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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 September 30, 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  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  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
On November 4, 2022, Euronet Worldwide, Inc. had 49,593,877 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 September 30, 2022 and December 31, 2021 1
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 2
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021 3
Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2022 and 2021 4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 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 24
Item 3. Quantitative and Qualitative Disclosures About Market Risk 41
Item 4. Controls and Procedures 42
PART II—OTHER INFORMATION
Item 1. Legal Proceedings 42
Item 1A. Risk Factors 43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 43
Item 6. Exhibits 44
Signatures 45

 

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(In thousands, except share and per share data) 
 
As of

 
September 30,
2022

 
December 31,
2021

 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents 
$
967,100
 
$
1,260,466
ATM cash
646,121
 
543,422
Restricted cash
8,396
 
3,693
Settlement assets
1,034,898
 
1,102,389
Trade accounts receivable, net of credit losses of $4,059 and $4,469
225,166
 
203,010
Prepaid expenses and other current assets
364,209
 
195,443
Total current assets
3,245,890
 
3,308,423
Operating right of use lease assets
137,993
 
161,494
Property and equipment, net of accumulated depreciation of $516,239 and $532,631
317,602
 
345,381
Goodwill
764,780
 
641,605
Acquired intangible assets, net of accumulated amortization of $180,280 and $185,054
180,257
 
97,793
Other assets, net of accumulated amortization of $64,542 and $62,349
181,305
 
189,580
Total assets
$
4,827,827
 
$
4,744,276
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Settlement obligations
$
1,034,898
 
$
1,102,389
Trade accounts payable
169,835
 
193,529
Accrued expenses and other current liabilities
494,745
 
367,692
Current portion of operating lease liabilities
45,562
 
52,136
Short-term debt obligations and current maturities of long-term debt obligations
303,549
 
821
Income taxes payable
62,783
 
59,037
Deferred revenue
59,071
 
77,037
Total current liabilities
2,170,443
 
1,852,641
Debt obligations, net of current portion
1,428,471
 
1,420,085
Operating lease obligations, net of current portion
95,057
 
111,355
Deferred income taxes
37,810
 
46,505
Other long-term liabilities
68,803
 
58,166
Total liabilities
3,800,584
 
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 63,863,162 and 63,779,009
1,277
 
1,275
Additional paid-in-capital
1,234,090
 
1,274,118
Treasury stock, at cost, shares issued 14,270,009 and 12,631,125
(1,105,883
)
 
(931,212
)
Retained earnings
1,280,509
 
1,083,882
Accumulated other comprehensive loss
(382,224
)
 
(172,582
)
Total Euronet Worldwide, Inc. stockholders’ equity
1,027,769
 
1,255,481
Noncontrolling interests
(526
)
 
43
Total equity
1,027,243
 
1,255,524
Total liabilities and equity
$
4,827,827
 
$
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
September 30,

Nine Months Ended
September 30,

 

2022



2021


2022

 
2021

Revenues
$
931,266


$
816,560


$
2,493,042

 
$
2,183,916

Operating expenses:







 
 
 
Direct operating costs, exclusive of depreciation

526,048



484,438


1,484,863

 
1,389,770

Salaries and benefits

134,471



119,421


392,544

 
356,160

Selling, general and administrative

69,508



64,298


207,613

 
182,193

Depreciation and amortization

32,781



33,909


101,784

 
100,729

Total operating expenses

762,808



702,066


2,186,804

 
2,028,852

Operating income

168,458



114,494


306,238

 
155,064

Other income (expense):








 
 
 
Interest income

600



153


990

 
539

Interest expense

(11,716
)


(10,072
)

(26,712
)
 
(28,718
)
Foreign currency exchange gain (loss), net

(15,798
)


(8,135
)

(35,958
)
 
(12,051
)
Other gains, net

10





202

 
31
Other expense, net

(26,904
)


(18,054
)

(61,478
)
 
(40,199
)
Income before income taxes

141,554



96,440


244,760
 
114,865
Income tax expense

(44,002
)


(22,726
)

(81,884
)
 
(41,140
)
Net income

97,552



73,714


162,876
 
73,725
Net income attributable to noncontrolling interests

170



168


361
 
127
Net income attributable to Euronet Worldwide, Inc.
$
97,722


$
73,882


$
163,237
 
$
73,852
 








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








 
 
 
Basic
$
1.97


$
1.40


$
3.24
 
$
1.40

Diluted
$
1.87


$
1.37


$
3.10
 
$
1.37

 








 
 
 
Weighted average shares outstanding:








 
 
 
Basic

49,583,317



52,829,386


50,345,293

 
52,799,199

Diluted

52,751,304



53,853,675


53,688,800

 
53,933,226


See accompanying notes to the unaudited consolidated financial statements.


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

 

Three Months Ended
September 30,


Nine Months Ended
September 30,

 

2022



2021



2022

 
2021

Net income
$
97,552


$
73,714


$
162,876
 
$
73,725
Translation adjustment

(100,458
)


(29,692
)

(209,850
)
 
(59,907
)
Comprehensive income (loss)

(2,906
)


44,022

(46,974
)
 
13,818
Comprehensive income attributable to noncontrolling interests 

262


196

569
 
200

Comprehensive income (loss) attributable to Euronet Worldwide, Inc.
$
(2,644
)

$
44,218


$
(46,405
)
 
$
14,018
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
)
Net (loss) income
Other comprehensive loss
Stock issued under employee stock plans 
25,769
1
1,199
267
Share-based compensation

10,984

Balance as of June 30, 2021
52,822,254
1,269
1,252,456
(703,247
)
Net income















Other comprehensive income















Stock issued under employee stock plans

33,217



1



1,022



111

Share-based compensation









6,805





Balance as of September 30, 2021

52,855,471



1,270



1,260,283



(703,136
)

 
 
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
)
Net income (loss)



Other comprehensive loss



Stock issued under employee stock plans
31,233
1
1,322
(73
)
Share-based compensation

10,142

Repurchase of shares
(1,000,000 )


(104,600
)
Balance as of June 30, 2022
49,579,755
1,277
1,223,294
(1,106,094
)
Net income















Other comprehensive income















Stock issued under employee stock plans

13,398






460



211

Share-based compensation









10,336





Repurchase of shares













Balance as of September 30, 2022

49,593,153



1,277



1,234,090



(1,105,883
)

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 income (loss)
(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
Net income (loss)
8,635
(3
)
8,632
Other comprehensive loss
12,675
11
12,686
Stock issued under employee stock plans
1,467
Share-based compensation
10,984
Balance as of June 30, 2021
1,013,125
(124,384
)
277
1,439,496
Net income

73,882







(168
)

73,714

Other comprehensive income





(29,664
)

(28
)

(29,692
)
Stock issued under employee stock plans













1,134

Share-based compensation













6,805

Balance as of September 30, 2021

1,087,007



(154,048
)

81



1,491,457


 
 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
Net income (loss)
57,218

(184
)
57,034
Other comprehensive loss

(88,199
)
(79
)
(88,278
)
Stock issued under employee stock plans



1,250
Share-based compensation



10,142
Repurchase of shares













(104,600
)
Balance as of June 30, 2022
1,182,787
(281,858
)
(264
)
1,019,142
Net income (loss)

97,722







(170
)

97,552

Other comprehensive loss





(100,366
)

(92
)

(100,458
)
Stock issued under employee stock plans













671

Share-based compensation













10,336

Repurchase of shares













Balance as of September 30, 2022

1,280,509



(382,224
)

(526
)

1,027,243


See accompanying notes to the unaudited consolidated financial statements.


EURONET WORLDWIDE, INC. AND SUBSIDIARIES
(Unaudited, in thousands)
 
 
Nine Months Ended September 30,

 
2022

 
2021

Net income
$
162,876
 
$
73,725
Adjustments to reconcile net income to net cash provided by operating activities: 
 
 
 
Depreciation and amortization
101,784
 
100,729
Share-based compensation
30,281
 
26,281
Unrealized foreign exchange loss, net
35,958
 
12,051
Deferred income taxes
12,210
 
1,412
Accretion of convertible debt discount and amortization of debt issuance costs
2,351
 
15,099
Changes in working capital, net of amounts acquired:
 
Income taxes payable, net
9,153
 
17,464
Trade accounts receivable, including amounts in settlement assets
6,087
 
96,541
Prepaid expenses and other current assets, including amounts in settlement assets
(205,363
)
 
119,698
Trade accounts payable, including amounts in settlement obligations
(107,139
)
 
(209,069
)
Deferred revenue
(10,988
)
 
(2,782
)
Accrued expenses and other current liabilities, including amounts in settlement obligations
400,955
 
47,254
Changes in noncurrent assets and liabilities
10,471
 
5,937
Net cash provided by operating activities
448,636
 
304,340
Cash flows from investing activities:
 
 
Acquisitions, net of cash acquired
(331,372
)
 
-
Purchases of property and equipment
(79,351
)
 
(66,058
)
Purchases of other long-term assets
(5,844
)
 
(6,171
)
Other, net
528
 
1,277
Net cash used in investing activities
(416,039
)
 
(70,952
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of shares
4,421
 
6,443
Repurchase of shares
(175,296
)
 
(979
)
Borrowings from revolving credit agreements
5,924,100
 
3,539,100
Repayments of revolving credit agreements
(5,581,200
)
 
(3,756,300
)
Net borrowings (repayments) from short-term debt obligations
4,631
 
199
Other, net
(3,119
)
 
(4,754
)
Net cash provided by (used in) financing activities
173,537
 
(216,291
)
Effect of exchange rate changes on cash and cash equivalents and restricted cash
(413,669
)
 
(82,667
)
Increase (decrease) in cash and cash equivalents and restricted cash
(207,535
)
 
(65,570
)
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
$
1,878,567
 
$
2,033,938
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Interest paid during the period
$
21,668
 
$
17,226
Income taxes paid during the period
$
65,658
 
$
28,752

 

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. Epay Segment is 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. Also, epay sells large loyalty rewards campaigns to retailers, which could be deployed in any given quarter and will impact the activity in that quarter accordingly. 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 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 September 30, 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 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.

 

The results of PBMA operations are included in our consolidated results of operation, as part of our EFT Processing business segment, beginning on March 16, 2022. For the three and nine months ended September 30, 2022, PBMA had $32.6 million and $63.8 million in revenue. The PBMA business is impacted by higher transaction volumes during the tourism season in the second and third quarters. 

 

(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)
September 30,
2022
December 31,
2021
Settlement assets:
 
 
Settlement cash and cash equivalents
$
210,802
$
203,624
Settlement restricted cash
46,148
74,897
Accounts receivable, net of credit losses of $30,622 and $27,341 
569,517
619,738
Prepaid expenses and other current assets
208,431
204,130
Total settlement assets
$
1,034,898
$
1,102,389
Settlement obligations:
 
 
Trade account payables
$
378,452
$
461,135
Accrued expenses and other current liabilities
656,446
641,254
Total settlement obligations 
$
1,034,898
$
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)
 
September 30,
2022
 
December 31,
2021
 
September 30,
2021
 
December 31,
2020
Cash and cash equivalents
 
$
967,100
 
$
1,260,466
 
$
1,048,466
 
$
1,420,255
Restricted cash
 
8,396
 
3,693
 
3,626
 
3,334
ATM cash
 
646,121
 
543,422
 
669,686
 
411,054
Settlement cash and cash equivalents
 
210,802
 
203,624
 
259,727
 
188,191
Settlement restricted cash
 
46,148
 
74,897
 
52,433
 
76,674
Cash and cash equivalents and restricted cash at end of period
 
$
1,878,567
 
$
2,086,102
 
$
2,033,938
 
$
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.   

 

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

  Three Months Ended
September 30,

Nine Months Ended

September 30,

 
2022

2021

2022

2021
Computation of diluted earnings:



   Net income (loss)
$
97,722
$
73,882
$
163,237
$
73,852
   Add: Interest expense from assumed conversion of convertible notes, net of tax
1,148


3,253

      Net income (loss) for diluted earnings per share calculation
$
98,870
$
73,882
$
166,490
$
73,852













Computation of diluted weighted average shares outstanding:



Basic weighted average shares outstanding
49,583,317

52,829,386

50,345,293

52,799,199
Incremental shares from assumed exercise of stock options and vesting of restricted stock
386,169

1,024,289

561,689

1,134,027
Incremental shares from assumed conversion of convertible debt
2,781,818


2,781,818

Diluted weighted average shares outstanding 

52,751,304

53,853,675

53,688,800

53,933,226

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 3,308,000 and 2,849,000 for the three and nine months ended September 30, 2022 and 770,000 and 751,000 for the three and nine months ended September 30, 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. Therefore, our Convertible Notes were included in the calculation of diluted earnings (loss) per share if their inclusion was dilutive. 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. Under the repurchase programs we repurchased $0 million and $175.0 million of stock, for the three and nine months ended September 30, 2022, respectively. 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 $100.5 million and $209.9 million for the three and nine months ended September 30, 2022, respectively, and losses of $29.7 million and $59.9 million for the three and nine months ended September 30, 2021There were no reclassifications of foreign currency translation into the consolidated statements of income for the three and nine months ended September 30, 2022 and 2021.

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(6) GOODWILL AND ACQUIRED INTANGIBLE ASSETS, NET

 

A summary of acquired intangible assets and goodwill activity for the nine months ended September 30, 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
 
(20,164
)
 
 
(20,164
)
Foreign currency exchange rate changes
 
(19,827
)
 
(89,008
)
 
(108,835
)
Balance as of September 30, 2022
 
$
180,257
 
$
764,780
 
$
945,037

 

Of the total goodwill balance of $764.8 million as of September 30, 2022$351.3 million relates to the Money Transfer Segment, $298.6 million relates to the EFT Processing Segment and the remaining $114.9 million relates to the epay SegmentEstimated amortization expense on acquired intangible assets with finite lives as of September 30, 2022, is expected to total $6.6 million for the remainder of 2022, $22.3 million for 2023, $16.6 million for 2024, $13.6 million for 2025, $13.3 million for 2026 and $12.1 million for 2027.

 

(7) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

Accrued expenses and other current liabilities consist of the following: 
 
 
As of
(in thousands)
 
September 30,
2022
 
December 31, 2021
Accrued expenses
 
$
348,219
 
$
285,098
Derivative liabilities
 
85,799
 
23,285
Accrued payroll expenses
57,827
55,162
Current portion of finance lease obligations
 
2,900
 
4,147
Total
 
$
494,745
 
$
367,692

 

(8) DEFERRED 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 nine months ended September 30, 2022 is the result of $26.0 million of cash payments received in the current year for which we have not yet satisfied the performance obligations, offset by $43.9 million of revenues recognized that were included in the deferred revenue balance as of December 31, 2021.

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