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Organization

Euronet Worldwide, Inc. (the “Company” or “Euronet”) was established as a Delaware corporation on December 13, 1997 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 automated teller machine (“ATM”), point-of-sale (“POS”), card outsourcing, card issuing and merchant acquiring services, electronic distribution of prepaid mobile airtime and other electronic payment products, and global money transfer 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 and cash flows for the interim periods. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2019, including the notes thereto, set forth in the Company’s 2019 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, 2020.

Seasonality

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

COVID-19 (coronavirus)

The outbreak of the COVID-19 (coronavirus) pandemic has resulted in travel restrictions across borders, and shelter-in-place orders in most of the countries where the Company operates. The majority of these orders went into effect in late February 2020 or early March 2020. These orders have negatively impacted all of our three operating segments. The EFT Segment has experienced declines in transaction volumes due to these restrictions, especially high-margin cross-border transactions. Although the epay Segment has experienced revenue growth from increased digital content purchases which can be completed remotely, many of its POS retail locations have been closed, reducing in person transactions. Our Money Transfer Segment has experienced declines in transaction volumes due to the restrictions noted above, which have also led to the temporary closure of many of our company owned stores and agents. The Money Transfer Segment has experienced an increase in receivable delinquencies as our agents have been temporarily closed as nonessential services.

In response to the COVID-19 driven impacts, the Company has implemented several key measures to offset the impact across the business, including negotiating certain third party contracts, reducing travel, decreasing planned 2020 capital expenditures, and expanding ATM winterizations (placing them in dormancy status) in more sites and more markets.

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In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions for contracts, hedging relationships, and other transactions affected by reference rate reform due to the anticipated cessation of LIBOR on or before December 31, 2021. This guidance is effective from March 12, 2020 through December 31, 2022 and could impact the accounting for LIBOR provisions in the Company’s unsecured credit agreement. The Company does not expect that the adoption of this guidance will have a significant impact on its consolidated financial statements.

The Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), as of January 1, 2020, which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaced the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. The adoption of this standard did not have a significant impact on the Company's consolidated financial statements and related disclosures.

Settlement assets represent funds received or to be received from agents for unsettled money transfers and from merchants for unsettled prepaid transactions. The Company records corresponding settlement obligations relating to amounts payable. Settlement assets consist of cash and cash equivalents, restricted cash, accounts receivable and prepaid expenses and other current assets. Cash received by Euronet agents and merchants generally become available to the Company 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 the Company.

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

		As of
(in thousands)		March 31, 2020				December 31, 2019
Settlement assets:
Settlement cash and cash equivalents		$	256,456			$	282,188
Settlement restricted cash		36,243				49,168
Accounts receivable		364,148				574,410
Prepaid expenses and other current assets		116,489				107,301
Total settlement assets		$	773,336			$	1,013,067
Settlement obligations:
Trade account payables		$	353,498			$	504,667
Accrued expenses and other current liabilities		419,838				508,400
Total settlement obligations		$	773,336			$	1,013,067

A portion of the Company's credit losses are recorded in the accounts receivable within settlement assets. The balance of credit losses related to accounts receivable within settlement assets was $28.3 million and $24.0 million as of March 31, 2020 and December 31, 2019, respectively.

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

		As of
(in thousands)		March 31, 2020				December 31, 2019				March 31, 2019				December 31, 2018
Cash and cash equivalents		$	709,521			$	786,081			$	558,454			$	385,031
Restricted cash		28,953				34,301				34,398				31,237
ATM cash		558,580				665,641				421,897				395,378
Settlement cash and cash equivalents		256,456				282,188				235,946				273,948
Settlement restricted cash		36,243				49,168				40,547				45,358
Cash and cash equivalents and restricted cash at end of period		$	1,589,753			$	1,817,379			$	1,291,242			$	1,130,952

Earnings Per Share

Basic earnings per share has been computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the respective period. Diluted earnings per share has been computed by dividing earnings available to common stockholders by the weighted average shares outstanding during the respective period, after adjusting for the potential dilution of options to purchase the Company's Common Stock, assumed vesting of restricted stock and the assumed conversion of the Company's convertible debt.

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

	Three Months Ended March 31,
	2020			2019
Computation of diluted weighted average shares outstanding:
Basic weighted average shares outstanding	53,607,104			51,880,534
Incremental shares from assumed exercise of stock options and vesting of restricted stock	1,172,217			1,285,139
Incremental shares from assumed conversion of convertible debentures	—			2,411,194
Diluted weighted average shares outstanding	54,779,321			55,576,867

The table includes all stock options and restricted stock that are dilutive to the Company's weighted average common shares outstanding during the period. The calculation of diluted earnings per share excludes stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding for the three months ended March 31, 2020 and 2019 of approximately 886,000 and 402,000, respectively.

The Company issued new Convertible Senior Notes ("Convertible Notes") due March 2049 on March 18, 2019 and retired the existing convertible notes ("Retired Convertible Notes") that would have matured in 2044 on May 28, 2019. The Company's Convertible Notes currently have, and the Retired Convertible Notes had, a settlement feature requiring the Company 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 the Company's common stock or a combination thereof, at the Company's option. The Company has stated its intent to settle any conversion of these notes by paying cash for the principal value and issuing common stock for any conversion premium. Accordingly, the Convertible Notes and the Retired Convertible Notes were included in the calculation of diluted earnings per share if their inclusion was dilutive. The dilutive effect increases the more the market price exceeds the conversion price. The Retired Convertible Notes had a dilutive effect for the three months ended March 31, 2019 as the $142.59 market price per share of common stock as of March 31, 2019 exceeded the $72.18 conversion price per share. The Convertible Notes would only have a dilutive effect if the market price per share of common stock exceeds the conversion price of $188.73 per share. The market price per share per share of common stock was $85.72, therefore, according to ASC Topic 260, Earnings per Share (“ASC 260”), there was no dilutive effect of the assumed conversion of the debentures as of March 31, 2020, whereas the dilutive effect was 2,411,194 shares for the three months ended March 31, 2019. See Note 8, Debt Obligations, to the Consolidated Financial Statements for more information about the convertible notes.

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Share repurchases

The Company's Board of Directors had authorized a stock repurchase program allowing Euronet to repurchase up to $375 million in value or 10.0 million shares of stock through March 31, 2020. On March 11, 2019, in connection with the issuance of the Convertible Notes, the Board of Directors authorized an additional repurchase program of $120 million in value of the Company's common stock through March 11, 2021. On February 26, 2020, the Company 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. For the first quarter of 2020, the Company repurchased $239.8 million in value of Euronet common stock under the repurchase programs. Repurchases under either 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. The Company recorded foreign currency translation losses of $59.8 million for the three months ended March 31, 2020 and $16.2 million for the three months ended March 31, 2019. There were no reclassifications of foreign currency translation into the consolidated statements of income for the three months ended March 31, 2020 and 2019.

A summary of acquired intangible assets and goodwill activity for the three months ended March 31, 2020 is presented below:

(in thousands)		Acquired Intangible Assets				Goodwill				Total Intangible Assets
Balance as of December 31, 2019		$	141,847			$	743,823			$	885,670
Decreases:
Acquisition		—				(474		)		(474		)
Amortization		(5,726		)		—				(5,726		)
Other (primarily changes in foreign currency exchange rates)		(5,944		)		(28,850		)		(34,794		)
Balance as of March 31, 2020		$	130,177			$	714,499			$	844,676

Estimated amortization expense on intangible assets with finite lives as of March 31, 2020, is expected to total $16.1 million for the remainder of 2020, $20.8 million for 2021, $19.8 million for 2022, $15.3 million for 2023, $9.3 million for 2024 and $6.3 million for 2025.

The Company’s annual goodwill impairment test is performed during the fourth quarter of its fiscal year. The annual impairment test for the year ended December 31, 2019 resulted in no impairment charge. The Company considered the impact of COVID-19 on its operations at the reporting unit level and determined that there was no impairment as of March 31, 2020. 

Determining the fair value of reporting units requires significant management judgment in estimating future cash flows and assessing potential market and economic conditions. It is reasonably possible that the Company’s operations will not perform as expected, or that the estimates or assumptions included in the 2019 annual impairment test could change, which may result in the Company recording material non-cash impairment charges during the year in which these changes take place. In response to the COVID-19 pandemic, we will continue to monitor the evaluation of global medical experts and scientists. As information regarding the impact of the COVID-19 pandemic on the Company's business, including intangible assets, becomes available, the impacts to cash flows and the related impact on recovery of intangible assets will be evaluated.

Accrued expenses and other current liabilities consist of the following:

		As of
(in thousands)		March 31, 2020				December 31, 2019
Accrued expenses		$	228,724			$	246,699
Derivative liabilities		130,555				41,935
Current portion of capital lease obligations		6,047				5,919
Deferred income taxes		—				4
Total		$	365,326			$	294,557

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Accounting Standards Codification ("ASC") Topic 606, “Revenue from Contracts with Customers” (“Topic 606”) requires the deferral of incremental costs to obtain customer contracts, known as contract assets, which are then amortized to expense as part of selling, general and administrative expense over the respective periods of expected benefit. Such costs are not material; however, the Company has implemented processes and controls to record such costs on an ongoing basis and will disclose them if they become material.

The Company records deferred revenues when cash payments are received or due in advance of its performance. The increase in the deferred revenue balance for the first quarter of 2020 is primarily driven by $19.0 million of cash payments received in the current year for which the Company has not yet satisfied the performance obligations, largely offset by $15.7 million of revenues recognized that were included in the deferred revenue balance as of December 31, 2019.

Debt obligations consist of the following:

		As of
(in thousands)		March 31, 2020				December 31, 2019
Credit Facility:
Revolving credit agreement		$	—			$	—
Convertible Debt:
0.75% convertible notes, unsecured, due 2049		440,713				436,965
1.375% Senior Notes, due 2026		661,560				673,440
Other obligations		3,598				6,215
Total debt obligations		1,105,871				1,116,620
Unamortized debt issuance costs		(18,725		)		(19,592		)
Carrying value of debt		1,087,146				1,097,028
Short-term debt obligations and current maturities of long-term debt obligations		(3,528		)		(6,089		)
Long-term debt obligations		$	1,083,618			$	1,090,939

Credit Facility

On October 17, 2018, the Company entered into an unsecured revolving credit agreement (the "Credit Facility") for $1.0 billion that expires on October 17, 2023. Fees and interest on borrowings are based upon the Company's corporate credit rating and are based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over London Inter-Bank Offered Rate (“LIBOR”) or a margin over the base rate, as selected by the Company, with the applicable margin ranging from 1.125% to 2.0% (or 0.175% to 1.0% for base rate loans). The unsecured revolving credit agreement allows for borrowings in Australian Dollars, British Pounds Sterling, Canadian Dollars, Czech Koruna, Danish Krone, euros, Hungarian Forints, Japanese Yen, New Zealand Dollars, Norwegian Krone, Polish Zlotys, Swedish Krona, Swiss Francs, and U.S. Dollars. The revolving credit facility contains a $200 million sublimit for the issuance of letters of credit, a $50 million sublimit for U.S. Dollar swingline loans, and a $90 million sublimit for certain foreign currencies swingline loans.

The unsecured revolving credit agreement contains customary affirmative and negative covenants, events of default and financial covenants. The Company was in compliance with all debt covenants, as of March 31, 2020.

Convertible Debt

On March 18, 2019, the Company completed the sale of $525.0 million of Convertible Senior Notes ("Convertible Notes"). The Convertible Notes mature in March 2049 unless redeemed or converted prior to such date, and are convertible into shares of Euronet Common Stock at a conversion price of approximately $188.73 per share if certain conditions are met (relating to the closing price of Euronet Common Stock exceeding certain thresholds for specified periods). Holders of the Convertible Notes have the option to require the Company to purchase their notes on each of March 15, 2025, March 15, 2029, March 15, 2034,

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March 15, 2039 and March 15, 2044 at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date.

On March 18, 2019, the Company provided a notice of redemption to the trustee of the indenture governing the Company's 1.5% Convertible Senior Notes due 2044 (the "Retired Convertible Notes"), pursuant to which the Company would redeem all of the remaining principal amount outstanding of the Retired Convertible Notes on May 28, 2019 (the "Redemption Date") for cash at a redemption price equal to 100% of the principal amount of the Retired Convertible Notes redeemed plus accrued and unpaid interest, if any, to, but excluding, the Redemption Date.

In accordance with ASC 470-20-30-27, proceeds from the issuance of convertible debt is allocated between debt and equity components so that debt is discounted to reflect the Company's nonconvertible debt borrowing rate. ASC 470-20-35-13 requires the debt discount to be amortized over the period the convertible debt is expected to be outstanding as additional non-cash interest expense. The allocation resulted in an increase to additional paid-in capital of $99.7 million for the Convertible Notes.

Contractual interest expense for the Convertible Notes was $1.0 million for the three months ended March 31, 2020. Accretion expense for the Convertible Notes was $3.7 million for the three months ended March 31, 2020. Contractual interest expense for the Convertible Notes and Retired Convertible Notes was $0.2 million and $1.5 million, respectively for the three months ended March 31, 2019. Accretion expense for the Convertible Notes and Retired Convertible Notes was $0.6 million and $2.9 million, respectively for the three months ended March 31, 2019. The effective interest rate was 4.4% for the three months ended March 31, 2020. As of March 31, 2020, the unamortized discount was $84.3 million and will be amortized through March 2025.

1.375% Senior Notes due 2026

On May 22, 2019, the Company completed the sale of €600 million ($669.9 million) aggregate principal amount of Senior Notes that expire on May 2026 (the “Senior Notes”). The Senior Notes accrue interest at a rate of 1.375% per year, payable annually in arrears commencing May 22, 2020, until maturity or earlier redemption. As of March 31, 2020, the Company has outstanding €600 million ($661.6 million) principal amount of the Senior Notes. In addition, the Company may redeem some or all of these notes on or after February 22, 2026 at their principal amount plus any accrued and unpaid interest.

Other obligations

Certain of the Company's subsidiaries have available lines of credit and overdraft credit facilities that generally provide for short-term borrowings that are used from time to time for working capital purposes. As of March 31, 2020 and December 31, 2019, borrowings under these arrangements were $3.6 million and $6.2 million, respectively.

Uncommitted Line of Credit

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

Foreign currency exchange contracts - Ria Operations and Corporate

In the United States, the Company uses short-duration foreign currency forward contracts, generally with maturities up to 14 days, to offset the fluctuation in foreign currency exchange rates on the collection of money transfer funds between initiation of a transaction and its settlement. Due to the short duration of these contracts and the Company’s credit profile, the Company is generally not required to post collateral with respect to these foreign currency forward contracts. Most derivative contracts executed with counterparties in the U.S. are governed by an International Swaps and Derivatives Association agreement that includes standard netting arrangements; therefore, asset and liability positions from forward contracts and all other foreign exchange transactions with the same counterparty are net settled upon maturity. As of March 31, 2020, the Company had

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foreign currency forward contracts outstanding in the U.S. with a notional value of $213 million. The foreign currency forward contracts consist primarily in Australian dollars, Canadian dollars, British pounds, euros and Mexican pesos.

In addition, the Company uses forward contracts, typically with maturities from a few days to less than one year, to offset

foreign exchange rate fluctuations on certain short-term borrowings that are payable in currencies other than the U.S dollar. As of March 31, 2020, the Company had foreign currency forward contracts outstanding with a notional value of $193 million, primarily in euros.

Foreign currency exchange contracts - xe Operations

xe, writes derivative instruments, primarily foreign currency forward contracts and cross-currency swaps, mostly with counterparties comprised of individuals and small-to-medium size businesses and derives a currency margin from this activity as part of its operations. xe aggregates its foreign currency exposures arising from customer contracts and hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties. Foreign exchange revenues from xe's total portfolio of positions were $18.1 million and $18.6 million for the three months ended March 31, 2020 and 2019, respectively. All of the derivative contracts used in the Company' s xe operations are economic hedges and are not designated as hedges under ASC 815. The duration of these derivative contracts is generally less than one year.

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

The aggregate equivalent U.S. dollar notional amounts of foreign currency derivative customer contracts held by the Company in its xe operations as of March 31, 2020 was approximately $1.5 billion. The significant majority of customer contracts are written in major currencies such as the euro, U.S. dollar, British pound, Australian dollar and New Zealand dollar.

Balance Sheet Presentation

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

		Asset Derivatives										Liability Derivatives
				Fair Value										Fair Value
(in thousands)		Balance Sheet Location		March 31, 2020				December 31, 2019				Balance Sheet Location		March 31, 2020				December 31, 2019
Derivatives not designated as hedging instruments
Foreign currency exchange contracts		Prepaid expenses and other current assets		$	142,148			$	54,765			Accrued expenses and other current liabilities		$	(130,555	)		$	(41,935	)

The following tables summarize the gross and net fair value of derivative assets and liabilities as of March 31, 2020 and December 31, 2019 (in thousands):

Offsetting of Derivative Assets

														Gross Amounts Not Offset in the Consolidated Balance Sheet
As of March 31, 2020		Gross Amounts of Recognized Assets				Gross Amounts Offset in the Consolidated Balance Sheet				Net Amounts Presented in the Consolidated Balance Sheet				Financial Instruments				Cash Collateral Received				Net Amounts
Derivatives subject to a master netting arrangement or similar agreement		$	142,148			$	—			$	142,148			$	(105,671	)		$	(14,633	)		$	21,844
As of December 31, 2019
Derivatives subject to a master netting arrangement or similar agreement		$	54,765			$	—			$	54,765			$	(34,935	)		$	(7,362	)		$	12,468

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Offsetting of Derivative Liabilities

														Gross Amounts Not Offset in the Consolidated Balance Sheet
As of March 31, 2020		Gross Amounts of Recognized Liabilities				Gross Amounts Offset in the Consolidated Balance Sheet				Net Amounts Presented in the Consolidated Balance Sheet				Financial Instruments				Cash Collateral Paid				Net Amounts
Derivatives subject to a master netting arrangement or similar agreement		$	(130,555	)		$	—			$	(130,555	)		$	105,671			$	1,760			$	(23,124	)
As of December 31, 2019
Derivatives subject to a master netting arrangement or similar agreement		$	(41,935	)		$	—			$	(41,935	)		$	34,935			$	827			$	(6,173	)

See Note 10, Fair Value Measurements, for the determination of the fair values of derivatives.

Income Statement Presentation

The following table summarizes the location and amount of gains and losses on derivatives in the Consolidated Statements of Income for the three months ended March 31, 2020 and 2019:

				Amount of Gain Recognized in Income on Derivative Contracts (a)
		Location of Gain Recognized in Income on Derivative Contracts		Three Months Ended March 31,
(in thousands)				2020				2019
Foreign currency exchange contracts - Ria Operations		Foreign currency exchange gain, net		$	1,019			$	2,459

(a) The Company enters into derivative contracts such as foreign currency exchange forwards and cross-currency swaps as part of its xe operations. These derivative contracts are excluded from this table as they are part of the broader disclosure of foreign currency exchange revenues for this business discussed above.

See Note 10, Fair Value Measurements, for the determination of the fair values of derivatives.

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

•	Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

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

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

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The following table details financial assets and liabilities measured and recorded at fair value on a recurring basis:

				As of March 31, 2020
(in thousands)		Balance Sheet Classification		Level 1				Level 2				Level 3				Total
Assets
Foreign currency exchange contracts		Other current assets		$	—			$	142,148			$	—			$	142,148
Liabilities
Foreign currency exchange contracts		Other current liabilities		$	—			$	(130,555	)		$	—			$	(130,555	)

				As of December 31, 2019
(in thousands)		Balance Sheet Classification		Level 1				Level 2				Level 3				Total
Assets
Foreign currency exchange contracts		Other current assets		$	—			$	54,765			$	—			$	54,765
Liabilities
Foreign currency exchange contracts		Other current liabilities		$	—			$	(41,935	)		$	—			$	(41,935	)

Other Fair Value Disclosures

The carrying amounts of cash and cash equivalents, trade accounts receivable, trade accounts payable and short-term debt obligations approximate fair values due to their short maturities. The carrying values of the Company’s revolving credit agreements approximate fair values because interest is based on LIBOR that resets at various intervals of less than one year. The Company estimates the fair value of the Convertible Notes using quoted prices in inactive markets for identical liabilities (Level 2). As of March 31, 2020, the fair values of the Convertible Notes and Senior Notes were $597.0 million and $615.7 million, respectively, with carrying values of $440.7 million and $661.6 million, respectively.

Euronet’s reportable operating segments have been determined in accordance with ASC Topic 280, Segment Reporting (“ASC 280”). The Company currently operates in the following three reportable operating segments:

1)

Through the EFT Processing Segment, the Company processes transactions for a network of ATMs and POS terminals across Europe, the Middle East and Asia Pacific. The Company provides comprehensive electronic payment solutions consisting of ATM cash withdrawal services, ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing, dynamic currency conversion, domestic and international surcharge and other value added services. Through this segment, the Company also offers a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems.

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

3)

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

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In addition, the Company accounts for non-operating activity, share-based compensation expense, certain intersegment eliminations and the costs of providing corporate and other administrative services in its administrative division, “Corporate Services, Eliminations and Other.” These services are not directly identifiable with the Company’s reportable operating segments.

The following tables present the Company’s reportable segment results for the three months ended March 31, 2020 and 2019:

		For the Three Months Ended March 31, 2020
(in thousands)		EFT Processing				epay				Money Transfer				Corporate Services, Eliminations and Other				Consolidated
Total revenues		$	145,825			$	172,911			$	266,234			$	(1,063	)		$	583,907
Operating expenses:
Direct operating costs		87,536				130,074				142,909				(1,063		)		359,456
Salaries and benefits		22,091				15,697				53,864				9,588				101,240
Selling, general and administrative		10,941				8,838				38,582				2,432				60,793
Depreciation and amortization		20,322				1,844				8,571				79				30,816
Total operating expenses		140,890				156,453				243,926				11,036				552,305
Operating income (expense)		$	4,935			$	16,458			$	22,308			$	(12,099	)		$	31,602

		For the Three Months Ended March 31, 2019
(in thousands)		EFT Processing				epay				Money Transfer				Corporate Services, Eliminations and Other				Consolidated
Total revenues		$	145,703			$	176,114			$	256,581			$	(889	)		$	577,509
Operating expenses:
Direct operating costs		83,776				133,525				137,404				(872		)		353,833
Salaries and benefits		19,431				14,753				51,156				7,455				92,795
Selling, general and administrative		9,086				8,052				29,109				1,900				48,147
Depreciation and amortization		16,642				1,785				8,138				75				26,640
Total operating expenses		128,935				158,115				225,807				8,558				521,415
Operating income (expense)		$	16,768			$	17,999			$	30,774			$	(9,447	)		$	56,094

The following table presents the Company’s total assets by reportable segment:

	Total Assets as of
(in thousands)	March 31, 2020				December 31, 2019
EFT Processing	$	1,755,395			$	1,914,144
epay	763,636				962,671
Money Transfer	1,406,116				1,560,136
Corporate Services, Eliminations and Other	259,238				220,715
Total	$	4,184,385			$	4,657,666

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

		For the Three Months Ended March 31, 2020
(in thousands)		EFT Processing				epay				Money Transfer				Total
Europe		$	99,474			$	115,277			$	91,058			$	305,809
North America		15,019				33,852				137,895				186,766
Asia Pacific		31,328				19,274				30,848				81,450
Other		4				4,508				6,433				10,945
Eliminations		—				—				—				(1,063		)
Total		$	145,825			$	172,911			$	266,234			$	583,907

		For the Three Months Ended March 31, 2019
(in thousands)		EFT Processing				epay				Money Transfer				Total
Europe		$	107,611			$	114,906			$	85,559			$	308,076
North America		8,205				39,664				134,832				182,701
Asia Pacific		29,877				17,374				30,713				77,964
Other		10				4,170				5,477				9,657
Eliminations		—				—				—				(889		)
Total		$	145,703			$	176,114			$	256,581			$	577,509

The Company's effective income tax rate was 58.7% and 31.6% for the three months ended March 31, 2020 and 2019, respectively. The Company's effective income tax rate for the three months ended March 31, 2020 was higher than the applicable statutory income tax rate of 21% primarily as a result of certain foreign earnings of the Company being subject to higher local statutory income tax rates. The Company's effective income tax rate for the three months ended March 31, 2019 was higher than the applicable statutory income tax rate of 21% largely because of the application to the Company of the global intangible low-taxed income ("GILTI") tax provision and certain foreign earnings of the Company being subject to higher local statutory income tax rates.

As of March 31, 2020, the Company had $73.0 million of stand-by letters of credit/bank guarantees issued on its behalf, of which $49.7 million are outstanding under the Credit Facility. The remaining stand-by letters of credit/bank guarantees are collateralized by $3.9 million by cash deposits held by the respective issuing banks.

Under certain circumstances, Euronet grants guarantees in support of obligations of subsidiaries. As of March 31, 2020, the Company had granted off balance sheet guarantees for cash in various ATM networks amounting to $11.4 million over the terms of the cash supply agreements and performance guarantees amounting to approximately $37.5 million over the terms of agreements with the customers.

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From time to time, the Company enters into agreements with commercial counterparties that contain indemnification provisions, the terms of which may vary depending on the negotiated terms of each respective agreement. The amount of such potential obligations is generally not stated in the agreements. Euronet's liability under such indemnification provisions may be mitigated by relevant insurance coverage and may be subject to time and materiality limitations, monetary caps and other conditions and defenses. Such indemnification obligations include the following:

•	In connection with contracts with financial institutions in the EFT Processing Segment, the Company is responsible for damage to ATMs and theft of ATM network cash. As of March 31, 2020, the balance of such cash used in the Company's ATM networks for which the Company was responsible was approximately $509 million. The Company maintains insurance policies to mitigate this exposure;

•

In connection with contracts with financial institutions in the EFT Processing Segment, the Company is responsible for losses suffered by its customers and other parties as a result of the breach of its computer systems, including in particular, losses arising from fraudulent transactions made using information stolen through its processing systems. The Company maintains insurance policies to mitigate this exposure;

•	In connection with the license of proprietary systems to customers, the Company provides certain warranties and infringement indemnities to the licensee, which generally warrant that such systems do not infringe on intellectual property owned by third parties and that the systems will perform in accordance with their specifications;

•	Euronet has entered into purchase and service agreements with vendors and consulting agreements with providers of consulting services, pursuant to which the Company has agreed to indemnify certain of such vendors and consultants, respectively, against third-party claims arising from the Company’s use of the vendor’s product or the services of the vendor or consultant;

•

In connection with acquisitions and dispositions of subsidiaries, operating units and business assets, the Company has entered into agreements containing indemnification provisions, which can be generally described as follows: (i) in connection with acquisitions of operating units or assets made by Euronet, the Company has agreed to indemnify the seller against third party claims made against the seller relating to the operating unit or asset and arising after the closing of the transaction, and (ii) in connection with dispositions made by Euronet, Euronet has agreed to indemnify the buyer against damages incurred by the buyer due to the buyer’s reliance on representations and warranties relating to the subject subsidiary, operating unit or business assets in the disposition agreement if such representations or warranties were untrue when made; and

•	Euronet has entered into agreements with certain third parties, including banks that provide fiduciary and other services to Euronet or to the Company’s benefit plans. Under such agreements, the Company has agreed to indemnify such service providers for third-party claims relating to carrying out their respective duties under such agreements.

The Company is also required to meet minimum capitalization and cash requirements of various regulatory authorities in the jurisdictions in which the Company has money transfer operations. The Company has obtained surety bonds in compliance with money transfer licensing requirements of the applicable governmental authorities.

To date, the Company is not aware of any significant claims made by the indemnified parties or third parties to guarantee agreements with the Company and, accordingly, no liabilities were recorded as of March 31, 2020 or December 31, 2019.

From time to time, the Company is a party to legal or regulatory proceedings arising in the ordinary course of its business. Currently, there are no legal proceedings or regulatory findings that management believes, either individually or in the aggregate, would have a material adverse effect on the Company's consolidated financial condition or results of operations. In accordance with U.S. GAAP, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case.

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The Company enters into operating leases for ATM sites, office spaces, retail stores and equipment. The Company's finance leases are immaterial. Right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease terms.

The present value of lease payments is determined using the incremental borrowing rate based on information available at the lease commencement date. All leases with fixed payments, including leases with an initial term of 12 months or less, are recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Most leases include an option to renew, with renewal terms that can extend the lease terms. The exercise of lease renewal options is at the Company’s sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease terms. The Company also has a unilateral termination right for most of the ATM site leases. Since the Company is not reasonably certain to exercise the renewal or termination options, the options are not considered in determining the lease terms, and associated payment impacts are excluded from lease payments.

Certain of the Company's lease agreements include variable rental payments based on revenues generated from the use of the leased location and certain leases include rental payments adjusted periodically for inflation. Variable lease payments are recognized when the event, activity or circumstance in the lease agreement on which those payments are assessed occurs and are excluded from the right of use assets and lease liabilities balances. The lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Future minimum lease payments

Future minimum lease payments under non-cancelable operating leases (with initial lease terms in excess of one year) as of March 31, 2020 are:

	As of March 31, 2020
Maturity of Lease Liabilities (in thousands)	Operating Leases
Remainder of 2020	$	98,827
2021	99,540
2022	70,832
2023	49,670
2024	30,813
Thereafter	46,573
Total lease payments	$	396,255
Less: imputed interest	(23,465		)
Present value of lease liabilities	$	372,790

Lease expense recognized in the Consolidated Statements of Income is summarized as follows:

Lease Expense (in thousands)	Income Statement Classification		Three Months Ended March 31, 2020
Operating lease expense	Selling, general and administrative and Direct operating costs		$	33,188
Variable lease expense	Selling, general and administrative and Direct operating costs		8,680
Total lease expense			$	41,868

Other information about lease amounts recognized in the consolidated financial statements is summarized as follows:

Lease Term and Discount Rate of Operating Leases		As of March 31, 2020
Weighted- average remaining lease term (years)		4.4
Weighted- average discount rate		3.0	%

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The following table presents supplemental cash flow and non-cash information related to leases.

Other Information (in thousands)		Three Months Ended March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities (a)		$	32,792
Supplemental non-cash information on lease liabilities arising from obtaining ROU assets
ROU assets obtained in exchange for new operating lease liabilities		$	50,525

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•	our business plans and financing plans and requirements;

•	trends affecting our business plans and financing plans and requirements;

•	the effect of the COVID-19 pandemic on our business;

•	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.

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•

The EFT Processing Segment, which processes transactions for a network of 42,176 ATMs and approximately 329,000 POS terminals across Europe, the Middle East, Asia Pacific, and the United States. We provide comprehensive electronic payment solutions consisting of ATM cash withdrawal and deposit services, ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing, DCC, and other value added services. Through this segment, we also offer a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems.

•

The epay Segment, which provides distribution, processing and collection services for prepaid mobile airtime and other electronic content. We operate a network of approximately 732,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services and other electronic content in Europe, the Middle East, Asia Pacific, the United States and South America. We also provide vouchers and physical gift fulfillment services in Europe.

•

The Money Transfer Segment, which provides global consumer-to-consumer money transfer services, primarily under the brand names Ria, AFEX Money Express, IME and xe and global account-to-account money transfer services under the brand name xe. We offer services under the brand names Ria, AFEX Money Express and IME through a network of sending agents, Company-owned stores (primarily in North America, Europe and Malaysia) and our websites (riamoneytransfer.com and online.imeremit.com), disbursing money transfers through a worldwide correspondent network that includes approximately 402,000 locations. xe is a provider of foreign currency exchange information and offers money transfer services on its currency data websites (xe.com and x-rates.com). In addition to money transfers, we also offer customers bill payment services (primarily in the U.S.), payment alternatives such as money orders and prepaid debit cards, comprehensive check cashing services for a wide variety of issued checks, along with competitive foreign currency exchange services and prepaid mobile top-up. Through our xe brand, we offer cash management solutions and foreign currency risk management services to small-to-medium sized businesses.

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•	increasing the number of ATMs and cash deposit terminals in our independent ATM networks;

•	increasing transactions processed on our network of owned and operated ATMs and POS devices;

•	signing new outsourced ATM and POS terminal management contracts;

•	expanding value added services and other products offered by our EFT Processing Segment, including the sale of DCC, acquiring and other prepaid card services to banks and retailers;

•	expanding our epay processing network and portfolio of digital content;

•	expanding our money transfer services, cross-currency payments products and bill payment network;

•	expanding our cash management solutions and foreign currency risk management services; and

•	developing our credit and debit card outsourcing business.

•	the impact of competition by banks and other ATM operators and service providers in our current target markets;

•	the demand for our ATM outsourcing services in our current target markets;

•	our ability to develop products or services, including value added services, to drive increases in transactions and revenues;

•	the expansion of our various business lines in markets where we operate and in new markets;

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•	our entry into additional card acceptance and ATM management agreements with banks;

•	our ability to obtain required licenses in markets we intend to enter or expand services;

•	our ability to enter into sponsorship agreements where our licenses are not applicable;

•	our ability to enter into and renew ATM network cash supply agreements with financial institutions;

•	the availability of financing for expansion;

•	our ability to efficiently install ATMs contracted under newly awarded outsourcing agreements;

•	our ability to renew existing contracts at profitable rates;

•	our ability to maintain pricing at current levels or mitigate price reductions in certain markets;

•	the impact of changes in rules imposed by international card organizations such as Visa and Mastercard on card transactions on ATMs, including reductions in ATM interchange fees, restrictions on the ability to apply direct access fees, the ability to offer DCC transactions on ATMs, and increases in fees charged on DCC transactions;

•	the impact of changes in laws and regulations affecting the profitability of our services, including regulation of DCC transactions by the E.U.;

•	the impact of overall market trends on ATM transactions in our current target markets:

•	our ability to expand and sign additional customers for the cross-border merchant processing and acquiring business;

•	the continued development and implementation of our software products and their ability to interact with other leading products; and

•	the duration and severity of the COVID-19 pandemic may limit access to ATM locations, create consumer fear regarding contracting the virus by touching ATM screens, keyboards or cash, impact consumer cross-border travel habits and reduce high margin cross-border transactions.

•	our ability to maintain and renew existing agreements, and to negotiate new agreements in additional markets with mobile operators, digital content providers, agent financial institutions and retailers;

•	our ability to use existing expertise and relationships with mobile operators, digital content providers and retailers to our advantage;

•	the continued use of third-party providers such as ourselves to supply electronic processing solutions for existing and additional digital content;

•	the development of mobile phone networks in the markets in which we do business and the increase in the number of mobile phone users;

•	the overall pace of growth in the prepaid mobile phone and digital content market, including consumer shifts between prepaid and postpaid services;

•	our market share of the retail distribution capacity;

•	the development of new technologies that may compete with POS distribution of prepaid mobile airtime and other products;

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•	the level of commission that is paid to the various intermediaries in the electronic payment distribution chain;

•	our ability to fully recover monies collected by retailers;

•	our ability to add new and differentiated products in addition to those offered by mobile operators;

•	our ability to develop and effectively market additional value added services;

•	our ability to take advantage of cross-selling opportunities with our EFT Processing and Money Transfer Segments, including providing money transfer services through our distribution network;

•	the availability of financing for further expansion; and

•	the duration and severity of the COVID-19 pandemic may limit access to POS merchant locations, our ability to maintain and grow our relationships with digital content providers that are experiencing increased demand due to the COVID-19 pandemic, and increase our credit risk as many of our merchants are temporarily closed as nonessential services.

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•	the continued growth in worker migration and employment opportunities;

•	the mitigation of economic and political factors that have had an adverse impact on money transfer volumes, such as changes in the economic sectors in which immigrants work and the developments in immigration policies in the countries in which we operate;

•	the continuation of the trend of increased use of electronic money transfer and bill payment services among high-income individuals, immigrant workers and the unbanked population in our markets;

•	our ability to maintain our agent and correspondent networks;

•	our ability to offer our products and services or develop new products and services at competitive prices to drive increases in transactions;

•	the development of new technologies that may compete with our money transfer network, and our ability to acquire, develop and implement new technologies;

•	the expansion of our services in markets where we operate and in new markets;

•	our ability to strengthen our brands;

•	our ability to fund working capital requirements;

•	our ability to recover from agents funds collected from customers and our ability to recover advances made to correspondents;

•	our ability to maintain compliance with the regulatory requirements of the jurisdictions in which we operate or plan to operate;

•	our ability to take advantage of cross-selling opportunities with our epay Segment, including providing prepaid services through our stores and agents worldwide;

•	our ability to leverage our banking and merchant/retailer relationships to expand money transfer corridors to Europe, Asia and Africa, including high growth corridors to Central and Eastern European countries;

•	the availability of financing for further expansion;

•	the ability to maintain banking relationships necessary for us to service our customers;

•	our ability to successfully expand our agent network in Europe using our payment institution licenses under the Second Payment Services Directive ("PSD2") and using our various licenses in the United States;

•	our ability to provide additional value-added products under the xe brand; and

•	the duration and severity of the COVID-19 pandemic impact on worker migration and employment opportunities, the ability of our customers to access agent network locations due to government ordered business closures, and the potential for an increase in credit risk and customer agent receivable defaults.

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