnote 2, Recently Issued and Adopted Accounting Pronouncements, for more information regarding this adoption.

1.375% Senior Notes due 2026

On May 22, 2019, the Company completed the sale of 600 million ($669.9 million) aggregate principal amount of Senior Notes that expire in May 2026 (the “Senior Notes”). The Senior Notes accrue interest at a rate of 1.375% per year, payable annually in arrears commencing May 22, 2020, until maturity or earlier redemption. As of March 31, 2022, the Company has outstanding 600 million ($663.9 million) principal amount of the Senior Notes. In addition, the Company may redeem some or all of these notes on or after February 22, 2026 at their principal amount plus any accrued and unpaid interest.

Other obligations

Certain of the Company's subsidiaries have available lines of credit and overdraft credit facilities that generally provide for short-term borrowings that are used from time to time for working capital purposes. As of March 31, 2022 and December 31, 2021, borrowings under these arrangements were $0.4 million and $0.9 million, respectively.

Debt Issuance Costs

As of March 31, 2022, we had unamortized debt issuance costs of $2.1 million for the Credit Facility, $6.4 million for the Convertible Notes and $5.1 million for the Senior Notes that will be amortized through October 2023, March 2025 and May 2026, respectively.

(10) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company is exposed to foreign currency exchange risk resulting from (i) the collection of funds or the settlement of money transfer transactions in currencies other than the U.S. Dollar, (ii) derivative contracts written to its customers in connection with providing cross-currency money transfer services and (iii) certain foreign currency denominated other asset and liability positions. The Company enters into foreign currency derivative contracts, primarily foreign currency forwards and cross-currency swaps, to minimize its exposure related to fluctuations in foreign currency exchange rates. As a matter of Company policy, the derivative instruments used in these activities are economic hedges and are not designated as hedges under ASC 815primarily due to either the relatively short duration of the contract term or the effects of fluctuations in currency exchange rates are reflected concurrently in earnings for both the derivative instrument and the transaction and have an offsetting effect. 

Foreign currency exchange contracts - Ria Operations and Corporate

In the United States, the Company uses short-duration foreign currency forward contracts, generally with maturities up to 14 days, to offset the fluctuation in foreign currency exchange rates on the collection of money transfer funds between initiation of a transaction and its settlement. Due to the short duration of these contracts and the Company’s credit profile, the Company is generally not required to post collateral with respect to these foreign currency forward contracts. Most derivative contracts executed with counterparties in the U.S. are governed by an International Swaps and Derivatives Association agreement that includes standard netting arrangements; therefore, asset and liability positions from forward contracts and all other foreign exchange transactions with the same counterparty are net settled upon maturity. The Company had foreign currency forward contracts outstanding in the U.S. with a notional value of $231.1 million and $222.1 million as of March 31, 2022 and December 31, 2021, respectively. The foreign currency forward contracts consist primarily in Australian dollars, Canadian dollars, British pounds sterling, euro and Mexican pesos.
In addition, the Company uses forward contracts, typically with maturities from a few days to less than one year, to offset foreign exchange rate fluctuations on certain short-term borrowings that are payable in currencies other than the U.S dollar. The Company had foreign currency forward contracts outstanding with a notional value of $16.2 million and $216.1 million as of March 31, 2022 and December 31, 2021, respectively, primarily in euro.


14



Foreign currency exchange contracts - xe Operations
xe writes derivative instruments, primarily foreign currency forward contracts and cross-currency swaps, mostly with counterparties comprised of individuals and small-to-medium size businesses and derives a currency margin from this activity as part of its operations. xe aggregates its foreign currency exposures arising from customer contracts and hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties. Foreign exchange revenues from xe's total portfolio of positions were $22.5 million and $18.5 million for the three months ended March 31, 2022 and 2021, respectively. All of the derivative contracts used in the Company' s xe operations are economic hedges and are not designated as hedges under ASC 815The duration of these derivative contracts is generally less than one year.

The fair value of xe's total portfolio of positions can change significantly from period to period based on, among other factors, market movements and changes in customer contract positions. xe manages counterparty credit risk (the risk that counterparties will default and not make payments according to the terms of the agreements) on an individual counterparty basis. It mitigates this risk by entering into contracts with collateral posting requirements and/or by performing financial assessments prior to contract execution, conducting periodic evaluations of counterparty performance and maintaining a diverse portfolio of qualified counterparties. xe does not expect any significant losses from counterparty defaults.

The aggregate equivalent U.S. dollar notional amount of foreign currency derivative customer contracts held by the Company in its xe operations as of March 31, 2022 and December 31, 2021 was approximately $1.1 billion and $1.0 billion, respectively. The significant majority of customer contracts are written in major currencies such as the euro, U.S. dollar, British pounds sterling, Australian dollar and New Zealand dollar.

Balance Sheet Presentation

The following table summarizes the fair value of the derivative instruments as recorded in the Consolidated Balance Sheets as of the dates below:

 
 
Asset Derivatives
 
Liability Derivatives
 
 
 
 
Fair Value
 
 
 
Fair Value
(in thousands)
 
Balance Sheet Location
 
March 31, 2022
 
December 31, 2021
 
Balance Sheet Location
 
March 31, 2022
 
December 31, 2021
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
Other current assets
 
$
36,997

 
$
27,582

 
Other current liabilities
 
$
(28,741
)
 
$
(23,285
)

The following tables summarize the gross and net fair value of derivative assets and liabilities as of March 31, 2022 and December 31, 2021 (in thousands):

Offsetting of Derivative Assets
 
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Consolidated Balance Sheet
 
 
As of March 31, 2022
 
Gross Amounts of Recognized Assets
 
Gross Amounts Offset in the Consolidated Balance Sheet
 
Net Amounts Presented in the Consolidated Balance Sheet
 
Financial Instruments
 
Cash Collateral Received
 
Net Amounts
Derivatives subject to a master netting arrangement or similar agreement
 
$
36,997

 
$

 
$
36,997

 
$
(17,631
)
 
$
(3,052
)
 
$
16,314

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2021
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives subject to a master netting arrangement or similar agreement
 
$
27,582

 
$

 
$
27,582

 
$
(14,875
)
 
$
(2,284
)
 
$
10,423


15



Offsetting of Derivative Liabilities 

 
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Consolidated Balance Sheet
 
 
As of March 31, 2022
 
Gross Amounts of Recognized Liabilities
 
Gross Amounts Offset in the Consolidated Balance Sheet
 
Net Amounts Presented in the Consolidated Balance Sheet
 
Financial Instruments
 
Cash Collateral Paid
 
Net Amounts
Derivatives subject to a master netting arrangement or similar agreement
 
$
(28,741)
 
$

 
$
(28,741)
 
$
17,631

 
$
1,834

 
$
(9,276)
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2021
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives subject to a master netting arrangement or similar agreement
 
$
(23,285
)
 
$

 
$
(23,285
)
 
$
14,875

 
$
640

 
$
(7,770
)

See Note 11, Fair Value Measurements, for the determination of the fair values of derivatives.
 
Income Statement Presentation

The following table summarizes the location and amount of losses on derivatives in the Consolidated Statements of Income for the three months ended March 31, 2022 and 2021:

 
 
 
 
Amount of Loss Recognized in Income on Derivative Contracts (a)
 
 
Location of Loss Recognized in Income on Derivative Contracts
 
Three Months Ended
March 31,
(in thousands)
 
 
2022
 
2021
Foreign currency exchange contracts - Ria Operations
 
Foreign currency exchange loss, net
 
$
(110
)
 
$
(2,468)
(a) The Company enters into derivative contracts such as foreign currency exchange forwards and cross-currency swaps as part of its xe operations. These derivative contracts are excluded from this table as they are part of the broader disclosure of foreign currency exchange revenues for this business discussed above.

See Note 11, Fair Value Measurements, for the determination of the fair values of derivatives.  

(11) FAIR VALUE MEASUREMENTS


Fair value measurements used in the unaudited consolidated financial statements are based upon the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: 
 
  • Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. 

  • Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

  • Level 3 – Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the inputs that market participants would use in pricing.
16



The following table details financial assets and liabilities measured and recorded at fair value on a recurring basis:
 
 
 
 
As of March 31, 2022
(in thousands)
 
Balance Sheet Classification
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
Other current assets
 
$

 
$
36,997

 
$

 
$
36,997

Liabilities
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
Other current liabilities
 
$

 
$
28,741
 
$

 
$
28,741
 
 
 
 
As of December 31, 2021
(in thousands)
 
Balance Sheet Classification
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
Other current assets
 
$

 
$
27,582

 
$

 
$
27,582

Liabilities
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
Other current liabilities
 
$

 
$
(23,285
)
 
$

 
$
(23,285
)

Other Fair Value Disclosures

The carrying amounts of cash and cash equivalents, trade accounts receivable, trade accounts payable and short-term debt obligations approximate fair values due to their short maturities. The carrying values of the Company’s revolving credit agreements approximate fair values because interest is based on LIBOR that resets at various intervals of less than one year. The Company estimates the fair value of the Convertible Notes and Senior Notes using quoted prices in inactive markets for identical liabilities (Level 2). As of March 31, 2022the fair values of the Convertible Notes and Senior Notes were $563.4 million and $628.6 million, respectively, with carrying values of $525.0 million and $663.9 million, respectively.

(12) SEGMENT INFORMATION

Our reportable operating segments have been determined in accordance with ASC Topic 280, Segment Reporting ("ASC 280"). We currently operate in the following three reportable operating segments:


1) Through the EFT Processing Segment, we process transactions for a network of ATMs and POS terminals across Europe, the Middle East, Africa, Asia Pacific and the United States. We provide comprehensive electronic payment solutions consisting of ATM cash withdrawal services, ATM network participation, outsourced ATM and POS management solutions, credit, debit and prepaid card outsourcing, dynamic currency conversion, domestic and international surcharges and other value added services. Through this segment, we also offer a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems. 

17



2) Through the epay Segment, we provide distribution, processing and collection services for prepaid mobile airtime and other electronic payment products in Europe, the Middle East, Asia Pacific, the U.S. and South America.


3) Through the Money Transfer Segment, we provide global money transfer services under the brand names Ria, AFEX, IME, and xe. Ria, AFEX, and IME provide global consumer-to-consumer money transfer services through a network of sending agents, Company-owned stores and Company-owned websites, disbursing money transfers through a worldwide correspondent network. xe offers account-to-account international payment services to high-income individuals and small-to-medium sized businesses. xe is also a provider of foreign currency exchange information. We also offer customers bill payment services, payment alternatives such as money orders and prepaid debit cards, comprehensive check cashing services, foreign currency exchange services and mobile top-up. Furthermore, xe provides cash management solutions and foreign currency risk management services to small-to-medium sized businesses.

 

In addition, we account for non-operating activity, share-based compensation expense, certain intersegment eliminations and the costs of providing corporate and other administrative services in our administrative division, "Corporate Services, Eliminations and Other." These services are not directly identifiable with our reportable operating segments. 


The following tables present our reportable segment results for the three months ended March 31, 2022 and 2021:
 
 
For the Three Months Ended March 31, 2022
(in thousands)
 
EFT
Processing
 
epay
 
Money
Transfer
 
Corporate Services,
Eliminations
and Other
 
Consolidated
Total revenues
 
$
145,571

 
$
235,838

 
$
338,966

 
$
(1,908
)
 
$
718,467

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Direct operating costs, exclusive of depreciation
 
93,337

 
178,320

 
188,397

 
(1,901
)
 
458,153

Salaries and benefits
 
25,244

 
20,177

 
67,225

 
14,119

 
126,765

Selling, general and administrative
 
11,114

 
9,440

 
41,037

 
2,265

 
63,856

Depreciation and amortization
 
22,343

 
1,696

 
8,842

 
109

 
32,990

Total operating expenses
 
152,038

 
209,633

 
305,501

 
14,592

 
681,764

Operating (loss) income
 
$
(6,467
)
 
$
26,205

 
$
33,465

 
$
(16,500
)
 
$
36,703


 
 
For the Three Months Ended March 31, 2021
(in thousands)
 
EFT
Processing
 
epay
 
Money
Transfer
 
Corporate Services,
Eliminations
and Other
 
Consolidated
Total revenues
 
$
87,076

 
$
242,303

 
$
324,900

 
$
(1,609
)
 
$
652,670

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Direct operating costs, exclusive of depreciation
 
69,612

 
182,633

 
183,878

 
(1,607
)
 
434,516

Salaries and benefits
 
23,571

 
19,369

 
60,540

 
12,188

 
115,668

Selling, general and administrative
 
11,962

 
9,020

 
36,116

 
1,678

 
58,776

Depreciation and amortization
 
22,027

 
2,124

 
8,963

 
147

 
33,261

Total operating expenses
 
127,172

 
213,146

 
289,497

 
12,406

 
642,221

Operating (loss) income
 
$
(40,096)

 
$
29,157

 
$
35,403

 
$
(14,015
)
 
$
10,449


18



The following table presents our total assets by reportable segment:
 
Total Assets as of
(in thousands)
March 31, 2022
 
December 31, 2021
EFT Processing
$
2,167,634

 
$
1,682,680

epay
773,056

 
1,234,074

Money Transfer
1,670,666

 
1,621,726

Corporate Services, Eliminations and Other
286,957

 
205,796

   Total  
$
4,898,313

 
$
4,744,276


The following table presents our revenues disaggregated by segment and region. Sales and usage-based taxes are excluded from revenues. We believe disaggregation by segment and region best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The disaggregation of revenues by segment and region is based on management's assessment of segment performance together with allocation of financial resources, both capital and operating support costs, on a segment and regional level. Both segments and regions benefit from synergies achieved through concentration of operations and are influenced by macro-economic, regulatory and political factors in the respective segment and region. 
















 
 
For the Three Months Ended March 31, 2022

For the Three Months Ended March 31, 2021
(in thousands)
 
EFT
Processing