Euronet Worldwide, Inc.: Form 10-Q for the period ended Mar 31, 2024

The terms "Euronet," the "Company," "we" and "us" as used herein refer to Euronet Worldwide, Inc. and its subsidiaries.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains statements that constitute forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934 (“Exchange Act”). Generally, the words "believe," "expect," "anticipate," "intend," "estimate," "will" and similar expressions identify forward-looking statements. However, the absence of these words or similar expressions does not mean the statement is not forward-looking. All statements other than statements of historical facts included in this document are forward-looking statements, including, but not limited to, statements regarding the following:

our business plans and financing plans and requirements;

trends affecting our business plans and financing plans and requirements;

trends affecting our business;

the adequacy of capital to meet our capital requirements and expansion plans;

the assumptions underlying our business plans;

our ability to repay indebtedness;

our estimated capital expenditures;

the potential outcome of loss contingencies;

our expectations regarding the closing of any pending acquisitions;

business strategy;

government regulatory action;

the expected effects of changes in laws or accounting standards;

technological advances; and

projected costs and revenues.

Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to be correct.

Investors are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may materially differ from those in the forward-looking statements as a result of various factors, including, but not limited to, conditions in world financial markets and general economic conditions, including impacts from the COVID-19 or other pandemics; inflation; the war in the Ukraine, and related economic sanctions; military conflicts in the Middle East; our ability to successfully integrate any acquired operations; economic conditions in specific countries and regions; technological developments affecting the market for our products and services; our ability to successfully introduce new products and services; foreign currency exchange rate fluctuations; the effects of any breach of our computer systems or those of our customers or vendors, including our financial processing networks or those of other third parties; interruptions in any of our systems or those of our vendors or other third parties; our ability to renew existing contracts at profitable rates; changes in fees payable for transactions performed for cards bearing international logos or over switching networks such as card transactions on ATMs; our ability to comply with increasingly stringent regulatory requirements, including anti-money laundering, anti-terrorism, anti-bribery, sanctions, consumer and data protection and privacy and the European Union's General Data Protection Regulation, and Second Revised Payment Service Directive requirements; changes in laws and regulations affecting our business, including tax and immigration laws and any laws regulating payments, including DCC transactions; changes in our relationships with, or in fees charged by, our business partners; competition; the outcome of claims and other loss contingencies affecting Euronet; the cost of borrowing (including fluctuations in interest rates), availability of credit and terms of and compliance with debt covenants; and renewal of sources of funding as they expire and the availability of replacement funding and those factors referred to above and as set forth and more fully described in Part I, Item 1A — Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023. Our Annual Report on Form 10-K is available on the SEC's EDGAR website at www.sec.gov (http://www.sec.gov), and copies may also be obtained by contacting the Company. Any forward-looking statements made in this Form 10-Q speak only as of the date of this report. Except as required by law, we do not intend, and do not undertake any obligation, to update any forward-looking statements to reflect future events or circumstances after the date of such statements.

OVERVIEW

COMPANY OVERVIEW, GEOGRAPHIC LOCATIONS AND PRINCIPAL PRODUCTS AND SERVICES

Euronet is a leading global financial technology solutions and payments provider. We offer payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers. Our primary product offerings include comprehensive ATM, point-of-sale ("POS"), card outsourcing, card issuing and merchant acquiring services, software solutions, electronic distribution of prepaid mobile airtime, managed services and other electronic payment products, foreign currency exchange services and global money transfer services. We operate in the following three segments:

1) The EFT Processing Segment meets the needs of financial institutions and consumers through Euronet-owned and outsourced ATMs and POS terminals combined with value added and transaction processing services. We deploy and operate our own ATMs, providing ATM services for financial institutions and providing electronic payment processing solutions. EFT offers a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems. Transactions processed span a network of 49,290 active ATMs and approximately 713,000 POS terminals.

2) The epay Segment provides retail payment solutions and delivers innovative connections between the digital content of the world’s leading brands and consumers. epay has one of the largest retail networks across Europe and Asia for the distribution of physical and digital third-party content, including branded payments, mobile, and alternative payments, partnering with 1,000+ of the world’s leading brands. In addition, through our own products, we have leveraged our technology to solve business challenges, delivering scalable solutions to drive efficiency and effectiveness. Our comprehensive range of consumer products simplifies transactions and provides financial convenience across a wide range of branded payments. epay operates in 60+ countries. We operate a network that includes approximately 808,000 POS terminals that enable electronic processing of prepaid mobile airtime "top-up" services and other digital media content.

3) The Money Transfer Segment provides global money transfers and currency exchange information in retail stores, apps, and websites through Ria Money Transfer, Xe and the Dandelion cross-border real-time payments network. Euronet’s Money Transfer segment offers real-time, cross-border payments to consumers and businesses across 198 countries and territories, enabling banks, fintechs and big tech platforms to integrate an international payments solution into their own platforms. Ria Money Transfer offers real-time international money transfers with a special focus on emerging markets. In addition, Ria offers safe and affordable money transfers through a global network of cash locations and online, serving over 20 million customers annually. Xe offers web and app-based currency information and industry-leading consumer and business cross-border money transfer services. Customers can send money, buy property overseas, and execute other international payments via the Xe website or app. Dandelion offers consumer and business transaction processing and fulfillment with alternative payout channels like bank accounts, cash pick-up and mobile wallets. Dandelion powers cross-border payments for Xe and Ria, as well as third party banks, fintechs, and big tech platforms.

We have six processing centers in Europe,seven in Asia Pacific and two in North America. We have 36 principal offices in Europe, 14 in Asia Pacific, 10 in North America, three in the Middle East, two in South America and one in Africa. Our executive offices are located in Leawood, Kansas, USA. With approximately 74% of our revenues denominated in currencies other than the U.S. dollar, any significant changes in foreign currency exchange rates will likely have a significant impact on our results of operations (for a further discussion, see Item 1A - Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023).

SOURCES OF REVENUES AND CASH FLOW

Euronet earns revenues and income primarily from ATM management fees, transaction fees, commissions and foreign currency exchange margin. Each operating segment’s sources of revenues are described below.

EFT Processing Segment — Revenues in the EFT Processing Segment, which represented approximately 25% of total consolidated revenues for the three months ended March 31, 2024 are derived from fees charged for transactions made by cardholders on our proprietary network of ATMs, fixed management fees and transaction fees we charge to customers for operating ATMs and processing debit and credit cards under outsourcing and cross-border acquiring agreements, foreign currency exchange margin on DCC transactions, domestic and international surcharge, foreign currency dispensing and other value added services such as advertising, prepaid telecommunication recharges, bill payment, and money transfers provided over ATMs. Revenues in this segment are also derived from cardless payment, banknote recycling, tax refund services, license fees, professional services and maintenance fees for proprietary application software and sales of related hardware.

epay Segment — Revenues in the epay Segment, which represented approximately 30% of total consolidated revenues for the three months ended March 31, 2024 are primarily derived from commissions or processing fees received from mobile phone operators for the processing and distribution of prepaid mobile airtime and commissions earned from the distribution of other electronic content, vouchers, and physical gifts. The proportion of epay Segment revenues earned from the distribution of prepaid mobile phone time as compared with other electronic products has decreased over time, and digital media content now produces approximately 67% of epay Segment revenues. Other electronic content offered by this segment includes digital content such as music, games, and software, as well as other products including prepaid long distance calling card plans, prepaid Internet plans, prepaid debit cards, gift cards, vouchers, transport payments, lottery payments, bill payment, and money transfer.

Money Transfer Segment — Revenues in the Money Transfer Segment, which represented approximately 45% of total consolidated revenues for the three months ended March 31, 2024, respectively, are primarily derived from transaction fees, as well as the margin earned from purchasing foreign currency at wholesale exchange rates and selling the foreign currency to customers at retail exchange rates. We have a sending agent network in place comprised of agents, customer service representatives, Company-owned stores, primarily in North America, Europe and Malaysia, Ria, and xe branded websites, along with a worldwide network of correspondent agents, consisting primarily of financial institutions in the transfer destination countries. Under the brand "Dandelion", Ria offers payment processing services to third party partners. The Dandelion cross-border payments platform provides financial institutions, fintechs such as digital wallets and banks, and enterprise software companies access to Euronet's money transfer network through an API connection. Sending and correspondent agents each earn fees for cash collection and distribution services, which are recognized as direct operating costs at the time of sale. .

Corporate Services, Eliminations and Other — In addition to operating in our principal operating segments described above, our “Corporate Services, Eliminations and Other” category includes non-operating activity, certain inter-segment eliminations and the cost of providing corporate and other administrative services to the operating segments, including most share-based compensation expense. These services are not directly identifiable with our reportable operating segments.

Opportunities and Challenges

The global product markets in which we operate are large and fragmented, which poses both opportunities and challenges for our technology to disrupt new and existing competition. As an organization, our focus is on increasing our market presence through both physical (ATMs, POS terminals, Company stores and agent correspondents) and digital assets and providing new and improved products and services for customers through all of our channels, which may in turn drive an increase in the number of transactions on our networks. Each of these opportunities also presents us with challenges, including differentiating our portfolio of products and services in highly competitive markets, the successful development and implementation of our software products and access to financing for expansion.

1) The EFT Processing Segment opportunities include physical expansion into target markets, developing value-added products or services, increasing high value DCC and surcharge transactions and efficiently leveraging our portfolio of software solutions. Our opportunities are dependent on renewing and expanding our card acceptance, ATM, POS and merchant acquiring services, cash supply and other commercial agreements with customers and financial institutions. Operational challenges in the EFT Processing Segment include obtaining and maintaining the required licenses and sponsorship agreements in markets in which we operate and navigating frequently changing rules imposed by international card organizations, such as Visa® and Mastercard®, that govern ATM interchange fees, direct access fees and other restrictions. Our profitability is dependent on the laws and regulations that govern DCC transactions, specifically in the E.U., as well as the laws and regulations of each country in which we operate. These laws and regulations may impact our cross-border and cross-currency transactions. The timing and amount of revenues in the EFT Processing Segment is uncertain and unpredictable due to inherent limitations in managing our estate of ATMs. Our ATM estate is dependent on contracts that cover large numbers of ATMs, and management is complicated by legal and regulatory considerations of local countries, as well as customers' decisions whether to outsource ATMs. Inflationary pressure may impact our business as travelers have less cash available to spend on vacations.

2) The epay Segment opportunities include renewing existing and negotiating new agreements in target markets in which we operate, primarily with digital content providers, mobile operators, financial institutions and retailers. The overall growth rate in the digital media content and prepaid mobile phone markets, shifts between prepaid and postpaid services, and our market share in those respective markets will have a significant impact on our ability to maintain and grow the epay Segment revenues. There is significant competition in these markets that may impact our ability to grow organically and increase the margin we earn and the margin that we pay to retailers. The profitability of the epay Segment is dependent on our ability to adapt to new technologies that may compete with POS distribution of digital content and prepaid mobile airtime, as well as our ability to leverage cross-selling opportunities with our EFT and Money Transfer Segments. The epay Segment opportunities may be impacted by government-imposed restrictions on retailers and/or content providers with whom we partner in countries in which we have a presence, and corresponding licensure requirements mandated upon such parties to legally operate in such countries.

3) The Money Transfer Segment opportunities include expanding our portfolio of products and services to new and existing customers around the globe, which in turn may lead to an increase in transaction volumes. The opportunities to expand are contingent on our ability to effectively leverage our network of bank accounts for digital money transfer delivery, maintaining our physical agent network, cross selling opportunities with our EFT and epay Segments and our penetration into high growth money transfer corridors. The challenges inherent in these opportunities include maintaining compliance with all regulatory requirements, maintaining all required licenses, ensuring the recoverability of funds advanced to agents and the continued reliance on the technologies required to operate our business. The volume of transactions processed on our network is impacted by shifts in our customer base, which can change rapidly with worker migration patterns and changes in unbanked populations across the globe. Foreign regulations that impact cross-border migration patterns and the money transfer markets can significantly impact our ability to grow the number of transactions on our network.

For all segments, our continued expansion may involve additional acquisitions that could divert our resources and management time and require integration of new assets with our existing networks and services. Our ability to effectively manage our growth has required us to expand our operating systems and employee base, particularly at the management level, which has added incremental operating costs. An inability to continue to effectively manage expansion could have a material adverse effect on our business, growth, financial condition or results of operations. Inadequate technology and resources would impair our ability to maintain current processing technology and efficiencies, as well as deliver new and innovative services to compete in the marketplace. Recently, inflation has been increasing our cost structure in many parts of the world in which we operate.

SEGMENT SUMMARY RESULTS OF OPERATIONS

Revenues and operating income by segment for the three months ended March 31, 2024 and 2023 are summarized in the tables below:

(dollar amounts in millions)

(dollar amounts in millions)

26

Impact of changes in foreign currency exchange rates

Our revenues and local expenses are recorded in the functional currencies of our operating entities, and then are translated into U.S. dollars for reporting purposes; therefore, amounts we earn outside the U.S. are negatively impacted by a stronger U.S. dollar and positively impacted by a weaker U.S. dollar. If significant, in our discussion we will refer to the impact of fluctuations in foreign currency exchange rates in our comparison of operating segment results.

To provide further perspective on the impact of foreign currency exchange rates, the following table shows the changes in values relative to the U.S. dollar of the currencies of the countries in which we have our most significant operations:

27

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

EFT PROCESSING SEGMENT

The following table summarizes the results of operations for our EFT Processing Segment for the three months ended March 31, 2024 and 2023:

(dollar amounts in millions)

Revenues

EFT Processing Segment total revenues were $217.2 million for the three months ended March 31, 2024, an increase of $25.0 million or 13% compared to the same period in 2023. The increase in revenues was primarily due to the increase in domestic and international cash withdrawal transactions resulting from the increase in travel bringing more tourists, the increase in low-value point-of-sale transactions in Europe and low-value payment processing transactions in Asia Pacific. Fluctuations in foreign currency exchange rates increased revenues by approximately $1.3 million for the three months ended March 31, 2024 compared to the same period in 2023.

Direct operating costs

EFT Processing Segment direct operating costs were $131.1 million for the three months ended March 31, 2024, an increase of $12.1 million or 10% compared to the same period in 2023. Direct operating costs primarily consist of site rental fees, cash delivery costs, cash supply costs, maintenance, insurance, telecommunications, payment scheme processing fees, data center operations-related personnel, as well as the processing centers’ facility-related costs and other processing center-related expenses and commissions paid to retail merchants, banks and card processors.

The increase in direct costs was primarily due to the increase in number of ATMs, and an increase in high volume low value cash transactions in Asia Pacific. Fluctuations in foreign currency exchange rates increased direct operating costs by approximately $1.7 million for the three months ended March 31, 2024 compared to the same period in 2023.

Gross profit

Gross profit, which is calculated as revenues less direct operating costs, was $86.1 million for the three months ended March 31, 2024, an increase of $12.9 million or 18% compared to $73.2 million for the same period in 2023. Gross profit as a percentage of revenues (“gross margin”) increased to 39.6% for the three months ended March 31, 2024, compared to 38.1% for the same period in 2023. The increase in gross profit was primarily due to the increase in domestic and international cash withdrawal transactions resulting from the increase in travel bringing more tourists, the increase in low-value point-of-sale transactions in Europe and low-value payment processing transactions in Asia Pacific.

Salaries and benefits

Salaries and benefits expenses were $31.8 million for the three months ended March 31, 2024, an increase of $4.3 million or 16% compared to the same period in 2023. The increase is primarily due to an increase in headcount to support the growth of the business and salary increases due to inflationary pressures. Fluctuations in foreign currency exchange rates in the countries in which we employ our workforce increased salaries by approximately $0.3 million for the three months ended March 31, 2024 As a percentage of revenues, salary expense increased to 14.6% for the three months ended March 31, 2024, compared to 14.3% for the same period in 2023.

Selling, general and administrative

Selling, general and administrative expenses were $9.2 million for the three months ended March 31, 2024, a decrease of $6.9 million or 43% compared to the same period in 2023. The decrease was primarily due to a decrease in professional fees and the refund of a duty fee. As a percentage of revenues, these expenses decreased to 4.2% for the three months ended March 31, 2024, compared to 8.4% for the same period in 2023.

Depreciation and amortization

Depreciation and amortization expenses were $23.6 million for the three months ended March 31, 2024, an increase of $0.9 million or 4% compared to the same period in 2023. As a percentage of revenues, these expenses decreased to 10.9% for the three months ended March 31, 2024, compared to 11.8% for the same period in 2023.

Operating income

EFT Processing Segment had operating income of $21.5 million for the three months ended March 31, 2024, an increase of $14.6 million or 212% compared to the same period in 2023. Operating income as a percentage of revenues (“operating margin”) increased to 9.9% for the three months ended March 31, 2024, compared to 3.6% for the same period in 2023. The increase in operating income was primarily due to a decrease in professional fees and the refund of a duty fee paid and expensed during 2023.

EPAY SEGMENT

The following table presents the results of operations for the three months ended March 31, 2024 and 2023 for our epay Segment:

(dollar amounts in millions)

Revenues

epay Segment total revenues were $257.1 million for the three months ended March 31, 2024, an increase of $19.7 million or 8% compared to the same period in 2023. The increase in revenue for the three months ended March 31, 2024 was driven by continued expansion in mobile and digital branded payments. Fluctuations in foreign currency exchange rates increased revenue by approximately $1.2 million for the three months ended March 31, 2024, compared to the same period in 2023.

Revenue per transaction increased to $0.27 for the three months ended March 31, 2024, compared to $0.24 for the same period in 2023. The increase in revenue per transaction was primarily due to the rise in account activations, coupled with improved margins, reduced costs, and a boost in sales volume, offset by declines in promotional campaigns delivered on behalf of our retail partners that were recognized in the prior year that did not repeat in the first quarter this year.

Direct operating costs

epay Segment direct operating costs were $195.1 million for the three months ended March 31, 2024, an increase of $17.0 million or 10% compared to the same period in 2023. Direct operating costs primarily consist of the commissions paid to retail merchants for the distribution and sale of prepaid mobile airtime and other prepaid products, expenses incurred to operate POS terminals and the cost of vouchers sold and physical gifts fulfilled. Foreign currency exchange rates increased direct operating costs by $1.2 million for the three months ended March 31, 2024 compared to the same period in 2023. The increase in direct operating costs was the result of increase in business activity and inflationary pressure.

Gross profit

Gross profit was $62.0 million for the three months ended March 31, 2024, an increase of $2.7 million or 5% compared to $59.3 million for the same period in 2023. Gross margin decreased to 24.1% for the three months ended March 31, 2024, compared to 25.0% for the same period in 2023. The changes in gross profit and gross margin were primarily due to the shift in the mix of transactions processed.

Salaries and benefits

Salaries and benefits expenses were $24.1 million for the three months ended March 31, 2024, an increase of $2.7 million or 13% compared to the same period in 2023. The fluctuations in salaries and benefits were driven by an increase in headcount to support the growth of the business and salary increases due to inflationary pressures. As a percentage of revenues, these expenses increased to 9.4% for the three months ended March 31, 2024, compared to 9.0% for the same period in 2023. Fluctuations in foreign currency exchange rates in the countries in which we employ our workforce increased salaries by approximately $0.2 million for the three months ended March 31, 2024 as compared to the same period in 2023.

Selling, general and administrative

Selling, general and administrative expenses were $9.6 million for the three months ended March 31, 2024, an increase of $0.8 million or 9% compared to the same period in 2023. As a percentage of revenues, these expenses were 3.7% for both the three months ended March 31, 2024, compared to the same period in 2023.

Depreciation and amortization

Depreciation and amortization expenses were $1.7 million for the three months ended March 31, 2024, an increase of $0.1 million or 6% compared to the same period in 2023. Depreciation and amortization expense primarily represents depreciation of POS terminals we install in retail stores and amortization of acquired intangible assets. As a percentage of revenues, these expenses were 0.7% for both the three months ended March 31, 2024, and for the same period in 2023.

Operating income

epay Segment operating income was $26.6 million for the three months ended March 31, 2024, a decrease of $0.9 million or 3% compared to the same period in 2023. Operating margin decreased to 10.3% for the three months ended March 31, 2024, compared to 11.6% for the same period in 2023. Operating income per transaction was $0.03 for both the three months ended March 31, 2024 and the same period in 2023. Changes in operating income and operating margin for the three months ended March 31, 2024 compared to the same period in 2023 were primarily due to the shift in the mix of transactions processed and a decline in the promotional campaign activity this quarter compared to the same period last year.

MONEY TRANSFER SEGMENT

The following table presents the results of operations for the three months ended March 31, 2024 and 2023 for the Money Transfer Segment:

(dollar amounts in millions)

Revenues

Money Transfer Segment total revenues were $384.6 million for the three months ended March 31, 2024, an increase of $25.2 million or 7% compared to the same period in 2023. The increase in revenues was primarily due to an increase in international-originated money transfers, U.S. outbound transactions, and direct-to-consumer digital transactions, partially offset by a decrease in U.S. domestic transactions. Revenues per transaction decreased to $9.47 for the three months ended March 31, 2024, compared to $9.57 for the same period in 2023 due to a shift in the mix of transactions processed.

Direct operating costs

Money Transfer Segment direct operating costs were $209.4 million for the three months ended March 31, 2024, an increase of 13.1 million or 7% compared to the same period in 2023. Direct operating costs primarily consist of commissions paid to agents who originate money transfers on our behalf and correspondent agents who disburse funds to the customers’ destination beneficiaries, together with less significant costs, such as bank depository fees. The increase in direct operating costs was primarily due to the increase in the number of international-originated and U.S. outbound money transfer transactions.

Gross profit

Gross profit was $175.2 million for the three months ended March 31, 2024, an increase of $12.1 million or 7% compared to $163.1 million for the same period in 2023. Gross margin increased to 45.6% for the three months ended March 31, 2024, compared to 45.4% for the same period in 2023. The increase in gross profit and gross margin was primarily due to increases in international-originated money transfers, U.S. outbound transactions and direct-to-consumer digital transactions.

Salaries and benefits

Salaries and benefits expenses were $80.7 million for the three months ended March 31, 2024, an increase of $6.4 million or 9% compared to the same period in 2023. The increase in salaries and benefits was primarily driven by an increase in headcount to support the growth of the business and salary increases due to inflationary pressures. As a percentage of revenues, these expenses increased to 21.0% for the three months ended March 31, 2024, compared to 20.7%, for the same period in 2023. Fluctuations in foreign currency exchange rates in the countries in which we employ our workforce increased salaries by approximately $0.3 million for the three months ended March 31, 2024, as compared to the same period in 2023.

Selling, general and administrative

Selling, general and administrative expenses were $50.0 million for the three months ended March 31, 2024, an increase of $2.3 million or 5% compared to the same period in 2023. As a percentage of revenues, these expenses decreased to 13.0% for the three months ended March 31, 2024, compared to 13.3% for the same period in 2023.

Depreciation and amortization

Depreciation and amortization expenses were $7.3 million for the three months ended March 31, 2024, a decrease of $1.2 million or 14% compared to the same period in 2023. Depreciation and amortization expense primarily represents amortization of acquired intangible assets and depreciation of money transfer terminals, computers and software, leasehold improvements and office equipment. As a percentage of revenues, these expenses decreased to 1.9% for the three months ended March 31, 2024, compared to 2.4% for the same period in 2023.

Operating income

Money Transfer Segment operating income was $37.2 million for the three months ended March 31, 2024, an increase of $4.6 million or 14% compared to the same period in 2023. Operating margin increased to 9.7% for the three months ended March 31, 2024, compared to 9.1% for the same period in 2023. Operating income per transaction increased to $0.92, for the three months ended March 31, 2024, compared to $0.87 for the same period in 2023. We improved our operating income and operating margin due to effective cost management.

CORPORATE SERVICES

The following table presents the operating expenses for the three months ended March 31, 2024 and 2023 for Corporate Services:

(dollar amounts in millions)

33

Corporate operating expenses

Total Corporate operating expenses were $21.3 million for the three months ended March 31, 2024, a decrease of $0.1 million compared to the same period in 2023.

OTHER EXPENSE, NET

(dollar amounts in millions)

Interest income

Interest income was $5.7 million for the three months ended March 31, 2024, an increase of $3.1 million or 119% compared to the same period in 2023. This increase was driven by an increase in interest rates on our interest bearing bank accounts.

Interest expense

Interest expense was $14.9 million for the three months ended March 31, 2024, an increase of $4.8 million or 48% compared to the same period in 2023. This increase was driven by an increase in interest rates on our Credit Facility and uncommitted credit facility.

Foreign currency exchange loss, net

Foreign currency exchange activity includes gains and losses on certain foreign currency exchange derivative contracts and the impact of remeasurement of assets and liabilities denominated in foreign currencies. Assets and liabilities denominated in currencies other than the local currency of each of our subsidiaries give rise to foreign currency exchange gains and losses. Foreign currency exchange gains and losses that result from remeasurement of these assets and liabilities are recorded in net income.

We recorded net foreign currency exchange losses of $12.5 million for the three months ended March 31, 2024, compared to net foreign currency exchange losses of $1.1 million for the same period in 2023. These realized and unrealized foreign currency exchange losses reflect the fluctuation in the value of the U.S. dollar against the currencies of the countries in which we operated during the respective period.

INCOME TAX EXPENSE

The Company's effective income tax rate was 37.9% for the three months ended March 31, 2024, compared to 46.5% for the same period ended March 31, 2023. The Company's effective income tax rate for the three months ended March 31, 2024 was higher than the applicable statutory income tax rate of 21% as a result of certain foreign earnings being subject to higher local statutory tax rates and the Company’s U.S. deferred tax activity.

NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS

Noncontrolling interests represent the elimination of net income or loss attributable to the minority shareholders’ portion of the following consolidated subsidiaries that are not wholly owned:

NET INCOME (LOSS) ATTRIBUTABLE TO EURONET

Net income attributable to Euronet was $26.2 million for the three months ended March 31, 2024, an increase of $6.1 million or 30% compared to the same period in 2023. The increase in net income was primarily attributable to the $69.8 million increase in revenues, largely driven by successful business operations. The increased revenues led to a $27.7 million increase in gross profit. The increase in gross profit was partially offset by a $12.8 million increase in salaries and benefits expense and increase in foreign exchange currency loss of $11.4.

LIQUIDITY AND CAPITAL RESOURCES

Working capital

As of March 31, 2024, we had working capital of $970.7 million, which is calculated as the difference between total current assets and total current liabilities, compared to working capital of $1,462.1 million as of December 31, 2023. The decrease in working capital was primarily due to the net effect of the classification of the convertible debt to current liabilities, positive operational results, the Infinitium acquisition completed during the quarter and working capital changes. Our ratio of current assets to current liabilities was 1.33 and 1.54 at March 31, 2024 and December 31, 2023, respectively.

We require substantial working capital to finance operations. The Money Transfer Segment funds the payout of the majority of our consumer-to-consumer money transfer services before receiving the benefit of amounts collected from customers by agents. Working capital needs increase in order to cover weekends and banking holidays. As a result, we may report more or less working capital for the Money Transfer Segment based solely upon the day on which the reporting period ends. The epay Segment produces positive working capital, some of which is restricted in connection with the administration of its customer collection and vendor remittance activities. In our EFT Processing Segment, we obtain a significant portion of the cash required to operate our ATMs through various cash supply arrangements, the amount of which is not recorded on Euronet's Consolidated Balance Sheets. However, in certain countries, we fund the cash required to operate our ATM network from borrowings under our revolving credit facilities, uncommitted credit agreements and cash flows from operations. As of March 31, 2024, we had $599.7 million of our own cash in use or designated for use in our ATM network, which is recorded in ATM cash on Euronet's Consolidated Balance Sheet. ATM cash increased $74.5 million from $525.2 million as of December 31, 2023 to $599.7 million as of March 31, 2024 as a result of the increase in number of active ATMs as of March 31, 2024 compared to December 31, 2023. The Company has $1,236.2 million of unrestricted cash as of March 31, 2024 compared to $1,254.2 million as of December 31, 2023. Including the $599.7 million of cash in ATMs at March 31, 2024, we have access to $2,214.3 million in available cash, and $579.0 million available under the Credit Facility with no significant long-term debt principal payments until March 2025.

The following table identifies cash and cash equivalents provided by/(used in) our operating, investing and financing activities for the three months ended March 31, 2024 and 2023 (in millions):

Operating activity cash flow

Cash flows provided by operating activities were $30.0 million for the three months ended March 31, 2024 compared to cash flows provided by operating activities of $3.3 million for the same period in 2023. The net increase in operating cash flows was primarily due to an increase in net income, the effect of exchange rates on balance sheet positions in foreign currencies and other working capital fluctuations.

Investing activity cash flow

Cash flows used in investing activities were $96.8 million for the three months ended March 31, 2024 compared to $18.1 million for the same period in 2023. The increase in cash used in investing activities is primarily due to the $70.0 million of cash paid for the acquisition of Infinitium. Additionally, we used $23.8 million for purchases of property and equipment for the three months ended March 31, 2024 compared to $18.6 million for the same period in 2023.

Financing activity cash flow

Cash flows used by financing activities were $81.3 million for the three months ended March 31, 2024 compared to cash flows provided by financing activities of $4.4 million for the same period in 2023. Our borrowing activities on the Credit Facility for the three months ended March 31, 2024 consisted of net borrowings of $82.6 million compared to net borrowings of $24.3 million for the same period in 2023. The increase in net borrowings on the Credit Facility, during the three months ended March 31, 2024, is primarily the result of cash placed in ATMs reactivated in anticipation of the travel season and cash used to complete the acquisition of Infinitium. We received proceeds of $1.4 million and $1.0 million during the three months ended March 31, 2024 and 2023, respectively, for the issuance of stock in connection with our Stock Incentive Plan.

Effect of exchange rates on cash, cash equivalents and restricted cash

Fluctuations in foreign currency exchange rates for the three months ended March 31, 2024 and 2023 had a negative impact of $47.2 million and $33.9 million, respectively, on cash, cash equivalents, and restricted cash. The negative impact on cash, cash equivalents, and restricted cash for the three months ended March 31, 2024 and 2023 was due primarily to the negative impact in the exchange rate of the U.S. dollar to the euro.

Other sources of capital

Credit Facility - On October 24, 2022, the Company amended its revolving credit agreement (the “Credit Facility”) to increase the facility from $1.03 billion to $1.25 billion and to extend the expiration to October 24, 2027. The revolving credit facility contains a sublimit of up to $250 million, with $150 million committed, for the issuance of letters of credit, a $75 million sublimit both for U.S. dollar swingline loans and for swingline loans in euros or British pounds sterling. The Credit Facility allows for borrowings in British pounds sterling, euro and U.S. dollars. Subject to certain conditions, the Company has the option to increase the Credit Facility by up to an additional $500 million by requesting additional commitments from existing or new lenders. Fees and interest on borrowings vary based upon the Company's corporate credit rating and will be based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over a secured overnight financing rate, as defined in the agreement, with a margin, including the facility fee, ranging from 1.00% to 1.625% or the base rate, as selected by the Company. The applicable margin for borrowings under the credit facility, based on the Company's current credit rating is 1.25% including the facility fee.

As of March 31, 2024, we had $619.5 million of borrowings and $51.5 million of stand-by letters of credit outstanding under the Credit Facility. The remaining $579.0 million under the Credit Facility was available for borrowing.

Convertible debt - On March 18, 2019, we completed the sale of $525.0 million in principal amount of Convertible Senior Notes due 2049 (“Convertible Notes”). The Convertible Notes were issued pursuant to an indenture, dated as of March 18, 2019 (the “Indenture”), by and between us and U.S. Bank National Association, as trustee. The Convertible Notes have an interest rate of 0.75% per annum payable semi-annually in March and September and are convertible into shares of Euronet common stock at a conversion price of approximately $188.73 per share if certain conditions are met (relating to the closing prices of Euronet common stock exceeding certain thresholds for specified periods). Holders of the Convertible Notes have the option to require us to repurchase for cash all or part of their Convertible Notes on each of March 15, 2025, 2029, 2034, 2039 and 2044 at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date. In connection with the issuance of the Convertible Notes, we recorded $12.8 million in debt issuance costs, which are being amortized through March 1, 2025.

Senior Notes - On May 22, 2019, we completed the sale of €600 million ($669.9 million) aggregate principal amount of Senior Notes that expire on May 2026 (the “Senior Notes”). The Senior Notes accrue interest at a rate of 1.375% per year, payable annually in arrears on May 22 of each year, until maturity or earlier redemption. As of March 31, 2024, we have outstanding €600.0 million ($646.9 million) principal amount of the Senior Notes. In addition, we may redeem some or all of these notes on or after February 22, 2026 at their principal amount plus any accrued and unpaid interest.

Uncommitted Credit Agreements - On June 26, 2023, the Company entered into an Uncommitted Loan Agreement for $150 million, fully drawn and outstanding at March 31, 2024, for the sole purpose of providing vault cash for ATMs, that expires no later than June 21, 2024. The loan is a Prime rate loan, Bloomberg Short-term Bank Yield ("BSBY") rate loan plus 0.95% or bears interest at the rate agreed to by the Bank and the Company at the time such loan is made. The weighted-average interest rate from the loan inception date to March 31, 2024 was 6.31%.

Other debt obligations — Certain of our subsidiaries have available credit lines and overdraft facilities to generally supplement short-term working capital requirements, when necessary. There was $0.2 million outstanding under these other obligation arrangements as of March 31, 2024.

Other uses of capital

Capital expenditures and needs - Total capital expenditures for the three months ended March 31, 2024 were $23.8 million. These capital expenditures were primarily for the purchase and installation of ATMs in key under-penetrated markets, the purchase of POS terminals for the epay and Money Transfer Segments, and office, data center and company store computer equipment and software. Total capital expenditures for 2024 are currently estimated to range from approximately 90 million to $100 million. At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on hand and amounts available under our Credit Facility and other existing and potential future financing will be sufficient to meet our debt (including our uncommitted credit facilities), leasing, and capital expenditure obligations. If our capital resources are not sufficient to meet these obligations, we will seek to refinance our debt and/or issue additional equity under terms acceptable to us. However, we can offer no assurances that we will be able to obtain favorable terms for the refinancing of any of our debt or other obligations or for the issuance of additional equity.

Inflation and functional currencies

Historically, the countries in which we operate have experienced low and stable inflation. Therefore, the local currency in each of these markets is the functional currency. We have seen indications that the current inflationary period will put pressure on our results of operations and our financial position. We have seen some signs of inflation impacting discretionary spend items, such as gaming products, in our epay business, discretionary travel expenditures in EFT, as well as some pressure on send amounts in money transfer. As a consequence of this inflationary period, we expect to see increasing expenses forthcoming. We continually review inflation and the functional currency in each of the countries where we operate.

OFF BALANCE SHEET ARRANGEMENTS.

On occasion, we grant guarantees of the obligations of our subsidiaries, and we sometimes enter into agreements with unaffiliated third parties that contain indemnification provisions, the terms of which may vary depending on the negotiated terms of each respective agreement. Our liability under such indemnification provisions may be subject to time and materiality limitations, monetary caps and other conditions and defenses. As of March 31, 2024, there were no material changes from the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2023. To date, we are not aware of any significant claims made by the indemnified parties or parties to whom we have provided guarantees on behalf of our subsidiaries and, accordingly, no liabilities have been recorded as of March 31, 2024. See also Note 15, Commitments, to the unaudited consolidated financial statements included elsewhere in this report.

CONTRACTUAL OBLIGATIONS

As of March 31, 2024, there have been no material changes outside the ordinary course of business in our future contractual obligations from the amounts reported within our Annual Report on Form 10-K for the year ended December 31, 2023.

Interest rate risk

As of March 31, 2024, our total debt outstanding, excluding unamortized debt issuance costs, was $1,941.6 million. Of this amount, $525.0 million, net of debt discounts, or 27% of our total debt obligations, relates to our contingent Convertible Notes that have a fixed coupon rate. Our $525.0 million outstanding principal amount of Convertible Notes accrue cash interest at a rate of 0.75% of the principal amount per annum. Based on quoted market prices, as of March 31, 2024, the fair value of our fixed rate Convertible Notes was $538.0 million, compared to a carrying value of $525.0 million. Further, as of March 31, 2024 we had $619.5 million of borrowings under our Credit Facility, or 32% of our total debt obligations. If we were to maintain these borrowings for one year and maximize the potential borrowings available under the revolving credit facility for one year, a 1% (100 basis points) increase in the applicable interest rate would result in additional interest expense to the Company of approximately $12.5 million. The carrying values of the Credit Facility approximates fair value because interest as of March 31, 2024, was based on SOFR that resets at various intervals of less than one year. Additionally, $646.9 million, or 33%of our total debt obligations, relates to Senior Notes having a fixed coupon rate. Our $646.9 million outstanding principal amount of Senior Notes accrue cash interest at a rate of 1.375% of the principal amount per annum. Based on quoted market prices, as of March 31, 2024, the fair value of our fixed rate Senior Notes was $609.0 million, compared to a carrying value of $646.9 million. An additional $150.0 million, or 8% of our total debt, is related to a short-term uncommitted credit agreement. The credit agreement is due within one year and accrues interest at variable rates. The remaining $0.2 million is related to borrowings by certain subsidiaries to fund, from time to time, working capital requirements. These arrangements generally are due within one year and accrue interest at variable rates.

Additionally, as of March 31, 2024, we had approximately $4.1 million of finance leases with fixed payment and interest terms that expire between the years of 2024 and 2028.

Our excess cash is invested in instruments with original maturities of three months or less or in certificates of deposit that may be withdrawn at any time without penalty; therefore, as investments mature and are reinvested, the amount we earn will increase or decrease with changes in the underlying short-term interest rates.

Foreign currency exchange rate risk

For the three months ended March 31, 2024, approximately 74% of our revenues were generated in non-U.S. dollar countries and we expect to continue generating a significant portion of our revenues in countries with currencies other than the U.S. dollar.

We are particularly vulnerable to fluctuations in exchange rates of the U.S. dollar to the currencies of countries in which we have significant operations, primarily the euro, British pound, Australian dollar, Polish zloty, Indian rupee, New Zealand dollar, Malaysian ringgit and Hungarian forint. As of March 31, 2024, we estimate that a 10% fluctuation in these foreign currency exchange rates would have the combined annualized effect on reported net income and working capital of approximately $120 million to $130 million. This effect is estimated by applying a 10% adjustment factor to our non-U.S. dollar results from operations, intercompany loans that generate foreign currency gains or losses and working capital balances that require translation from the respective functional currency to the U.S. dollar reporting currency.

Additionally, we have other non-current, non-U.S. dollar assets and liabilities on our balance sheet that are translated to the U.S. dollar during consolidation. These items primarily represent goodwill and intangible assets recorded in connection with acquisitions in countries other than the U.S. and our Senior Notes. We estimate that a 10% fluctuation in foreign currency exchange rates would have a non-cash impact on total comprehensive income of approximately $90 million to $100 million as a result of the change in value of these items during translation to the U.S. dollar. For the fluctuations described above, a strengthening U.S. dollar produces a financial loss, while a weakening U.S. dollar produces a financial gain.

We believe this quantitative measure has inherent limitations and does not take into account any governmental actions or changes in either customer purchasing patterns or our financing or operating strategies. Because a majority of our revenues and expenses are incurred in the functional currencies of our international operating entities, the profits we earn in foreign currencies are positively impacted by a weakening of the U.S. dollar and negatively impacted by a strengthening of the U.S. dollar. Additionally, a significant portion of our debt obligations are in U.S. dollars; therefore, as foreign currency exchange rates fluctuate, the amount available for repayment of debt will also increase or decrease.

We use derivatives to minimize our exposures related to changes in foreign currency exchange rates and to facilitate foreign currency risk management services by writing derivatives to customers. Derivatives are used to manage the overall market risk associated with foreign currency exchange rates; however, we do not perform the extensive record-keeping required to account for the derivative transactions as hedges. Due to the relatively short duration of the derivative contracts, we use the derivatives primarily as economic hedges. Since we do not designate foreign currency derivatives as hedging instruments pursuant to the accounting standards, we record gains and losses on foreign exchange derivatives in earnings in the period of change.

A majority of our consumer-to-consumer money transfer operations involve receiving and disbursing different currencies, in which we earn a foreign currency spread based on the difference between buying currency at wholesale exchange rates and selling the currency to consumers at retail exchange rates. We enter into foreign currency forward and cross-currency swap contracts to minimize exposure related to fluctuations in foreign currency exchange rates. The changes in fair value related to these contracts are recorded in Foreign currency exchange (loss) gain, net on the Consolidated Statements of Income. As of March 31, 2024, we had foreign currency derivative contracts outstanding with a notional value of $400.8 million, primarily in Australian dollars, British pounds, Canadian dollars, euros and Mexican pesos, that were not designated as hedges and mature within a few days.

For derivative instruments our xe operations write to customers, we aggregate the foreign currency exposure arising from customer contracts, and hedge the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties as part of a broader foreign currency portfolio. The changes in fair value related to the total portfolio of positions are recorded in Revenues on the Consolidated Statements of Income. As of March 31, 2024, we held foreign currency derivative contracts outstanding with a notional value of $1.1 billion, primarily in U.S. dollars, euros, British pounds, Australian dollars and New Zealand dollars, that were not designated as hedges and for which the majority mature within the next twelve months.

We use longer-term foreign currency forward contracts to mitigate risks associated with changes in foreign currency exchange rates on certain foreign currency denominated other asset and liability positions. As of March 31, 2024, the Company had foreign currency forward contracts outstanding with a notional value of $563.1 million, primarily in euros.

See Note 11, Derivative Instruments and Hedging Activities, to our unaudited consolidated financial statements for additional information.

Our executive management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Exchange Act as of March 31, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the design and operation of these disclosure controls and procedures were effective as of such date to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Change in Internal Controls

There have been no changes in our internal control over financial reporting during the three months period ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Except as otherwise described herein, there were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended 31 December 2023, as filed with the SEC.