EURONET WORLDWIDE, INC. - Quarter Report: 2007 September (Form 10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-31648

EURONET WORLDWIDE, INC.

(Exact name of the registrant as specified in its charter)


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

4601 COLLEGE BOULEVARD, SUITE 300
LEAWOOD, KANSAS 66211
(Address of principal executive offices)

(913) 327-4200
(Registrant’s telephone number, including area code)

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares of the issuer’s common stock, $0.02 par value, outstanding as of October 31, 2007 was 48,711,295 shares.

Table of Contents


PART I—FINANCIAL INFORMATION			3
ITEM 1. FINANCIAL STATEMENTS			3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			37
ITEM 4. CONTROLS AND PROCEDURES			38
PART II—OTHER INFORMATION			38
ITEM 1. LEGAL PROCEEDINGS			38
ITEM 1A. RISK FACTORS			38
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITES AND USE OF PROCEEDS			42
ITEM 6. EXHIBITS			43

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)


	As of September			As of
	30, 2007			December 31,
	(unaudited)			2006
ASSETS
Current assets:
Cash and cash equivalents	$	251,435		$	321,058
Restricted cash		107,538			80,703
Inventory — PINs and other		41,071			49,511
Trade accounts receivable, net of allowances for doubtful accounts of $6,023 at September 30, 2007 and $2,137 at December 31, 2006		312,075			212,631
Deferred income taxes, net		27,686			9,356
Prepaid expenses and other current assets		25,656			15,212

Total current assets		765,461			688,471
Property and equipment, net of accumulated depreciation of $116,359 at September 30, 2007 and $91,883 at December 31, 2006		76,864			55,174
Goodwill		756,173			297,134
Acquired intangible assets, net of accumulated amortization of $39,316 at September 30, 2007 and $23,073 at December 31, 2006		162,043			50,649
Deferred income taxes, net		19,718			19,004
Other assets, net of accumulated amortization of $13,431 at September 30, 2007 and $10,542 at December 31, 2006		24,644			19,208

Total assets	$	1,804,903		$	1,129,640

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	274,163		$	269,212
Accrued expenses and other current liabilities		186,818			99,039
Current installments on capital lease obligations		5,514			6,592
Short-term debt obligations and current maturities of long-term debt obligations		5,498			4,378
Income taxes payable		20,415			9,463
Deferred income taxes		6,954			4,108
Deferred revenue		12,327			11,318

Total current liabilities		511,689			404,110
Debt obligations, net of current portion		501,633			349,073
Capital lease obligations, excluding current installments		12,260			13,409
Deferred income taxes		75,825			44,094
Other long-term liabilities		2,639			1,811
Minority interest		9,171			8,350

Total liabilities		1,113,217			820,847

Stockholders’ equity:
Preferred Stock, $0.02 par value. Authorized 10,000,000 shares; none issued		—			—
Common Stock, $0.02 par value. 90,000,000 shares authorized; 48,823,598 and 37,647,782 issued at September 30, 2007 and December 31, 2006, respectively		972			749
Additional paid-in-capital		653,087			338,216
Treasury stock, at cost, 205,919 and 207,755 shares at September 30, 2007 and December 31, 2006, respectively		(387	)		(196	)
Subscriptions receivable		(39	)		(170	)
Accumulated deficit		(25,531	)		(59,409	)
Restricted reserve		953			780
Accumulated other comprehensive income		62,631			28,823

Total stockholders’ equity		691,686			308,793

Total liabilities and stockholders’ equity	$	1,804,903		$	1,129,640

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
(Unaudited, in thousands, except share and per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Revenues:
EFT Processing Segment	$	48,113		$	40,539		$	135,844		$	116,166
Prepaid Processing Segment		144,631			120,240			414,442			343,957
Money Transfer Segment		53,573			874			103,581			2,303


Total revenues		246,317			161,653			653,867			462,426


Operating expenses:
Direct operating costs		165,079			112,488			446,154			319,602
Salaries and benefits		32,437			18,676			82,155			56,164
Selling, general and administrative		16,889			9,971			45,104			27,684
Depreciation and amortization		13,478			7,512			34,333			21,575


Total operating expenses		227,883			148,647			607,746			425,025


Operating income		18,434			13,006			46,121			37,401

Other income (expense):
Interest income		4,053			3,682			12,494			9,791
Interest expense		(7,474	)		(3,802	)		(18,837	)		(11,055	)
Income from unconsolidated affiliates		(9	)		197			867			555
Loss on early retirement of debt		(411	)		—			(411)			—
Foreign currency exchange gain, net		8,561			1,090			10,302			5,420


Other income, net		4,720			1,167			4,415			4,711


Income from continuing operations before income taxes and minority interest		23,154			14,173			50,536			42,112
Income tax expense		(6,634	)		(3,599	)		(15,451	)		(10,712	)
Minority interest		(599	)		(243	)		(1,551	)		(716	)


Income from continuing operations		15,921			10,331			33,534			30,684
Gain from discontinued operations, net		—			—			344			—

Net income		15,921			10,331			33,878			30,684
Translation adjustment		22,395			5,321			34,390			14,047
Unrealized loss on interest rate swaps		(553	)		—			(582	)		—

Comprehensive income	$	37,763		$	15,652		$	67,686		$	44,731


Earnings per share — basic:
Continuing operations	$	0.33		$	0.28		$	0.76		$	0.83
Discontinued operations		—			—			0.01			—


Total	$	0.33		$	0.28		$	0.77		$	0.83


Basic weighted average shares outstanding		48,523,643			37,230,518			44,222,453			36,938,652

Earnings per share — diluted:
Continuing operations	$	0.31		$	0.26		$	0.72		$	0.78
Discontinued operations		—			—			0.01			—


Total	$	0.31		$	0.26		$	0.73		$	0.78


Diluted weighted average shares outstanding		54,439,296			42,525,511			49,905,599			42,463,401

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited, in thousands)


	Nine Months Ended September 30,
	2007			2006

Net income	$	33,878		$	30,684

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		34,333			21,575
Share-based compensation		6,138			5,832
Unrealized foreign exchange gain, net		(8,825	)		(4,841	)
Loss (gain) on disposal of property and equipment		37			(165	)
Gain on discontinued operations		(344	)		—
Deferred income tax benefit		524			(3,271	)
Income assigned to minority interest		1,551			716
Income from unconsolidated affiliates		(867	)		(555	)
Amortization of debt obligations issuance expense		1,769			1,581

Changes in working capital, net of amounts acquired:
Income taxes payable, net		(777	)		2,916
Restricted cash		17,198			(8,997	)
Inventory — PINs and other		12,177			(8,793	)
Trade accounts receivable		(33,931	)		10,945
Prepaid expenses and other current assets		(5,837	)		3,318
Trade accounts payable		(26,454	)		(10,741	)
Deferred revenue		493			1,750
Accrued expenses and other current liabilities		28,529			9,336
Other, net		(285	)		(670	)


Net cash provided by operating activities		59,307			50,620


Cash flows from investing activities:
Acquisitions, net of cash acquired		(352,573	)		(2,312	)
Acquisition escrow		(26,000	)		—
Proceeds from sale of property and equipment		127			732
Purchases of property and equipment		(21,781	)		(15,586	)
Purchases of other long-term assets		(3,420	)		(3,106	)
Other, net		596			—


Net cash used in investing activities		(403,051	)		(20,272	)


Cash flows from financing activities:
Proceeds from issuance of shares		165,389			12,456
Borrowings from short-term debt obligations and revolving credit agreements		639,119			12,523
Payments on short-term debt obligations and revolving credit agreements		(687,515	)		(18,464	)
Proceeds from long-term debt obligations		190,000			—
Repayment of long-term debt		(25,000	)		—
Repayment of capital lease obligations		(7,603	)		(4,639	)
Debt issuance costs		(3,827	)		—
Proceeds received from minority interest stockholders		188			—
Cash dividends paid to minority interest stockholders		(1,572	)		—
Other, net		115			(196	)


Net cash provided by financing activities		269,294			1,680


Effect of exchange differences on cash		4,827			3,406


Increase in cash and cash equivalents		(69,623	)		35,434
Cash and cash equivalents at beginning of period		321,058			219,932


Cash and cash equivalents at end of period	$	251,435		$	255,366


Interest paid during the period	$	15,102		$	7,366
Income taxes paid during the period		13,428			8,862

See accompanying notes to the consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) GENERAL

Organization

Euronet Worldwide, Inc. and its subsidiaries (the “Company” or “Euronet”) is an industry leader in processing secure electronic financial transactions. Euronet’s Prepaid Processing Segment is one of the world’s largest providers of “top-up” services for prepaid products, primarily prepaid mobile airtime. The EFT Processing Segment provides end-to-end solutions relating to operations of automated teller machine (“ATM”) and Point of Sale (“POS”) networks, and debit and credit card processing in Europe, the Middle East and Asia. The Money Transfer Segment, comprised primarily of the Company’s subsidiary, RIA Envia, Inc. (“RIA”), and its operating subsidiaries, is the third-largest global money transfer company based upon revenues and volumes and provides services through a sending network of agents and Company-owned stores in the U.S., the Caribbean, Europe and Asia, disbursing money transfers through a worldwide payer network.

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 of normal interim closing procedures) necessary to present fairly the financial position of the Company as of September 30, 2007, the results of its operations for the three- and nine-month periods ended September 30, 2007 and 2006 and cash flows for the nine-month periods ended September 30, 2007 and 2006.

The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of Euronet for the year ended December 31, 2006, including the notes thereto, set forth in the Company’s Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for the three- and nine-month periods ended September 30, 2007 are not necessarily indicative of the results to be expected for the full year ending December 31, 2007. Certain amounts in prior years have been reclassified to conform to current period presentation.

Goodwill and acquired intangible translation adjustment

During the third quarter 2007 the Company corrected an immaterial error related to foreign currency translation adjustments for goodwill and acquired intangible assets recorded in connection with acquisitions completed in periods prior to December 31, 2006. The impact of this adjustment increased goodwill by $18.4 million, acquired intangible assets by $3.1 million, deferred income tax liabilities by $1.0 million and accumulated other comprehensive income by $21.4 million as of December 31, 2006. Additionally, the adjustment increased intangible amortization expense by $0.1 million and $0.3 million for the three- and nine-month periods ended September 30, 2006, respectively, and increased comprehensive income by $3.0 million and $10.1 million for the three- and nine-month periods ended September 30, 2006, respectively. This correction did not impact the Company’s cash flows from operating, financing or investing activities.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

Money transfer settlement obligations

Money transfer settlement obligations are recorded in accrued expenses and other current liabilities on the Company’s unaudited consolidated balance sheet and consist of amounts owed by Euronet to money transfer recipients. As of September 30, 2007, the Company’s money transfer settlement obligations were $43.0 million.

Accounting for derivative instruments and hedging activities

The Company accounts for derivative instruments and hedging activities in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS No. 133”), which requires that all derivative instruments be recognized as either assets or liabilities on the balance sheet at fair value. During the second quarter 2007, the Company entered into derivative instruments to manage exposure to interest rate risk that are considered cash flow hedges under the provisions of SFAS No. 133. To qualify for hedge accounting under SFAS No. 133, the details for the hedging relationship must be formally documented at the inception of the arrangement, including the Company’s hedging strategy, risk management objective, the specific risk being hedged, the derivative instrument being used, the item being hedged, an assessment of hedge effectiveness and how effectiveness will continue to be assessed and measured. For the effective portion of a cash flow hedge, changes in the value of the hedge instrument are recorded temporarily in stockholders’ equity as a component of other comprehensive income and then recognized as an adjustment to interest expense over the term of the hedging instrument.

In the Money Transfer Segment, the Company enters into foreign currency forward contracts to offset foreign currency exposure related to the notional value of money transfer transactions collected in currencies other than the U.S. dollar. These forward contracts are considered derivative instruments under the provisions of SFAS No. 133, however, the Company does not designate such instruments as hedges. Accordingly, changes in the value of these contracts are recognized immediately as a component of foreign currency exchange gain, net in the unaudited consolidated statement of income and comprehensive income. The impact of changes in value of these forward contracts, together with the impact of the change in value of the related foreign currency denominated receivable, on the Company’s unaudited consolidated statement of income and comprehensive income is not significant.

Cash flows resulting from derivative instruments are classified as cash flows from operating activities in the Company’s unaudited consolidated statement of cash flows. The Company enters into derivative instruments with highly credit-worthy financial institutions and does not use derivative instruments for trading or speculative purposes. See Note 9, Derivative Instruments and Hedging Activities, for further discussion of derivative instruments.

Presentation of taxes collected and remitted to governmental authorities

During 2006, the Emerging Issues Task Force (“EITF”) issued EITF 06-3, “How Taxes Collected and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation).” The Company presents taxes collected and remitted to governmental authorities on a net basis in the accompanying consolidated statements of income.

Accounting for uncertainty in income taxes

Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation of SFAS No. 109, “Accounting for Income Taxes.” FIN 48 seeks to reduce the diversity in practice associated with certain aspects of the measurement and recognition related to accounting for income taxes.

The Company’s policy is to record estimated interest and penalties related to the underpayment of income taxes as income tax expense in the consolidated statements of income. See Note 14, Income Taxes, for further discussion regarding the adoption of FIN 48.

Recent accounting pronouncements

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 expands the use of fair value accounting but does not affect existing standards which require assets or liabilities to be carried at fair value. Under SFAS No. 159, a company may elect to use fair value to measure accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees and issued debt. Other eligible items include firm commitments for financial instruments that otherwise would not be recognized at inception and non-cash warranty obligations where a warrantor is permitted to pay a third party to provide the warranty goods or services. If the use of fair value is elected, any upfront costs and fees related to the item must be recognized in earnings and cannot be deferred, such as deferred financing costs. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. At the adoption date, unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings. Subsequent to the adoption of SFAS No. 159, changes in fair value are recognized in earnings. SFAS No. 159 is effective for Euronet beginning in the first quarter 2008. Euronet is currently determining whether fair value accounting is appropriate for any of its eligible items and cannot estimate the impact, if any, which SFAS No. 159 will have on its consolidated results of operations and financial condition.

(3) 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 the assumed conversion of the Company’s convertible debentures, shares issuable in connection with acquisition obligations, options to purchase the Company’s common stock and restricted stock. The following table provides a reconciliation of net income to earnings available to common stockholders and the computation of diluted weighted average number of common shares outstanding:


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollar amounts in thousands)	2007		2006		2007		2006
Reconciliation of net income to earnings available to earnings available to common stockholders:
Net income	$	15,921	$	10,331	$	33,878	$	30,684
Add: interest expense of 1.625% convertible debentures		836		797		2,370		2,391


Earnings available to common stockholders	$	16,757	$	11,128	$	36,248	$	33,075


Computation of diluted weighted average shares outstanding:
Basic weighted average shares outstanding		48,523,643		37,230,518		44,222,453		36,938,652
Additional shares from assumed conversion of 1.625% convertible debentures		4,163,488		4,163,488		4,163,488		4,163,488
Weighted average shares issuable in connection with acquisition obligations (See Note 4 - Acquisitions)		714,644		—		467,672		48,685
Incremental shares from assumed conversion of stock options and restricted stock		1,037,521		1,131,505		1,051,986		1,312,576


Diluted weighted average shares outstanding		54,439,296		42,525,511		49,905,599		42,463,401

The table includes all stock options and restricted stock that are dilutive to Euronet’s weighted average common shares outstanding during the period. For both the three- and nine-month periods ended September 30, 2007, the table does not include 567,093 stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding. For the three-month period ended September 30, 2006, the table does not include 592,400 stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding. For the nine-month period ended September 30, 2006, the table does not include 55,000 stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding.

The Company has $140 million of 1.625% convertible debentures due 2024 and $175 million of 3.50% convertible debentures due 2025 outstanding that, if converted, would have a potentially dilutive effect on the Company’s stock. These debentures are convertible into 4.2 million shares of Common Stock for the $140 million 1.625% issue, and 4.3 million shares of Common Stock for the $175 million 3.50% issue only upon the occurrence of certain conditions. As required by EITF Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share,” if dilutive, the impact of the contingently issuable shares must be included in the calculation of diluted earnings per share under the “if-converted” method, regardless of whether the conditions upon which the debentures would be convertible into shares of the Company’s Common Stock have been met. Under the if-converted method, the assumed conversion of the 1.625% convertible debentures was dilutive for the three- and nine-month periods ended September 30, 2007 and 2006. Under the if-converted method, the assumed conversion of the 3.50% convertible debentures was anti-dilutive for the three- and nine-month periods ended September 30, 2007 and 2006.

(4) ACQUISITIONS

In accordance with SFAS No. 141, “Business Combinations,” the Company allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired based on estimated fair values. Any excess purchase price over those fair values is recorded as goodwill. The fair value assigned to intangible assets acquired is supported by valuations using estimates and assumptions provided by management. For certain acquisitions, management engages an appraiser to assist in the valuation process.

2007 Acquisitions:

Acquisition of RIA

In April 2007, the Company completed the acquisition of the common stock of RIA, which expanded the Company’s money transfer operations in the U.S. and internationally. The purchase price of $504.3 million was comprised of $358.3 million in cash, 4,053,606 shares of Euronet Common Stock valued at $108.9 million, 3,685,098 contingent value rights (“CVRs”) and stock appreciation rights (“SARs”) valued at a total of $32.1 million and transaction costs of approximately $5.0 million. The Company financed the cash portion of the purchase price through a combination of cash on hand and $190 million in additional debt obligations. The following table summarizes the allocation of the purchase price to the fair values of the acquired tangible and intangible assets at the acquisition date, which remains preliminary while management completes its valuation of the fair value of the net assets acquired.


	Estimated
(dollar amounts in thousands)	Life
Current assets		$	78,220
Property and equipment	various		10,854
Customer relationships	3 - 8 years		73,280
Trademarks and trade names	20 years		36,760
Software	5 years		1,610
Non-compete agreements	3 years		270
Other non-current assets			1,396
Goodwill	Indefinite		403,523

Assets acquired			605,913

Current liabilities			(85,190	)
Non-current liabilities			(1,574	)
Deferred income tax liability			(14,852	)

Net assets acquired		$	504,297

Pursuant to the terms of the Stock Purchase Agreement in the RIA acquisition (as amended, the “Stock Purchase Agreement”), $35.0 million in cash and 276,382 shares of Euronet Common Stock valued at $7.4 million are being held in escrow to secure certain obligations of the sellers under the Stock Purchase Agreement. These amounts have been reflected in the purchase price because the Company has determined beyond a reasonable doubt that the obligations will be met. The 3,685,098 CVRs mature on October 1, 2008 and will result in the issuance of up to $20 million of additional shares of Euronet Common Stock or payment of additional cash, at the Company’s option, if the price of Euronet Common Stock is less than $32.56 on the maturity date. The 3,685,098 SARs entitle the sellers to acquire additional shares of Euronet Common Stock at an exercise price of $27.14 at any time through October 1, 2008. Combined, the CVRs and SARs entitle the sellers to additional consideration of at least $20 million in Euronet Common Stock or cash. Management has initially estimated the total fair value of the CVRs and SARs at approximately $32.1 million using a Black Scholes pricing model. These and other terms and conditions applicable to the CVRs and SARs are set forth in the agreements governing these instruments.

Additionally, in April 2007, the Company combined its previous money transfer business with RIA and incurred total exit costs of approximately $0.9 million during the second quarter 2007. These costs were recorded as operating expenses and represent the accelerated depreciation and amortization of property and equipment, software and leasehold improvements that were disposed of during the second quarter 2007; the write off of marketing materials and trademarks that have been discontinued or will not be used; the write off of accounts receivable from agents that did not meet RIA’s credit requirements; and severance and retention payments made to certain employees. Additional costs incurred in association with exiting the Company’s previous money transfer business, if any, are not expected to be significant.

Other acquisitions:

During the nine-months ended September 30, 2007, the Company completed three other acquisitions described below for an aggregate purchase price of $26.5 million, comprised of $18.1 million in cash, 275,429 shares of Euronet Common Stock valued at $7.6 million and notes payable of $0.8 million. In connection with one of these acquisitions, the Company agreed to certain contingent consideration arrangements based on the value of Euronet Common Stock and the achievement of certain performance criteria. Upon the achievement of certain performance criteria, during 2009 and 2010, the Company may have to pay a total of $2.5 million in cash or 75,489 shares of Euronet Common Stock, at the option of the seller.

	•		During January 2007, EFT Services Holding BV and Euronet Adminisztracios Kft, both wholly-owned subsidiaries of Euronet, completed the acquisition of a total of 100% of the share capital of Brodos SRL in Romania (“Brodos Romania”). Brodos Romania is a leading electronic prepaid mobile airtime processor that expanded the Company’s Prepaid Processing Segment business to Romania.

	•		During February 2007, e-pay Holdings Limited, a wholly-owned subsidiary of Euronet, completed the acquisition of all of the share capital of Omega Logic, Ltd. (“Omega Logic”). Omega Logic is a prepaid top-up company based, and primarily operating, in the U.K. This acquisition enhanced our Prepaid Processing Segment business in the U.K.

	•		During April 2007, PaySpot, Inc. (a wholly-owned subsidiary of Euronet) acquired customer relationships from Synergy Telecom, Inc. (“Synergy”) and Synergy agreed not to compete with PaySpot in the prepaid mobile phone top-up business in the U.S. for a period of five years. This acquisition enhances the Company’s Prepaid Processing Segment business in the U.S.

As of September 30, 2007, 75,743 shares of Euronet Common Stock issued in connection with these acquisitions remains in escrow subject to the achievement of certain performance criteria. These shares have been reflected in the purchase price because the Company has determined beyond a reasonable doubt that the performance criteria will be met.

Agreement to acquire La Nacional

During January 2007, the Company signed a stock purchase agreement to acquire Envios de Valores La Nacional Corp. and its U.S. based affiliates (“La Nacional”), a money transfer company originating transactions through a network of sending agents and company-owned stores. See Note 12, Commitments, Litigation and Contingencies, for further disclosure regarding the agreement to acquire La Nacional.

2006 Acquisition:

In January 2006, the Company completed the acquisition of the assets of Essentis Limited (“Essentis”) for approximately $2.9 million, which was comprised of $0.9 million in cash and approximately $2.0 million in assumed liabilities. Essentis is a U.K. company that owns and develops software packages that enhance Euronet’s outsourcing and software offerings to banks. Essentis is reported with our software business in the Company’s EFT Processing Segment. There are no potential additional purchase price or escrow arrangements associated with the acquisition of Essentis.

Pro Forma and Condensed Statements of Net Income:

The following unaudited pro forma financial information presents the condensed combined results of operations of Euronet for the three-months ended September 30, 2006 and nine-months ended September 30, 2007 and 2006, as if the acquisition of RIA described above had occurred January 1, 2006. Adjustments were made to reflect the impact of events that are a direct result of the acquisition and are expected to have a continuing impact on the Company’s combined results of operations, including amortization of purchased intangible assets that would have been recorded if the acquisition had occurred at the beginning of the periods presented. The pro forma financial information is not intended to represent, or be indicative of, the consolidated results of operations or financial condition of Euronet that would have been reported had the acquisitions been completed as of the beginning of the periods presented. Moreover, the pro forma financial information should not be considered as representative of the future consolidated results of operations or financial condition of Euronet.


	Pro Forma
	Three Months Ended		Nine Months Ended September 30,
(in thousands, except per share data)	September 30, 2006		2007		2006
Revenues	$	207,961	$	700,056	$	595,033
Operating income	$	15,771	$	47,156	$	42,766
Net income	$	6,578	$	26,703	$	17,004

Per share data:
Net income per share-basic	$	0.16	$	0.59	$	0.41
Net income per share-diluted	$	0.15	$	0.56	$	0.39

(5) PROPERTY AND EQUIPMENT, NET

The components of property and equipment, net of accumulated depreciation and amortization, as of September 30, 2007 and December 31, 2006 are as follows:


	September 30,			December 31,
(in thousands)	2007			2006
ATMs	$	87,797		$	75,568
POS terminals		29,688			25,473
Vehicles and office equipment		23,664			8,990
Computers and software		52,074			37,026

		193,223			147,057
Less accumulated depreciation and amortization		(116,359	)		(91,883	)

Total	$	76,864		$	55,174

(6) GOODWILL AND INTANGIBLE ASSETS

A summary of intangible assets and goodwill activity for the nine-month period ended September 30, 2007 is presented below:


	Amortizable					Total
	Intangible					Intangible
(in thousands):	Assets			Goodwill		Assets
Balance as of December 31, 2006 (Adjusted — See Note 1)	$	50,649		$	297,134	$	347,783
Increases (decreases):
Acquisition of RIA		111,920			403,523		515,443
Other 2007 acquisitions		8,366			21,553		29,919
Adjustment to 2006 acquisition		(116	)		—		(116	)
Amortization		(14,394	)		—		(14,394	)
Other (primarily changes in foreign currency exchange rates)		5,618			33,963		39,581

Balance as of September 30, 2007	$	162,043		$	756,173	$	918,216

Estimated annual amortization expense on intangible assets with finite lives, before income taxes, as of September 30, 2007, is expected to total $20.7 million for 2007, $24.9 million for 2008, $24.8 million for 2009, $24.5 million for 2010, $19.2 million for 2011 and $16.5 million for 2012.

The Company’s annual goodwill impairment test is performed during the fourth quarter. For the year ended December 31, 2006, the results of the Company’s goodwill impairment test indicated that there were no impairments. Determining the fair value of reporting units for the purpose of the goodwill impairment test 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 estimates or assumptions could change, which may result in the Company recording material non-cash impairment charges during the year in which these changes take place.

(7) OTHER ASSETS

During the third quarter 2007, the Company recognized $0.3 million of equity losses related to e-pay Malaysia’s unsuccessful expansion efforts into Indonesia. The Company has a 40% minority investment in e-pay Malaysia.

During October 2007, e-pay Malaysia reported that it was ceasing operations in Indonesia. It is uncertain whether this business development will adversely impact the Company’s share of equity earnings in this minority investment. As of September 30, 2007, the Company’s investment in e-pay Malaysia was $2.6 million. Based on the performance of e-pay Malaysia’s core business, management of the Company does not believe that the amount recorded as investment in e-pay Malaysia is impaired.

(8) DEBT OBLIGATIONS

A summary of debt obligation activity for the nine-month period ended September 30, 2007 is presented below:

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1.625% 3.50%

Revolving Convertible Convertible

Credit Other Debt Capital Debentures Debentures

(in thousands) Facilities Obligations Leases Due 2024 Due 2025 Term Loan Total

Balance at January 1, 2007
$ 34,073 $ 4,378 $ 20,001 $ 140,000 $ 175,000 $ — $ 373,452

Increases (decreases):

Net borrowings (repayments)
(10,762 ) (1,045 ) (5,051 ) — — 165,000 148,142

Capital lease interest
— — 1,301 — — — 1,301

Foreign exchange gain (loss)
222 265 1,523 — — — 2,010

Balance at September 30, 2007
23,533 3,598 17,774 140,000 175,000 165,000 524,905

Less — current maturities
— (3,598 ) (5,514 ) — — (1,900 ) (11,012 )

Long-term obligations at September 30, 2007
$ 23,533 $ — $ 12,260 $ 140,000 $ 175,000 $ 163,100 $ 513,893

In connection with the completion of the acquisition of RIA during April 2007, the Company entered into a $290 million secured syndicated credit facility consisting of a $190 million seven-year term loan, which was fully-drawn at closing, and a $100 million five-year revolving credit facility (the “Credit Facility”) that replaced an existing $50 million revolving credit facility. The $190 million seven-year term loan bears interest at LIBOR plus 200 basis points or prime plus 100 basis points and contains a 1% per annum principal amortization requirement, payable quarterly, with the remaining balance outstanding due at the end of year seven. The $100 million five-year revolving line of credit bears interest at LIBOR or prime plus a margin that adjusts each quarter based upon the Company’s consolidated total leverage ratio. The weighted average interest rate of the Company’s borrowings under the revolving credit facility was 8.2% as of September 30, 2007.

The term loan may be expanded by up to an additional $150 million and the revolving credit facility may be expanded by up to an additional $25 million, subject to satisfaction of certain conditions including pro-forma debt covenant compliance. The agreements for the credit facility contain certain mandatory prepayments, customary events of default and financial covenants, including leverage ratios. The leverage ratios step down on various dates through September 2008. Financing costs of $4.8 million have been deferred and are being amortized over the terms of the respective loans.

During the nine-months ended September 30, 2007, the Company repaid $25.0 million of the term loan, of which $1.0 million was scheduled repayments. The remaining $24.0 million represents prepayment of amounts not yet due and resulted in the Company recognizing a $0.4 million loss on early retirement of debt.

(9) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

During the second quarter 2007, the Company entered into interest rate swap agreements for a total notional amount of $50 million to manage interest rate exposure related to a portion of the term loan, which currently bears interest at LIBOR plus 200 basis points. The interest rate swap agreements are determined to be cash flow hedges and effectively convert $50 million of the term loan to a fixed interest rate of 7.3% through the May 2009 maturity date of the swap agreements. As of September 30, 2007, the Company has recorded a liability of $0.6 million in the other long-term liabilities caption on the Company’s consolidated balance sheets to recognize the fair value of the swap agreements. The offset is recorded in accumulated other comprehensive income. The fair value of swap agreements is based on market quotes received from the agreement counterparties and represents the net amount the Company would have been required to pay to terminate the positions.

As of September 30, 2007, the Company had foreign currency forward contracts outstanding with a notional value of $41.0 million, primarily in euros, which were not designated as hedges and had a weighted average maturity of six days.

(10) EQUITY PRIVATE PLACEMENT

During March 2007, the Company entered into a securities purchase agreement with certain accredited investors to issue and sell 6,374,528 shares of Common Stock in a private placement. The offering price for the shares was $25.00 per share and the gross proceeds of the offering were approximately $159.4 million. The net proceeds from the sale, after deducting commissions and expenses, were approximately $154.3 million.

(11) SEGMENT INFORMATION

Euronet’s reportable operating segments have been determined in accordance with SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information.” Effective January 1, 2007, the Company began reporting and managing the operations of the EFT Processing Segment and the former Software Solutions Segment on a combined basis. Additionally, as a result of the acquisition of RIA in April 2007, the Company began reporting the Money Transfer Segment. The Company’s former money transfer business was

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previously reported within the Prepaid Processing Segment. Previously reported amounts have been adjusted to reflect these changes, which did not impact the Company’s consolidated financial statements. As a result of these changes, 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, Asia and Africa. The Company provides comprehensive electronic payment solutions consisting of ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing and electronic recharge services for prepaid mobile airtime. Through this segment, the Company also offers a suite of integrated electronic financial transaction (“EFT”) software solutions for electronic payment, merchant acquiring, card issuing and transaction delivery systems.

2) Through the Prepaid Processing Segment, the Company provides distribution of prepaid mobile airtime and other prepaid products and collection services in the U.S., Europe, Africa and Asia Pacific.

3) Through the Money Transfer Segment, the Company provides global money transfer and bill payment services through a sending network of agents and Company-owned stores primarily in North America, the Caribbean, Europe and Asia Pacific, disbursing money transfers through a worldwide payer network.

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

The following tables present the segment results of the Company’s operations for the three- and nine-month periods ended September 30, 2007 and 2006:

For the Three Months Ended September 30, 2007

Corporate

Services,

EFT Prepaid Money Eliminations

(in thousands) Processing Processing Transfer and Other Consolidated

Total revenues
$ 48,113 $ 144,631 $ 53,573 $ — $ 246,317

Operating expenses:

Direct operating costs
18,644 118,038 28,397 — 165,079

Salaries and benefits
10,616 7,081 10,784 3,956 32,437

Selling, general and administrative
3,981 4,879 6,777 1,252 16,889

Depreciation and amortization
4,641 4,230 4,205 402 13,478

Total operating expenses
37,882 134,228 50,163 5,610 227,883

Operating income (loss)
$ 10,231 $ 10,403 $ 3,410 $ (5,610 ) $ 18,434

For the Three Months Ended September 30, 2006

Corporate

Services,

EFT Prepaid Money Eliminations

(in thousands) Processing Processing Transfer and Other Consolidated

Total revenues
$ 40,539 $ 120,240 $ 874 $ — $ 161,653

Operating expenses:

Direct operating costs
14,674 97,294 520 — 112,488

Salaries and benefits
8,964 5,488 631 3,593 18,676

Selling, general and administrative
3,970 4,338 455 1,208 9,971

Depreciation and amortization
3,791 3,559 106 56 7,512

Total operating expenses
31,399 110,679 1,712 4,857 148,647

Operating income (loss)
$ 9,140 $ 9,561 $ (838 ) $ (4,857 ) $ 13,006

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For the Nine Months Ended September 30, 2007

Corporate

Services,

EFT Prepaid Money Eliminations

(in thousands) Processing Processing Transfer and Other Consolidated

Total revenues
$ 135,844 $ 414,442 $ 103,581 $ — $ 653,867

Operating expenses:

Direct operating costs
53,335 337,516 55,303 — 446,154

Salaries and benefits
30,427 20,486 21,207 10,035 82,155

Selling, general and administrative
12,933 14,845 14,047 3,279 45,104

Depreciation and amortization
12,733 11,976 9,101 523 34,333

Total operating expenses
109,428 384,823 99,658 13,837 607,746

Operating income (loss)
$ 26,416 $ 29,619 $ 3,923 $ (13,837 ) $ 46,121

Total assets as of September 30, 2007
$ 182,735 $ 712,695 $ 682,197 $ 227,276 $ 1,804,903

For the Nine Months Ended September 30, 2006

Corporate

Services,

EFT Prepaid Money Eliminations

(in thousands) Processing Processing Transfer and Other Consolidated

Total revenues
$ 116,166 $ 343,957 $ 2,303 $ — $ 462,426

Operating expenses:

Direct operating costs
41,531 276,708 1,363 — 319,602

Salaries and benefits
26,643 17,038 1,570 10,913 56,164

Selling, general and administrative
11,513 12,048 1,128 2,995 27,684

Depreciation and amortization
10,649 10,523 259 144 21,575

Total operating expenses
90,336 316,317 4,320 14,052 425,025

Operating income (loss)
$ 25,830 $ 27,640 $ (2,017 ) $ (14,052 ) $ 37,401

Total assets as of December 31, 2006
$ 172,191 $ 694,437 $ 18,387 $ 244,625 $ 1,129,640

(12) COMMITMENTS, LITIGATION AND CONTINGENCIES

Future minimum lease payments

Future minimum lease payments under noncancelable operating leases (with remaining lease terms in excess of one year) as of September 30, 2007 are:

(in thousands)

Year ending December 31,

2007 (three months)
$ 4,666

2008
15,689

2009
15,210

2010
12,754

2011
7,420

thereafter
3,325

Total minimum lease payments
$ 59,064

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Litigation

During 2005, a former cash supply contractor in Central Europe (the “Contractor”) claimed that the Company owed it approximately $2.0 million for the provision of cash during the fourth quarter 1999 and first quarter 2000 that had not been returned. This claim was made after the Company terminated its business with the Contractor and established a cash supply agreement with another supplier. In the first quarter 2006, the Contractor initiated legal action in Budapest, Hungary regarding the claim. In April 2007, an arbitration tribunal awarded the Contractor $1.0 million, plus $0.2 million in interest, under the claim, which was recorded as selling, general and administrative expenses of the Company’s EFT Processing Segment during the first quarter 2007 and paid in the second quarter 2007.

Contingencies

In connection with the agreement to acquire La Nacional, in January 2007, the Company deposited $26 million in an escrow account created for the proposed acquisition, which can only be released by mutual agreement of the Company and La Nacional or through legal remedies available under the agreement. On February 6, 2007, two employees of La Nacional working in different La Nacional stores were arrested for allegedly violating federal money laundering laws and certain state statutes. On April 5, 2007, the Company gave notice to the stockholder of La Nacional of the termination of the stock purchase agreement and requested the release of the escrowed funds under the terms of the stock purchase agreement. La Nacional is contesting the Company’s request for release of the escrowed funds. While pursuing all legal remedies available, the Company is also engaged in negotiations to determine whether the dispute can be resolved through revised terms for the acquisition.

In addition, from time to time, the Company is a party to litigation arising in the ordinary course of its business. Currently, there are no legal proceedings that management believes, either individually or in the aggregate, would have a material adverse effect upon the consolidated results of operations or financial condition of the Company. The Company expenses legal costs in connection with loss contingencies when incurred.

During 2006, the Internal Revenue Service (“IRS”) announced that Internal Revenue Code Section 4251 (relating to communications excise tax) will no longer apply to, among other services, prepaid mobile airtime services such as those offered by the Company’s Prepaid Processing Segment’s U.S. operations. Additionally, companies that paid this excise tax during the period beginning on March 1, 2003 and ending on July 31, 2006, are entitled to a credit or refund of amounts paid in conjunction with the filing of 2006 federal income tax returns. The Company has claimed a refund for amounts paid during this period and has been informed by the IRS that the refund is currently being examined. Therefore, no benefit for any potential recovery has been recorded in the Consolidated Financial Statements, and no such amounts will be recorded until such time as the refund is considered “realizable” as stipulated under SFAS No. 5, “Accounting for Contingencies.”

(13) GUARANTEES

As of September 30, 2007, the Company had $36.7 million of bank guarantees issued on its behalf, of which $1.7 million are collateralized by cash deposits held by the respective issuing banks and $35.5 million are supported by stand-by letters of credit issued against the Company’s revolving credit facility.

Euronet regularly grants guarantees of the obligations of its wholly-owned subsidiaries. As of September 30, 2007, the Company had granted guarantees in the following amounts:

• Cash in various ATM networks — $24.6 million over the terms of the cash supply agreements.

• Performance guarantees — $26.7 million over the terms of the agreements with the customers.

From time to time, Euronet enters into agreements with unaffiliated parties 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. Our liability under such indemnification provisions 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 that supply cash to ATMs in the EFT Processing Segment, the Company is responsible for the loss of network cash that, generally, is not recorded on the Company’s consolidated balance sheet, because the cash remains the property of the financial institutions while in the ATMs. As of September 30, 2007, the balance of ATM network cash for which the Company was responsible was approximately $300 million. The Company maintains insurance policies to mitigate this exposure;

• In connection with the license of proprietary systems to customers, Euronet 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 our 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;

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• 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 made by Euronet, the Company has agreed to indemnify the seller against third party claims made against the seller relating to the subject subsidiary, 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;

• 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 the carrying out of their respective duties under such agreements; and

• The Company has issued surety bonds in compliance with money transfer licensing requirements of certain states.

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. 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 September 30, 2007 or December 31, 2006.

(14) INCOME TAXES

The Company’s effective tax rate, after consideration of minority interest, was 29.4% and 25.8% for the three-month periods ended September 30, 2007 and 2006, respectively, and was 31.5% and 25.9% for the nine-month periods ended September 30, 2007 and 2006, respectively. This increase in the 2007 effective tax rate relates to several factors. During the nine-months ended September 30, 2007, the Company recognized $3.7 million of non-cash deferred income tax expense related to the deduction of goodwill amortization expense for U.S. income tax purposes, a substantial portion of which relates to the Company’s acquisition of RIA. Additionally, during the second quarter 2007, the Company reversed $2.7 million in valuation allowances recorded against deferred tax assets related to U.S. Federal and state net operating losses; the Company concluded that it is more likely than not that the net deferred tax asset of $2.7 million will be realized because the Company would employ tax-planning strategies to utilize its net operating losses prior to expiration in the event they were to expire.

Since the Company is in a net operating loss position for its U.S. operations, valuation allowances have been recorded in instances where the Company determines that it is more likely than not that a tax benefit will not be realized. Accordingly, tax benefit or expense associated with foreign currency gains or losses incurred by the Company’s U.S. entities have historically been offset through an adjustment to the valuation allowance. During the quarter ended September 30, 2007, the Company’s U.S. operations recognized significant realized and unrealized foreign currency gains. The impact of these gains, as well as the above-mentioned reversal of $2.7 million of valuation allowances for tax-planning strategies, reduced the Company’s remaining valuation allowances related to its U.S. operations to $0.1 million. Consequently, should the Company’s U.S. operations generate pre-tax book income, including income from the recognition of additional foreign currency gains, the Company would be required to recognize tax expense on such income. For income tax purposes, however, the Company has approximately $114 million in net operating losses as of September 30, 2007 that will offset future taxable income and result in little or no cash taxes paid in the U.S. until the net operating losses have been fully utilized.

Other factors contributing to the increase in the effective tax rate include profits generated by RIA in jurisdictions having tax rates that are higher than the Company’s historical effective tax rate, and the recognition of significant deferred tax benefits from net operating losses in India and Poland during 2006.

As of January 1, 2007, the Company adopted the provisions of FIN 48 and has analyzed its filing positions in all federal, state and foreign jurisdictions. As a result of this analysis, the Company recognized less than $0.1 million in additional unrecognized tax benefits. The amount of unrecognized tax benefits as of January 1, 2007 included approximately $5.9 million of uncertain tax benefits and other items. Approximately $2.8 million of the unrecognized tax benefits would impact the Company’s provision for income taxes and effective tax rate, if recognized. Total estimated accrued interest and penalties related to the underpayment of income taxes was $0.5 million as of January 1, 2007 and September 30, 2007. The following tax years remain open in the Company’s major jurisdictions as of January 1, 2007:

Poland
1999 through 2006

U.S. (Federal)
2000 through 2006

Spain
2002 through 2006

Australia
2003 through 2006

U.K.
2004 through 2006

Germany
2004 through 2006

As of September 30, 2007, the Company’s open tax years in Spain are 2003 through 2006. The application of FIN 48 requires significant judgment in assessing the outcome of future tax examinations and their potential impact on the Company’s estimated effective tax rate and

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the value of deferred tax assets, such as those related to the Company’s net operating loss carryforwards. It is reasonably possible that amounts reserved for potential exposure could significantly change as a result of the conclusion of tax examinations and, accordingly, materially affect our operating results. During the nine-months ended September 30, 2007, the Company’s unrecognized tax benefits increased by $0.7 million and the amount that would impact the Company’s provision for income taxes, if recognized, increased by $0.5 million.

(15) GAIN FROM DISCONTINUED OPERATIONS

In July 2002, the Company sold substantially all of the non-current assets and related capital lease obligations of its ATM processing business in France to Atos S.A. During the first quarter 2007, the Company received a binding French Supreme Court decision relating to a lawsuit in France that resulted in a cash recovery and gain to the Company of $0.3 million, net of legal costs. There were no assets or liabilities held for sale at September 30, 2007 or December 31, 2006.

(16) RELATED PARTY TRANSACTIONS

The Company leases an airplane from a company owned by Mr. Michael J. Brown, Euronet’s Chief Executive Officer and Chairman of the Board of Directors, and Mr. Daniel R. Henry, a member of Euronet’s Board of Directors. The airplane is leased for business use on a per flight hour basis with no minimum usage requirement. During the nine-months ended September 30, 2007, Euronet incurred less than $0.1 million in expenses for the use of this airplane. Euronet did not incur any expense for the use of this plane during the nine-months ended September 30, 2006.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

COMPANY OVERVIEW, GEOGRAPHIC LOCATIONS AND PRINCIPAL PRODUCTS AND SERVICES

Euronet Worldwide, Inc. (together with our subsidiaries, “we,” “us,” “Euronet” or the “Company”) is a leading electronic transaction processor, offering automated teller machine (“ATM”) and Point of Sale (“POS”) outsourcing services, integrated electronic financial transaction (“EFT”) software, network gateways and electronic prepaid top-up services to financial institutions, mobile operators and retailers and electronic consumer money transfer and bill payment services. The EFT Processing Segment provides end to end solutions relating to operations of ATMs and POS networks, and debit and credit card processing in Europe, the Middle East, and Asia. We are one of the largest providers of prepaid mobile airtime processing. Based on revenues and volumes, the current year acquisition of RIA Envia, Inc. (“RIA”) also makes us the third-largest global money transfer company.

Effective January 1, 2007, we began reporting and managing the operations of the EFT Processing Segment and the former Software Solutions Segment on a combined basis. Additionally, as a result of the acquisition of RIA in April 2007, we commenced reporting of the Money Transfer Segment. Previously reported amounts have been adjusted to reflect these changes, which did not impact our consolidated financial statements. As a result of these changes, we operate in the following three principal business segments.

• An EFT Processing Segment, which processes transactions for a network of 10,516 ATMs and more than 48,000 POS terminals across Europe, Asia and Africa. We provide comprehensive electronic payment solutions consisting of ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing and electronic recharge services for prepaid mobile airtime. Through this segment, we also offer a suite of integrated EFT software solutions for electronic payment, merchant acquiring, card issuing and transaction delivery systems.

• A Prepaid Processing Segment, which provides distribution of prepaid mobile airtime and other prepaid products and collection services for various prepaid products, cards and services. Including terminals operated by unconsolidated subsidiaries, we operate a network of approximately 370,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services in the U.S., Europe, Africa and Asia Pacific.

• A Money Transfer Segment, which provides global money transfer and bill payment services through a sending network of agents and Company-owned stores primarily in North America, the Caribbean, Europe and Asia-Pacific, disbursing money transfers through a worldwide payer network.

We have six processing centers in Europe, two in Asia and two in the U.S., and we have 24 principal offices in Europe, five in the Asia-Pacific region, four in the U.S. and one each in the Middle East and Latin America. Our executive offices are located in Leawood, Kansas, USA.

SOURCES OF REVENUES AND CASH FLOW

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

EFT Processing Segment – Revenue in the EFT Processing Segment, which represented approximately 21% of total consolidated revenue for the nine-months ended September 30, 2007, is derived from fees charged for transactions effected by cardholders on our proprietary network of ATMs, as well as fixed management fees and transaction fees we charge to banks for operating ATMs and processing credit cards under outsourcing agreements. Through our proprietary network, we generally charge fees for four types of ATM transactions: i) cash withdrawals, ii) balance inquiries, iii) transactions not completed because the relevant card issuer does not give authorization, and iv) prepaid telecommunication recharges. Revenue in this segment is also derived from licensing, professional services and maintenance fees for software and sales of related hardware, primarily to financial institutions around the world.

Prepaid Processing Segment – Revenue in the Prepaid Processing Segment, which represented approximately 63% of total consolidated revenue for the nine-months ended September 30, 2007, is primarily derived from commissions and processing fees received from mobile and other telecommunication operators, or from distributors of prepaid wireless products for the distribution and/or processing of prepaid mobile airtime. Agreements with mobile operators are important to the success of our business. These agreements permit us to distribute prepaid mobile airtime to the mobile operators’ customers. Other products offered by this segment include prepaid long distance calling card plans, prepaid Internet plans, prepaid debit cards, prepaid gift cards and prepaid mobile content such as ring tones and games.

Money Transfer Segment – Revenue in the Money Transfer Segment, which represents approximately 16% of total consolidated revenue for the nine-months ended September 30, 2007, is primarily derived through the charging of a transaction fee, as well as the difference between purchasing foreign currency at wholesale exchange rates and selling the foreign currency to consumers at retail exchange rates. We have an origination network in place comprised of agents and Company-owned stores primarily in North America, the Caribbean,

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Europe and Asia-Pacific and a worldwide network of distribution agents, consisting primarily of financial institutions in the transfer destination countries. Origination and distribution agents each earn fees for cash collection and distribution services. These fees are recognized as direct operating costs at the time of sale.

OPPORTUNITIES AND CHALLENGES

EFT Processing Segment - The continued expansion and development of our EFT Processing Segment business will depend on various factors including, but not necessarily limited to, the following:

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

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

• the ability to develop products or services to drive increases in transactions;

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

• the entrance into additional card acceptance and ATM management agreements with banks;

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

• the availability of financing for expansion;

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

• the successful entry into the cross-border merchant processing and acquiring business;

• the successful entry into the card issuing and outsourcing business; and

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

Software products are an integral part of our product lines, and our investment in research, development, delivery and customer support reflects our ongoing commitment to an expanded customer base. We have been able to enter into agreements under which we use our software in lieu of cash as our initial capital contributions to new transaction processing joint ventures. Such contributions sometimes permit us to enter new markets without significant capital investment.

We have entered the cross-border merchant processing and acquiring business through the execution of an agreement with a large petrol retailer in Central Europe. Since the beginning of 2007, we have devoted significant resources to the development of the necessary processing systems and capabilities to enter this business, which involves the purchase and design of hardware and software. Merchant acquiring involves processing credit and debit card transactions that are made on POS terminals, including authorization, settlement, and processing of settlement files. It may involve the assumption of credit risk, as the principal amount of transactions may be settled to merchants before settlements are received from card associations.

Prepaid Processing Segment – The continued expansion and development of the Prepaid Processing Segment business will depend on various factors, including, but not necessarily limited to, the following:

• the ability to negotiate new agreements in additional markets with mobile phone operators, agent financial institutions and retailers;

• the ability to use existing expertise and relationships with mobile operators and retailers to our advantage;

• the continuation of the trend towards conversion from scratch card solutions to electronic processing solutions for prepaid mobile airtime among mobile phone users and the continued use of third party providers such as ourselves to supply this service;

• the development of mobile phone networks in these markets and the increase in the number of mobile phone users;

• the overall pace of growth in the prepaid mobile phone market;

• our market share of the retail distribution capacity;

• the level of commission that is paid to the various intermediaries in the prepaid mobile airtime distribution chain;

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

• the ability to take advantage of cross-selling opportunities with our Money Transfer Segment, including providing money transfer services through our prepaid locations;

• the availability of financing for further expansion; and

• our ability to successfully integrate newly acquired operations with our existing operations.

During the first quarter 2007, we completed the acquisitions of the stock of Omega Logic, Ltd. (“Omega Logic”) and Brodos SRL in Romania (“Brodos Romania”). Omega Logic is a prepaid top-up company based, and primarily operating, in the U.K. that enhanced our Prepaid Processing Segment business in the U.K. Brodos Romania is a leading electronic prepaid mobile airtime processor in Romania.

Money Transfer Segment – We completed the acquisition of RIA in April 2007, which expanded our money transfer and bill payment services business and makes Euronet the third-largest global money transfer company based upon revenues and volumes. RIA processes approximately $4.5 billion in money transfers annually, originates transactions through a network of approximately 11,000 sending agents, including Company-owned stores, located throughout 13 countries in North America, the Caribbean, Europe and Asia-Pacific.

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RIA disburses money transfers through a payer network of over 56,000 locations in over 100 countries. The Money Transfer Segment provides us with additional expansion opportunities.

The expansion and development of our money transfer business will depend on various factors, including, but not necessarily limited to, the following:

• 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 the immigration developments occurring in the U.S. during 2006 and 2007;

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

• the ability to develop products or services at competitive prices to drive increases in transactions;

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

• the ability to strengthen our brands;

• our ability to fund working capital requirements;

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

• the ability to take advantage of cross-selling opportunities with our Prepaid Processing Segment, including providing prepaid services through RIA’s stores and agents worldwide;

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

• our ability to successfully integrate RIA with our existing operations.

Like other participants in the money transfer industry, as a result of immigration developments, downturns in certain labor markets and/or other economic factors, growth rates in money transfers from the U.S. to Mexico have slowed. This slowing of growth began during the middle of 2006 and continues to impact money transfer revenues for transactions from the U.S. to Mexico. Despite recent improvement in this trend, we believe that it is too early to conclude on the impact, if any, to our results of operations.

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

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SEGMENT SUMMARY RESULTS OF OPERATIONS

Revenue and operating income by segment for the three- and nine-month periods ended September 30, 2007 and 2006 are summarized in the tables below:

Revenues for the Three

Months Ended Revenues for the Nine Months

September 30, Year-over-Year Change Ended September 30, Year-over-Year Change

Increase Increase Increase Increase

(in thousands) 2007 2006 Amount Percent 2007 2006 Amount Percent

EFT Processing
$ 48,113 $ 40,539 $ 7,574 19 % $ 135,844 $ 116,166 $ 19,678 17 %

Prepaid Processing
144,631 120,240 24,391 20 % 414,442 343,957 70,485 20 %

Money Transfer
53,573 874 52,699 6030 % 103,581 2,303 101,278 4398 %

Total
$ 246,317 $ 161,653 $ 84,664 52 % $ 653,867 $ 462,426 $ 191,441 41 %

Operating Income for the Operating Income for the

Three Months Ended Nine Months Ended

September 30, Year-over-Year Change September 30, Year-over-Year Change

Increase Increase Increase Increase

(Decrease) (Decrease) (Decrease) (Decrease)

(in thousands) 2007 2006 Amount Percent 2007 2006 Amount Percent

EFT Processing
$ 10,231 $ 9,140 $ 1,091 12 % $ 26,416 $ 25,830 $ 586 2 %

Prepaid Processing
10,403 9,561 842 9 % 29,619 27,640 1,979 7 %

Money Transfer
3,410 (838 ) 4,248 n/m 3,923 (2,017 ) 5,940 n/m

Total
24,044 17,863 6,181 35 % 59,958 51,453 8,505 17 %

Corporate services
(5,610 ) (4,857 ) (753 ) 16 % (13,837 ) (14,052 ) 215 (2 %)

Total
$ 18,434 $ 13,006 $ 5,428 42 % $ 46,121 $ 37,401 $ 8,720 23 %

n/m — not meaningful

Amounts shown above for the three- and nine-month periods ended September 30, 2006 have been adjusted for the impact of the correction for an immaterial error related to foreign currency translation adjustments for goodwill and acquired intangible assets. See Note 1 — General to the unaudited consolidated financial statements for further discussion.

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COMPARISON OF OPERATING RESULTS FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2007 AND 2006

EFT PROCESSING SEGMENT

The following table presents the results of operations for the three- and nine-month periods ended September 30, 2007 and 2006 for our EFT Processing Segment:

Results for the Three Results for the Nine

Months Ended September 30, Year-over-Year Change Months Ended September 30, Year-over-Year Change

Increase Increase

Increase Increase (Decrease) (Decrease)

(dollar amounts in thousands) 2007 2006 Amount Percent 2007 2006 Amount Percent

Total revenues
$ 48,113 $ 40,539 $ 7,574 19 % $ 135,844 $ 116,166 $ 19,678 17 %

Operating expenses:

Direct operating costs
18,644 14,674 3,970 27 % 53,335 41,531 11,804 28 %

Salaries and benefits
10,616 8,964 1,652 18 % 30,427 26,643 3,784 14 %

Selling, general and administrative
3,981 3,970 11 0 % 12,933 11,513 1,420 12 %

Depreciation and amortization
4,641 3,791 850 22 % 12,733 10,649 2,084 20 %

Total operating expenses
37,882 31,399 6,483 21 % 109,428 90,336 19,092 21 %

Operating income
$ 10,231 $ 9,140 $ 1,091 12 % $ 26,416 $ 25,830 $ 586 2 %

Transactions processed (in millions)
156.4 119.1 37.3 31 % 434.0 335.9 98.1 29 %

ATMs as of September 30
10,516 8,491 2,025 24 % 10,516 8,491 2,025 24 %

Average ATMs
10,296 8,351 1,945 23 % 9,664 7,837 1,827 23 %

As discussed previously, effective January 1, 2007, we began reporting and managing the operations of the EFT Processing Segment and the former Software Solutions Segment on a combined basis. Previously reported amounts have been adjusted to reflect these changes.

Revenues

Our revenues for the nine-months ended September 30, 2007 increased when compared to the nine-months ended September 30, 2006 primarily due to increases in the number of ATMs operated and, for owned ATMs, the number of transactions processed as well as the impact of foreign currency translations to the U.S. dollar. These increases were attributable to most of our operations, but primarily our operations in Poland, India and Greece and our software operations.

Partially offsetting these increases was a reduction in revenues associated with the extension of certain customer contracts for several years beyond their original terms. In exchange for these extensions, we paid or received up-front payments, and agreed on gradually declining fee structures. As prescribed by U.S. GAAP, revenue under these contracts is recognized based on proportional performance of services over the term of the contract, which generally results in “straight-line” (i.e., consistent value per period) revenue recognition of the contracts’ total cash flows, including any up-front payment. This straight-line revenue recognition results in revenue that is less than contractual invoices and cash receipts in the early periods of the agreement and revenue that is greater than the contractual invoices and cash receipts in the later years of the agreement. As a result of the revenue recognition under these contracts, amounts invoiced under the contracts exceeded the amount of revenue that we recognized by about $1.8 million for the nine-months ended September 30, 2007. We may decide to enter into similar arrangements with other EFT Processing Segment customers.

Average monthly revenues per ATM was $1,558 for the third quarter 2007 and $1,562 for the nine-months ended September 30, 2007 compared to $1,618 for the third quarter 2006 and $1,647 for the nine-months ended September 30, 2006. Revenues per transaction was $0.31 for both the third quarter 2007 and nine-months ended September 30, 2007 compared to $0.34 for the third quarter 2006 and $0.35 for the nine-months ended September 30, 2006. The decrease in revenues per ATM and revenues per transaction was due to the addition of ATMs where related revenue has not yet developed to mature levels, the impact of the contract extensions discussed above and the addition of ATMs in India where revenues per ATM have been historically lower than Central and Eastern Europe generally due to lower labor costs.

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Direct operating costs

Direct operating costs consist primarily of site rental fees, cash delivery costs, cash supply costs, maintenance, insurance, telecommunications and the cost of data center operations-related personnel, as well as the cost of facilities for our processing centers and other processing center related expenses. The increase in direct operating cost for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 is attributed to the increase in the number of ATMs under operation, the number of transactions processed and foreign currency translations to the U.S. dollar.

Gross margin

Gross margin, which is calculated as revenues less direct operating costs, increased to $29.5 million for the third quarter 2007 and $82.5 million for the nine-months ended September 30, 2007 from $25.9 million for the third quarter 2006 and $74.6 million for the nine-months ended September 30, 2006. Gross margin as a percentage of revenues was 61% for the nine-months ended September 30, 2007 compared to 64% for the nine-months ended September 30, 2006. The decrease in gross margin as a percentage of revenues is due to the impact of accounting for certain contract renewals and other fluctuations in revenues discussed above, as well as the increased contributions of our subsidiary in India, which has historically earned a lower gross margin than our other operations.

Salaries and benefits

The increase in salaries and benefits for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 was due to staffing costs to expand in emerging markets, such as India, China and new European markets, and additional products, such as POS, card processing and cross-border merchant processing and acquiring. Salaries and benefits also increased as a result of general merit increases awarded to employees and certain additional staffing requirements due to the larger number of ATMs under operation and transactions processed. As a percentage of revenue, however, these costs remained relatively flat at 22% of revenues for the nine-months ended September 30, 2007 compared to 23% for the nine-months ended September 30, 2006.

Selling, general and administrative

The increase in selling, general and administrative expenses for the nine-months ended September 30, 2007, compared to the nine-months ended September 30, 2006, is primarily due to the $1.2 million loss recorded in the first quarter 2007 under an arbitral award granted by a tribunal in Budapest, Hungary arising from a claim by a former cash supply contractor in Central Europe. The cash supply contractor claimed it provided us with cash during the fourth quarter 1999 and first quarter 2000 that was not returned. Excluding this loss, as a percentage of revenues, these costs decreased slightly to 9% of revenues for the nine-months ended September 30, 2007 from 10% of revenues for the nine-months ended September 30, 2006.

Depreciation and amortization

The increase in depreciation and amortization expense for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 is due primarily to additional equipment and software for the expansion of our Hungarian processing center incurred during 2006, additional ATMs in Poland and India and additional software amortization recorded by our Essentis software product. As a percentage of revenue, these expenses remained flat at 9% of revenues for both the nine-months ended September 30, 2007 and 2006.

Operating income

Operating income increased slightly for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006. This increase includes the arbitration loss described under selling, general and administrative expenses above. Excluding the arbitration loss: the increase in operating income for the segment is generally the result of increased revenues and gross margin described above, combined with leveraging certain management cost structures; and operating income as a percentage of revenues was 20% for the nine-months ended September 30, 2007 compared to 22% for the nine-months ended September 30, 2006 and $0.06 per transaction for the nine-months ended September 30, 2007 compared to $0.08 per transaction for the nine-months ended September 30, 2006. Also excluding the arbitration loss, average monthly operating income per ATM was $318 for the nine-months ended September 30, 2007 compared to $366 for the nine-months ended September 30, 2006. The decreases in operating income as a percentage of revenue, operating income per transaction and average monthly operating income per ATM were generally the result of the decreases in gross margin, revenues per ATM and revenues per transaction described above.

For the nine-months ended September 30, 2007 and 2006, operating income includes $0.9 million and $1.0 million, respectively, in losses associated with expanding operations for the Company’s 75% owned joint venture in China. As of September 30, 2007, we have deployed and are providing all of the day-to-day outsourcing services for over 100 ATMs. Under current agreements, we expect that the total number of ATMs in China deployed and for which we will be providing day-to-day outsourcing services will increase to over 800 during the next 12 to 18 months.

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Software sales backlog

As of September 30, 2007, we had a software contract backlog of approximately $7.0 million compared to approximately $10.3 million as of September 30, 2006. Such backlog represents software sales based on signed contracts under which we continue to have performance milestones before the sale will be completed. We recognize revenue on a percentage of completion method, based on certain milestone conditions, for our software solutions. As a result, we have not recognized all the revenues associated with these sales contracts. We cannot give assurances that the milestones under the contracts will be completed or that we will be able to recognize the related revenue within the next year.

PREPAID PROCESSING SEGMENT

The following table presents the results of operations for the three- and nine-month periods ended September 30, 2007 and 2006 for our Prepaid Processing Segment:

Results for the Three Results for the Nine

Months Ended September Months Ended September

30, Year-over-Year Change 30, Year-over-Year Change

Increase Increase Increase Increase

(dollar amounts in thousands) 2007 2006 Amount Percent 2007 2006 Amount Percent

Total revenues
$ 144,631 $ 120,240 $ 24,391 20 % $ 414,442 $ 343,957 $ 70,485 20 %

Operating expenses:

Direct operating costs
118,038 97,294 20,744 21 % 337,516 276,708 60,808 22 %

Salaries and benefits
7,081 5,488 1,593 29 % 20,486 17,038 3,448 20 %

Selling, general and administrative
4,879 4,338 541 12 % 14,845 12,048 2,797 23 %

Depreciation and amortization
4,230 3,559 671 19 % 11,976 10,523 1,453 14 %

Total operating expenses
134,228 110,679 23,549 21 % 384,823 316,317 68,506 22 %

Operating income
$ 10,403 $ 9,561 $ 842 9 % $ 29,619 $ 27,640 $ 1,979 7 %

Transactions processed (in millions)
162.4 121.7 40.7 33 % 462.1 325.8 136.3 42 %

Effective in the second quarter 2007, as a result of the acquisition of RIA, the Company established the Money Transfer Segment. The Company’s previous money transfer business was relatively insignificant and was reported and managed as part of the Company’s Prepaid Processing Segment. We have adjusted previously reported amounts to reflect the reclassification of the money transfer business from the Prepaid Processing Segment to Money Transfer Segment for all periods presented.

Revenues

The increase in revenues for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 was generally attributable to: (i) the increase in total transactions processed across all of our Prepaid Processing Segment operations, (ii) the first quarter 2007 acquisitions of Omega Logic and Brodos Romania, and (iii) foreign currency translations to the U.S. dollar. The acquisitions of Omega Logic and Brodos Romania contributed revenues of $13.6 million for the third quarter 2007 and $32.3 million for the nine-months ended September 30, 2007. Revenue growth was partially offset by reduced revenues in Spain resulting from the second quarter 2006 expiration of a preferential commission arrangement with a Spanish mobile operator. Additionally, in certain more mature markets, such as the U.K., Australia, New Zealand and Spain, our revenue growth has slowed substantially and, in some cases, revenues have decreased because conversion from scratch cards to electronic top-up is substantially complete and certain mobile operators and retailers are driving competitive reductions in pricing and margins. We expect most of our future revenue growth to be derived from: (i) developing markets or markets in which there is organic growth in the prepaid sector overall, (ii) from continued conversion from scratch cards to electronic top-up in less mature markets, (iii) from additional products sold over the base of prepaid processing terminals, and (iv) possibly, from acquisitions.

Revenues per transaction decreased to $0.89 for the third quarter 2007 and $0.90 for the nine-months ended September 30, 2007 from $0.99 for the third quarter 2006 and $1.06 for the nine-months ended September 30, 2006 due primarily to the growth in revenues and transactions recorded by our ATX subsidiary, which is 51% Euronet-owned. In accordance with U.S. GAAP, ATX is consolidated and the amounts in our financial statements and in the table above reflect 100% of ATX. Results attributable to the 49% minority owner are reflected in the minority interest line of our consolidated statements of income and comprehensive income. ATX provides only transaction processing services without direct costs and other operating costs generally associated with installing and managing terminals; therefore, the revenue we recognize from these transactions is a fraction of that recognized on average transactions but with very low cost. Transaction volumes at ATX have increased by approximately 140% for the nine-months ended September 30, 2007 compared to the same period in 2006. The expiration of preferential commission arrangements in Spain discussed above also contributed to the decrease in revenues per transaction. Partially offsetting the decreases described above was the growth in both volumes

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and revenues in Australia and the U.S., which generally have higher revenues per transaction, but also pay higher commission rates to retailers, than our other Prepaid Processing subsidiaries.

Direct operating costs

Direct operating costs in the Prepaid Processing Segment include the commissions we pay to retail merchants for the distribution and sale of prepaid mobile airtime and other prepaid products, as well as expenses required to operate POS terminals. Because of their nature, these expenditures generally fluctuate directly with revenues and processed transactions. The increase in direct operating costs is generally attributable to the increase in total transactions processed and foreign currency translations to the U.S. dollar compared to the prior year.

Gross margin

Gross margin, which represents revenues less direct costs, was $26.6 million for the third quarter 2007 and $76.9 million for the nine-months ended September 30, 2007 compared to $22.9 million for the third quarter 2006 and $67.2 million for the nine-months ended September 30, 2006. Gross margin as a percentage of revenues was relatively flat at 19% for the nine-months ended September 30, 2007 compared to 20% for the nine-months ended September 30, 2006. Gross margin per transaction was $0.16 for the third quarter 2007 and $0.17 for the nine-months ended September 30, 2007 compared to $0.19 for the third quarter 2006 and $0.21 for the nine-months ended September 30, 2006. Most of the reduction in gross margin per transaction is due to the growth of revenues and transactions at our ATX subsidiary, the expiration of preferential commission arrangements in Spain discussed above and the general maturity of the prepaid mobile airtime business in many of our markets.

Salaries and benefits

The increase in salaries and benefits for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 is primarily the result of the acquisitions of Brodos Romania and Omega Logic, as well as additional overhead to support development in other new and growing markets. As a percentage of revenue, salaries and benefits have decreased slightly to 4.9% for the nine-months ended September 30, 2007, from 5.0% for the same period in 2006.

Selling, general and administrative

The increase in selling, general and administrative expenses for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 is the result of the acquisitions of Brodos Romania and Omega Logic, as well as additional overhead to support development in other new and growing markets. As a percentage of revenues these selling, general and administrative expenses increased slightly to 3.6% for the nine-months ended September 30, 2007 from 3.5% for the nine-months ended September 30, 2006.

Depreciation and amortization

Depreciation and amortization expense primarily represents amortization of acquired intangibles and the depreciation of POS terminals we install in retail stores. The increase in depreciation and amortization for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 was primarily due to the acquisitions of Brodos Romania and Omega Logic. As a percentage of revenues, depreciation and amortization decreased slightly to 2.9% for the nine-months ended September 30, 2007 from 3.1% for the nine-months ended September 30, 2006.

Operating income

The improvement in operating income for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 was due to the significant growth in revenues and transactions processed and the benefit of foreign currency translations to the U.S. dollar, partially offset by the impact of the events in Spain discussed above and the costs of development in new and growing markets.

Operating income as a percentage of revenues was 7.2% for the third quarter 2007 and 7.1% for the nine-months ended September 30, 2007 compared to 8.0% for both the third quarter 2006 and the nine-months ended September 30, 2006. The decreases are primarily due the events in Spain and operating expenses incurred to support development in new and growing markets. Operating income per transaction was $0.06 for both the third quarter 2007 and nine- months ended September 30, 2007 compared to $0.08 for both the third quarter 2006 and nine-months ended September 30, 2006. The decrease in operating income per transaction is due to the events in Spain and the growth in revenues and transactions at our ATX subsidiary, partially offset by the benefit of foreign currency translations to the U.S. dollar.

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MONEY TRANSFER SEGMENT

The Money Transfer Segment was established during April 2007 with the acquisition of RIA, which is more fully described in Note 4 — Acquisitions, to the unaudited consolidated financial statements included in this report. To assist in better understanding the results of the Money Transfer Segment, pro forma results have been provided as if RIA’s results were included in our consolidated results of operations beginning January 1, 2006. Because our results of operations for the three- and nine-month periods ended September 30, 2006 were insignificant, and fluctuations when compared to the three- and nine-month periods ended September 30, 2007 are nearly entirely due to the acquisition of RIA, the following discussion and analysis will focus on pro forma results of operations. The pro forma financial information is not intended to represent, or be indicative of, the consolidated results of operations or financial condition that would have been reported had the RIA acquisition been completed as of the beginning of the periods presented. Moreover, the pro forma financial information should not be considered as representative of our future consolidated results of operations or financial condition. The following tables present the actual and pro forma results of operations for the three- and nine-month periods ended September 30, 2007 and 2006 for the Money Transfer Segment:

As Reported

Results for the Three Year-over- Results for the Nine Year-over-

Months Ended September 30, Year Change Months Ended September 30, Year Change

Increase Increase

(dollar amounts in thousands) 2007 2006 Amount 2007 2006 Amount

Total revenues
$ 53,573 $ 874 $ 52,699 $ 103,581 $ 2,303 $ 101,278

Operating expenses:

Direct operating costs
28,397 520 27,877 55,303 1,363 53,940

Salaries and benefits
10,784 631 10,153 21,207 1,570 19,637

Selling, general and administrative
6,777 455 6,322 14,047 1,128 12,919

Depreciation and amortization
4,205 106 4,099 9,101 259 8,842

Total operating expenses
50,163 1,712 48,451 99,658 4,320 95,338

Operating income (loss)
$ 3,410 $ (838 ) $ 4,248 $ 3,923 $ (2,017 ) $ 5,940

Transactions processed (in millions)
4.0 0.1 3.9 7.9 0.2 7.7

Pro Forma

Results for the Three Results for the Nine

Months Ended Months Ended

September 30, Year-over-Year Change September 30, Year-over-Year Change

Increase Increase Increase Increase

(Decrease) (Decrease)

(dollar amounts in thousands) 2007 2006 Amount Percent 2007 2006 Amount Percent

Total revenues
$ 53,573 $ 47,182 $ 6,391 14 % $ 149,770 $ 134,910 $ 14,860 11 %

Operating expenses:

Direct operating costs
28,397 24,889 3,508 14 % 80,097 72,060 8,037 11 %

Salaries and benefits
10,784 9,202 1,582 17 % 31,535 27,004 4,531 17 %

Selling, general and administrative
6,777 6,528 249 4 % 20,049 19,496 553 3 %

Depreciation and amortization
4,205 4,311 (106 ) (2 %) 13,131 12,677 454 4 %

Total operating expenses
50,163 44,930 5,233 12 % 144,812 131,237 13,575 10 %

Operating income
$ 3,410 $ 2,252 $ 1,158 51 % $ 4,958 $ 3,673 $ 1,285 35 %

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Comparison of pro forma operating results

During the second quarter 2007, we combined our previous money transfer business with RIA and incurred total exit costs of $0.9 million. These costs represented the accelerated depreciation and amortization of property and equipment, software and leasehold improvements that were disposed of during the second quarter 2007; the write off of marketing materials and trademarks that have been discontinued or will not be used; the write off of accounts receivable from agents that did not meet RIA’s credit requirements; and severance and retention payments made to certain employees. These exit costs are not included in pro-forma operating expenses in the above table.

Revenues

Revenues from the Money Transfer Segment include a transaction fee for each transaction as well as the difference between purchasing currency at wholesale exchange rates and selling the currency to customers at retail exchange rates. On a historical basis, about 75% of our Money Transfer Segment revenues are derived from transaction fees, about 25% is derived from the foreign currency spread and other small amounts of revenue are derived from sources such as fees for cashing checks, issuing money orders and processing bill payments. For the nine-months ended September 30, 2007, 74% of our money transfers were initiated in the U.S., 22% in Europe and 4% in other countries, such as Canada, Australia and the Dominican Republic. For the nine-months ended September 30, 2006, 80% of our money transfers were initiated in the U.S., 15% in Europe and 5% in other countries. We expect that the U.S. will continue to represent our highest volume market; however, significant future growth is expected to be derived from non-U.S. sources.

The increase in pro forma revenues for 2007 compared to 2006 is due to an increase in the number of transactions processed of 15% for the third quarter 2007 compared to the third quarter 2006 and an increase of 11% for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006. On a year-to-date basis, money transfers to Mexico, which represented approximately 40% of total money transfers, decreased by 1.6%, while transfers to all other countries increased 22% when compared to the prior year. The decline in transfers to Mexico was largely the result of immigration developments, downturns in certain labor markets and other economic factors impacting the U.S. market. These issues have also resulted in certain competitors lowering transaction fees and foreign currency exchange spreads in certain markets where we do business in an attempt to limit the impact on money transfer volumes. During the third quarter 2007, however, total money transfers to Mexico slightly exceeded total money transfers to Mexico during the third quarter 2006.

Direct operating costs

Direct operating costs in the Money Transfer Segment primarily represent commissions paid to agents that originate money transfers on our behalf and distribution agents that disburse funds to the customers’ destination beneficiary, together with less significant costs, such as telecommunication and bank fees to collect money from originating agents. Direct operating costs generally increase or decrease by a similar percentage as revenues.

Gross margin

Pro forma gross margin, which represents revenues less direct costs, was $25.2 million for the third quarter 2007 and $69.7 million for the nine-months ended September 30, 2007 compared to $22.3 million for the third quarter 2006 and $62.9 million for the nine-months ended September 30, 2006. This improvement is primarily due to the growth in money transfer transactions discussed above. Pro forma gross margin as a percentage of revenues was 47% for both the nine-months ended September 30, 2007 and 2006.

Salaries and benefits

Salaries and benefits include salaries and commissions paid to employees, the cost of providing employee benefits, amounts paid to contract workers and accruals for incentive compensation. Pro forma salaries and benefits expense for the nine-months ended September 30, 2007 increased as compared to the nine-months ended September 30, 2006 primarily due to overall Company growth. Pro forma salaries and benefits for 2006 also include costs associated with our previous money transfer business that generally have been eliminated from our cost structure beginning in the second quarter 2007.

Selling, general and administrative

Selling, general and administrative expenses include operations support costs, such as rent, utilities, professional fees, indirect telecommunications, advertising and other miscellaneous overhead costs. Pro forma selling, general and administrative expenses for the nine-months ended September 30, 2007 were relatively flat compared to the nine-months ended September 30, 2006. However, the prior year pro forma results include costs associated with our previous money transfer business, which generally have been eliminated from our cost structure beginning in the second quarter 2007. Excluding the impact of these costs, the increase in pro forma selling, general and administrative expenses for 2007 compared to 2006 is due primarily to overall Company growth.

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Depreciation and amortization

Depreciation and amortization primarily represents amortization of acquired intangibles and also includes depreciation of money transfer terminals, computers and software, leasehold improvements and office equipment. The increase in pro forma depreciation and amortization for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 is primarily due to additional computer equipment in our customer service centers and increased leasehold improvements, office equipment and computer equipment for expansion.

Operating income

The increase in pro forma operating income for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 is the result of increased pro forma revenues, without commensurate increases in pro forma operating expenses, as discussed in more detail in the sections above.

CORPORATE SERVICES

The following table presents the operating expenses for the three- and nine-month periods ended September 30, 2007 and 2006 for Corporate Services:

Results for the Three Results for the Nine

Months Ended Months Ended

September 30, Year-over-Year Change September 30, Year-over-Year Change

Increase Increase

Increase Increase (Decrease) (Decrease)

(dollar amounts in thousands) 2007 2006 Amount Percent 2007 2006 Amount Percent

Salaries and benefits
$ 3,956 $ 3,593 $ 363 10 % $ 10,035 $ 10,913 $ (878 ) (8 %)

Selling, general and administrative
1,252 1,208 44 4 % 3,279 2,995 284 9 %

Depreciation and amortization
402 56 346 618 % 523 144 379 263 %

Total operating expenses
$ 5,610 $ 4,857 $ 753 16 % $ 13,837 $ 14,052 $ (215 ) (2 %)

Corporate operating expenses

The decrease in salaries and benefits compensation for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 was due primarily to lower incentive compensation accruals and the December 2006 resignation of our former President and Chief Operating Officer. The increase in selling, general and administrative expenses was mainly the result of higher professional fees and other expenses associated with acquisitions that were not completed. The increase in corporate depreciation and amortization is the result of amortization associated with the purchase of a Company-wide three-year Microsoft license.

OTHER INCOME, NET

Results for the Three Results for the Nine

Months Ended Months Ended

September 30, Year-over-Year Change September 30, Year-over-Year Change

Increase Increase Increase Increase

(Decrease) (Decrease) (Decrease) (Decrease)

(dollar amounts in thousands) 2007 2006 Amount Percent 2007 2006 Amount Percent

Interest income
$ 4,053 $ 3,682 $ 371 10 % $ 12,494 $ 9,791 $ 2,703 28%

Interest expense
(7,474 ) (3,802 ) 3,672 97 % (18,837 ) (11,055 ) 7,782 70%

Income from unconsolidated affiliates
(9 ) 197 (206 ) (105 %) 867 555 312 56%

Loss on early retirement of debt
(411 ) — (411 ) n/m (411 ) — (411 ) n/m

Foreign currency exchange gain, net
8,561 1,090 7,471 685% 10,302 5,420 4,882 90%

Total other income (expense)
$ 4,720 $ 1,167 $ 3,553 304% $ 4,415 $ 4,711 $ (296 ) (6% )

n/m — Not meaningful.

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Interest income

Interest income was $12.5 million for the nine-months ended September 30, 2007 compared to $9.8 million for the nine-months ended September 30, 2006. The increase in interest income for 2007 was primarily due to the $154.3 million of net proceeds from the private equity placement that was completed during March 2007 and cash generated from operations. We have also benefited from higher average interest rates during 2007 compared to 2006 due to the general rise in short-term interest rates as well as a shift of a portion of our investments from money market accounts to commercial paper.

Interest expense

Interest expense was $18.8 million for the nine-months ended September 30, 2007 compared to $11.1 million for the nine-months ended September 30, 2006. The increase in interest expense is primarily related to the additional borrowings to finance the acquisition of RIA and borrowings under the revolving credit facility to finance the working capital requirements of RIA, which comprises our new Money Transfer Segment. The RIA acquisition was completed on April 4, 2007.

Income from unconsolidated affiliates

Income from unconsolidated affiliates increased for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 because we recognized a gain of $0.4 million from the sale of our 8% ownership interest in CashNet Telecommunications Egypt SAE during the second quarter 2007. The remainder of income from unconsolidated affiliates represents the equity in income of our 40% equity investment in e-pay Malaysia.

Loss on early retirement of debt

Loss on early retirement of debt of $0.4 million for the nine-months ended September 30, 2007 represents the pro-rata write-off of deferred financing costs associated with the portion of the $190 million term loan that was prepaid during 2007. We expect to continue to prepay amounts outstanding under the term loan through available cash flows and, accordingly, recognizing losses on early retirement of debt for the pro-rata portion of unamortized deferred financing costs.

Foreign currency exchange gain, net

The re-measurement of assets and liabilities denominated in currencies other than the functional currency of each of our subsidiaries gives rise to foreign currency exchange gains and losses that are recorded in determining net income. We recorded net foreign currency exchange gains of $10.3 million and $5.4 million during the nine-months ended September 30, 2007 and 2006, respectively. The increase for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 is generally due to the weakening of the U.S. dollar against many of the currencies of the countries in which we operate.

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INCOME TAX EXPENSE

Results for the Three Months Results for the Nine Months

Ended September 30, Ended September 30,

(dollar amounts in thousands) 2007 2006 2007 2006

Income from continuing operations before income taxes and minority interest
$ 23,154 $ 14,173 $ 50,536 $ 42,112

Minority interest
(599 ) (243 ) (1,551 ) (716 )

Income from continuing operations before income taxes
22,555 13,930 48,985 41,396

Income tax expense
6,634 3,599 15,451 10,712

Income from continuing operations
$ 15,921 $ 10,331 $ 33,534 $ 30,684

Effective income tax rate
29.4 % 25.8 % 31.5 % 25.9 %

Income from continuing operations before income taxes
$ 22,555 $ 13,930 $ 48,985 $ 41,396

Adjust: Foreign exchange gain, net
8,561 1,090 10,302 5,420

Income from continuing operations before income taxes and foreign exchange gain, net
$ 13,994 $ 12,840 $ 38,683 $ 35,976

Effective income tax rate, excluding foreign exchange gain, net
47.4 % 28.0 % 39.9 % 29.8 %

We calculate our effective tax rate by dividing income tax expense by pre-tax book income including the effect of minority interest. Our effective tax rate was 31.5% for the nine-months ended September 30, 2007 compared to 25.9% for the nine-months ended September 30, 2006. We are in a net operating loss position for our U.S. operations and, accordingly, have valuation allowances to reserve for deferred tax assets that are not considered more likely than not of realization. Therefore, we do not currently recognize the tax benefit or expense associated with foreign currency gains or losses incurred by our U.S. operations. Excluding foreign currency exchange translation results from pre-tax income, our effective tax rate was 39.9% for the nine-months ended September 30, 2007 and 29.8% for the nine-months ended September 30, 2006.

During the third quarter 2007, our U.S. operations recognized significant realized and unrealized foreign currency gains. The impact of these gains, as well as the reversal of $2.7 million of valuation allowances for tax-planning strategies, reduced our remaining valuation allowances related to our U.S. operations to $0.1 million as of September 30, 2007. Consequently, should our U.S. operations generate pre-tax income for financial reporting purposes, including income from the recognition of additional foreign currency gains, we would be required to recognize tax expense on such income. For income tax purposes, however, the Company has approximately $114 million in net operating losses as of September 30, 2007 that will offset future taxable income and result in little or no cash taxes paid in the U.S. until the net operating losses have been fully utilized.

The increase in the effective tax rate for the three- and nine-months ended September 30, 2007 compared to the same periods in 2006, excluding foreign currency gains and losses, primarily relates to the acquisition of RIA, which operates in jurisdictions that have tax rates that are higher than our historical effective tax rate, and the recognition of significant deferred tax benefits for net operating losses in certain countries during 2006.

During the nine-months ended September 30, 2007, we recognized $3.7 million of non-cash deferred income tax expense related to the deduction of goodwill amortization expense for U.S. income tax purposes, a substantial portion of which relates to the acquisition of RIA. Goodwill arising from certain business combinations involving our U.S. operations is amortized for tax purposes over 15 years but not for financial reporting purposes. Accordingly, we are required to record deferred income tax expense and a deferred tax liability for the tax effect of the amortization expense deducted for U.S. tax purposes. Consistent with the associated goodwill, the deferred tax liability is deemed to have an indefinite life and will remain on the consolidated balance sheet unless there is an impairment of goodwill for financial reporting purposes or the related business entity is disposed. Because we have significant tax net operating losses in the U.S., SFAS No. 109, “Accounting for Income Taxes,” does not allow the deferred income tax expense and related deferred tax liability to be offset by the tax benefit generated from tax assets with definite lives when we have significant unrecognized tax net operating losses. Moreover, during the nine-months ended September 30, 2007, we reversed $2.7 million in valuation allowances on deferred tax assets related to U.S. Federal and state net operating losses. We concluded that it is more likely than not that the net deferred tax asset will be realized because we would employ tax-planning strategies to utilize our net operating losses prior to expiration in the event they were to expire.

We determine income tax expense and remit income taxes based upon enacted tax laws and regulations applicable in each of the taxing jurisdictions where we conduct business. Based on our interpretation of such laws and regulations, and considering the evidence of available facts and circumstances and baseline operating forecasts, we have accrued the estimated tax effects of certain transactions, business ventures, contractual and organizational structures, projected business unit performance, and the estimated future reversal of timing differences. Should a taxing jurisdiction change its laws and regulations or dispute our conclusions, or should management become

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aware of new facts or other evidence that could alter our conclusions, the resulting impact to our estimates could have a material adverse effect on our consolidated financial statements.

DISCONTINUED OPERATIONS

In July 2002, we sold substantially all of the non-current assets and related capital lease obligations of our ATM processing business in France to Atos S.A. During the first quarter 2007, we received a binding French Supreme Court decision relating to a lawsuit in France that resulted in a cash recovery and gain of $0.3 million, net of legal costs. There were no assets or liabilities held for sale at September 30, 2007 or December 31, 2006.

NET INCOME

We recorded net income of $33.9 million for the nine-months ended September 30, 2007 compared to $30.7 million for the nine-months ended September 30, 2006. As more fully discussed above, the increase of $3.2 million was primarily the result of an increase in operating income of $8.7 million, an increase in the net foreign currency exchange gain of $4.9 million, an increase in income from unconsolidated affiliates of $0.3 million and a gain from discontinued operations of $0.3 million. These increases were partially offset by an increase in net interest expense of $5.1 million, an increase in income tax expense of $4.7 million, a loss on early retirement of debt of $0.8 million and an increase in income attributable to minority interest of $0.8 million.

LIQUIDITY AND CAPITAL RESOURCES

Working capital

As of September 30, 2007, we had working capital, which is calculated as the difference between total current assets and total current liabilities, of $253.8 million, compared to working capital of $284.4 million as of December 31, 2006. Our ratio of current assets to current liabilities was 1.50 at September 30, 2007, compared to 1.70 as of December 31, 2006. The decrease in working capital and the reduction in the ratio of current assets to current liabilities were due primarily to the reduction in cash of approximately $168.3 million for the acquisition of RIA, mostly offset by the proceeds from the private equity offering that we completed during March 2007. As of September 30, 2007, the net proceeds from the offering remained unused and included in unrestricted cash.

We require substantial working capital to finance operations. RIA traditionally funds the correspondent distribution network before amounts are collected from agents. Working capital needs increase due to weekends and banking holidays. As a result, we may require more or less working capital for RIA based solely upon the fiscal period ending on a particular day. As of September 30, 2007, RIA’s working capital was $30.9 million. We expect that RIA’s working capital needs will increase as we expand this business.

Operating cash flow

Cash flows provided by operating activities were $59.3 million for the nine-months ended September 30, 2007 compared to $50.6 million for the nine-months ended September 30, 2006. The increase was primarily due to increased profitability and the increase in depreciation and amortization expense, which is a non-cash expense and added back to net income to reconcile to net cash provided by operating activities. This increase was partially offset due to fluctuations in working capital associated with the timing of the settlement process with mobile operators in the Prepaid Processing Segment and other net working capital changes.

Investing activity cash flow

Cash flows used in investing activities were $403.1 million for nine-months ended September 30, 2007, compared to $20.3 million for the nine-months ended September 30, 2006. Our investing activities for the nine-months ended September 30, 2007 consisted of $352.6 million in cash paid related to acquisitions, primarily RIA. We placed $26 million in escrow in connection with the agreement to acquire Envios de Valores La Nacional Corp. (“La Nacional”). See further discussion under “Other trends and uncertainties — Agreement to acquire La Nacional” below. We also incurred $24.5 million for purchases of property and equipment, software development and other investing activities. Our investing activities for the nine-months ended September 30, 2006 include $2.3 million in cash paid for acquisitions and $18.0 million for purchases of property and equipment, software development and other investing activities.

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Financing activity cash flows

Cash flows from financing activities were $269.3 million during the nine-months ended September 30, 2007 compared to $1.7 million during the nine-months ended September 30, 2006. Our financing activities for the nine-months ended September 30, 2007 consisted primarily of $190.0 million in proceeds from borrowings under our term loan agreement that were used to finance a portion of the acquisition of RIA and proceeds from the equity private placement and stock option exercises totaling $165.4 million. Partially offsetting these increases were net repayments and early retirements of debt obligations of $73.4 million, dividends paid to minority interest stockholders of $1.6 million and debt issuance costs associated with our new syndicated credit facility of $3.8 million. To support the short-term cash needs of our Money Transfer Segment, we generally borrow amounts under the revolving credit facility several times each month to fund the correspondent network in advance of collecting remittance amounts from the agency network. These borrowings are repaid over a very short period of time, generally within a few days. Primarily as a result of this, during the nine-months ended September 30, 2007, we had a total of $639.1 million in borrowings and $687.5 million in repayments under our revolving credit facility. Our financing activities for the nine-months ended September 30, 2006 consisted primarily of proceeds from the exercise of stock options and employee share purchase of $12.5 million, partially offset by net repayments of short-term borrowings, payments on capital lease obligations and other financing activities totaling $10.8 million.

Other sources of capital

Credit Facility — In connection with completing the acquisition of RIA discussed under “Opportunities and Challenges” above, we entered into a $290 million secured credit facility consisting of a $190 million seven-year term loan, which was fully drawn at closing, and a $100 million five-year revolving credit facility (together, the “Credit Facility”). The $190 million seven-year term loan bears interest at LIBOR plus 200 basis points or prime plus 100 basis points and requires that we repay 1% of the outstanding balance each year, with the remaining balance payable after seven years. We estimate that we will be able to repay the $190 million term loan prior to its maturity date through cash flows available from operations, provided our operating cash flows are not required for future business developments. Financing costs of $4.8 million have been deferred and are being amortized over the terms of the respective loans.

The $100 million five-year revolving credit facility replaced the previously existing revolving credit facility and bears interest at LIBOR or prime plus a margin that adjusts each quarter based upon our consolidated total debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio. We intend to use the revolving credit facility primarily to fund working capital requirements, which are expected to increase as a result of our recent acquisitions. Based on our current projected working capital requirements, we anticipate that our revolving credit facility will be sufficient to fund our working capital needs.

We may be required to repay our obligations under the Credit Facility six months before any potential repurchase date under our $140 million 1.625% Convertible Senior Debentures Due 2024 or our $175 million 3.5% Convertible Debentures Due 2025, unless we are able to demonstrate that either: (i) we could borrow unsubordinated funded debt equal to the principal amount of the applicable convertible debentures while remaining in compliance with the financial covenants in the Credit Facility or (ii) we will have sufficient liquidity (as determined by the administrative agent and the lenders). The Credit Facility contains three financial covenants that become more restrictive through September 30, 2008: (1) total debt to EBITDA ratio, (2) senior secured debt to EBITDA ratio and (3) EBITDA to fixed charge coverage ratio. Because of the change to these covenants over time, in order to remain in compliance with our debt covenants we will be required to increase our EBITDA, repay debt, or both. These and other material terms and conditions applicable to the Credit Facility are described in the agreement governing the Credit Facility.

The term loan may be expanded by up to an additional $150 million and the revolving credit facility can be expanded by up to an additional $25 million, subject to satisfaction of certain conditions including pro-forma debt covenant compliance.

As of September 30, 2007, after making required repayments on the term loan of $1.0 million and voluntary prepayments of $24.0 million, we had borrowings of $165.0 million outstanding against the term loan. We had borrowings of $23.5 million and stand-by letters of credit of $35.5 million outstanding against the revolving credit facility. The remaining $41.0 million under the revolving credit facility ($66.0 million if the facility were increased to $125 million) was available for borrowing. Borrowings under the revolving credit facility are being used to fund short-term working capital requirements in the U.S. and India. Our weighted average interest rate under the revolving credit facility as of September 30, 2007 was 8.2%.

Short-term debt obligations — Short-term debt obligations consist primarily of the current portion of the term loan, credit lines, overdraft facilities and short-term loans to support ATM cash needs and supplement short-term working capital requirements. As of September 30, 2007, we had $5.5 million in short-term debt obligations, comprised of $3.6 million being used to fund short-term working capital requirements in the Czech Republic and Spain and $1.9 million for the 1% annual repayment under the term loan.

Our Prepaid Processing Segment subsidiaries in Spain enter into agreements with financial institutions to receive cash in advance of collections on customers’ accounts. These arrangements can be with or without recourse and the financial institutions charge the Spanish subsidiaries transaction fees and/or interest in connection with these advances. Cash received can be up to 40 days prior to the customer invoice due dates. Accordingly, the Spanish subsidiaries remain obligated to the banks on the cash advances until the underlying account receivable is ultimately collected. Where the risk of collection remains with Euronet, the receipt of cash continues to be carried on the consolidated balance sheet in each of trade accounts receivable and accrued expenses and other current liabilities. Amounts outstanding under these arrangements are generally $2 million or less.

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We believe that the short-term debt obligations can be refinanced at terms acceptable to us. However, if acceptable refinancing options are not available, we believe that amounts due under these obligations can be funded through cash generated from operations, together with cash on hand or borrowings under our revolving credit facility.

Convertible debt - We have $175 million in principal amount of 3.50% Convertible Debentures Due 2025 that are convertible into 4.3 million shares of Euronet Common Stock at a conversion price of $40.48 per share upon the occurrence of certain events (relating to the closing prices of Euronet Common Stock exceeding certain thresholds for specified periods). We will pay contingent interest for the six-month period from October 15, 2012 through April 14, 2013 and for each six-month period thereafter from April 15 to October 14 or October 15 to April 14 if the average trading price of the debentures for the applicable five trading-day period preceding such applicable six-month interest period equals or exceeds 120% of the principal amount of the debentures. Contingent interest will equal 0.35% per annum of the average trading price of a debenture for such five trading-day periods. The debentures may not be redeemed by us until October 20, 2012 but are redeemable at par at any time thereafter. Holders of the debentures have the option to require us to purchase their debentures at par on October 15, 2012, 2015 and 2020, or upon a change in control of the Company. When due, these debentures can be settled in cash or Euronet Common Stock, at our option, at predetermined conversion rates.

We also have $140 million in principal amount of 1.625% Convertible Senior Debentures Due 2024 that are convertible into 4.2 million shares of Euronet Common Stock at a conversion price of $33.63 per share upon the occurrence of certain events (relating to the closing prices of Euronet Common Stock exceeding certain thresholds for specified periods). We will pay contingent interest for the six-month period from December 20, 2009 through June 14, 2010 and for each six-month period thereafter from June 15 to December 14 or December 15 to June 14 if the average trading price of the debentures for the applicable five trading-day period preceding such applicable six-month interest period equals or exceeds 120% of the principal amount of the debentures. Contingent interest will equal 0.30% per annum of the average trading price of a debenture for such five trading-day periods. The debentures may not be redeemed by us until December 20, 2009 but are redeemable at any time thereafter at par. Holders of the debentures have the option to require us to purchase their debentures at par on December 15, 2009, 2014 and 2019, and upon a change in control of the Company. When due, these debentures can be settled in cash or Euronet Common Stock, at our option, at predetermined conversion rates.

These terms and other material terms and conditions applicable to the convertible debentures are set forth in the indenture agreements governing these debentures.

Proceeds from issuance of shares and other capital contributions - We have established, and shareholders have approved, share compensation plans that allow the Company to make grants of restricted stock, or options to purchase shares of Common Stock, to certain current and prospective key employees, directors and consultants. During the nine-months ended September 30, 2007, 283,884 stock options were exercised at an average exercise price of $15.68, resulting in proceeds to us of approximately $4.5 million.

Other uses of capital

Payment obligations related to acquisitions - As partial consideration for the acquisition of RIA, we granted the sellers of RIA 3,685,098 contingent value rights (“CVRs”) and 3,685,098 stock appreciation rights (“SARs”). The 3,685,098 CVRs mature on October 1, 2008 and will result in the issuance of up to $20 million of additional shares of Euronet Common Stock or payment of additional cash, at our option, if the price of Euronet Common Stock is less than $32.56 on the maturity date. The 3,685,098 SARs entitle the sellers to acquire additional shares of Euronet Common Stock at an exercise price of $27.14 at any time through October 1, 2008. Combined, the CVRs and SARs entitle the sellers to additional consideration of at least $20 million in Euronet Common Stock or cash. The SARS also provide potential additional value to the sellers for situations in which Euronet Common Stock appreciates beyond $32.56 per share prior to October 1, 2008, which is to be settled through the issuance of additional shares of Euronet Common Stock. These and other terms and conditions applicable to the CVRs and SARs are set forth in the agreements governing these instruments.

We have potential contingent obligations to the former owner of the net assets of Movilcarga. Based upon presently available information, we do not believe any additional payments will be required. The seller has disputed this conclusion and has initiated arbitration as provided for in the purchase agreement. A global public accounting firm has been engaged as an independent expert to review the results of the computation. Any additional payments, if ultimately determined to be owed the seller, will be recorded as additional goodwill and could be made in either cash of a combination of cash and Euronet Common Stock at our option.

In connection with the acquisition of Brodos Romania, we agreed to contingent consideration arrangements based on the achievement of certain performance criteria. If the criteria are achieved, during 2009 and 2010, we would have to pay a total of $2.5 million in cash or 75,489 shares of Euronet Common Stock, at the option of the seller.

Leases - We lease ATMs and other property and equipment under capital lease arrangements and as of September 30, 2007 we owed $17.8 million under these arrangements. The majority of these lease agreements are entered into in connection with long-term outsourcing agreements where, generally, we purchase a bank’s ATMs and simultaneously sell the ATMs to an entity related to the bank and lease back the ATMs for purposes of fulfilling the ATM outsourcing agreement with the bank. We fully recover the related lease costs from the bank under the outsourcing agreements. Generally, the leases may be canceled without penalty upon reasonable notice in the unlikely

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event the bank or we were to terminate the related outsourcing agreement. We expect that, if terms were acceptable, we would acquire more ATMs from banks under such outsourcing and lease agreements.

Capital expenditures and needs - Total capital expenditures for the nine-months ended September 30, 2007 were $27.0 million, of which $1.7 million were funded through capital leases. These capital expenditures were primarily for the purchase of ATMs to meet contractual requirements in Poland and India, the purchase and installation ATMs in key under-penetrated markets, the purchase of POS terminals for the Prepaid Processing and Money Transfer Segments, and office and data center computer equipment and software. We also incurred $3.0 million for a company-wide, three-year Microsoft license during the third quarter 2007. Included in capital expenditures for office and data center equipment and software for the nine-months ended September 30, 2007 is approximately $3.3 million in capital expenditures for the purchase and development of the necessary processing systems and capabilities to enter the cross-border merchant processing and acquiring business. Total capital expenditures for 2007 are estimated to be approximately $30 million to $35 million.

In the Prepaid Processing Segment, approximately 93,000 of the approximately 370,000 POS devices that we operate are Company-owned, with the remaining terminals being operated as integrated cash register devices of our major retail customers or owned by the retailers. As our Prepaid Processing Segment expands, we will continue to add terminals in certain independent retail locations at a price of approximately $300 per terminal. We expect the proportion of owned terminals to total terminals operated to remain relatively constant.

At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on hand and amounts available under our recently amended revolving credit facility and other existing and potential future financing will be sufficient to meet our debt, leasing, contingent acquisition and capital expenditure obligations. If our capital resources are insufficient to meet these obligations, we will seek to refinance our debt 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.

Litigation — During 2005, a former cash supply contractor in Central Europe (the “Contractor”) claimed that we owed approximately $2.0 million for the provision of cash during the fourth quarter 1999 and first quarter 2000 that had not been returned. This claim was made after the Company terminated its business with the Contractor and established a cash supply agreement with another supplier. In the first quarter 2006, the Contractor initiated legal action in Budapest, Hungary regarding the claim. In April 2007, an arbitration tribunal awarded the Contractor $1.0 million, plus $0.2 million in interest, under the claim, which was recorded as selling, general and administrative expenses of the Company’s EFT Processing Segment during the first quarter 2007 and paid in the second quarter 2007.

Contingencies

In addition to the La Nacional matter described below, from time to time we are a party to litigation arising in the ordinary course of its business. Currently, there are no legal proceedings arising in the ordinary course of our business that management believes, either individually or in the aggregate, would have a material adverse effect upon our consolidated results of operations or financial condition.

During 2006, the Internal Revenue Service announced that Internal Revenue Code Section 4251 (relating to telecommunications excise tax) will no longer apply to, among other services, prepaid mobile airtime such as the services offered by our Prepaid Processing Segment’s U.S. operations. Additionally, companies that paid this excise tax during the period beginning on March 1, 2003 and ending on July 31, 2006, are entitled to a credit or refund of amounts paid in conjunction with the filing of 2006 federal income tax returns. We have claimed a refund for amounts paid during this period and have been informed by the IRS that the refund is currently being examined.. Therefore, no amounts have been recorded for any potential recovery in the Consolidated Financial Statements, and no such amounts will be recorded until such time as the refund is considered “realizable” as stipulated under SFAS No. 5, “Accounting for Contingencies.”

Other trends and uncertainties

Agreement to acquire La Nacional — During January 2007, we signed a stock purchase agreement to acquire La Nacional, subject to regulatory approvals and other customary closing conditions. In connection with this agreement, in January 2007 we deposited $26 million in an escrow account created for the proposed acquisition. The escrowed funds can only be released by mutual agreement of the Company and La Nacional or through legal remedies available in the agreement.

On February 6, 2007, two employees of La Nacional working in different La Nacional stores were arrested for allegedly violating federal money laundering laws and certain state statutes. On April 5, 2007, we gave notice to the stockholders of La Nacional of the termination of the stock purchase agreement and requested the release of the $26 million held in escrow under the terms of the stock purchase agreement. La Nacional is contesting our request for release of the escrowed funds. While pursuing all legal remedies available to us, we are also engaged in negotiations to determine whether the dispute can be resolved through revised terms for the acquisition. We cannot predict when this dispute will be resolved or what the resolution may be.

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Cross border merchant processing and acquiring - In our EFT Processing Segment, we have entered the cross-border merchant processing and acquiring business, through the execution of an agreement with a large petrol retailer in Central Europe. Since the beginning of 2007, we have devoted significant resources, including capital expenditures of approximately $3.3 million, to the ongoing investment in development of the necessary processing systems and capabilities to enter this business, which involves the purchase and design of hardware and software. Merchant acquiring involves processing credit and debit card transactions that are made on POS terminals, including authorization, settlement, and processing of settlement files. It will involve the assumption of credit risk, as the principal amount of transactions will be settled to merchants before settlements are received from card associations. We expect to incur an additional $2.0 million to $2.5 million in capital expenditures associated with the development of the necessary systems and capabilities to enter this business that are expected to be funded through cash generated from operations or, if necessary, amounts available on our revolving credit facility.

Inflation and functional currencies

Generally, the countries in which we operate have experienced low and stable inflation in recent years. Therefore, the local currency in each of these markets is the functional currency. Currently, we do not believe that inflation will have a significant effect on our results of operations or financial position. We continually review inflation and the functional currency in each of the countries where we operate.

OFF BALANCE SHEET ARRANGEMENTS

We regularly grant guarantees of the obligations of our wholly-owned 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 September 30, 2007, other than the item listed below, there were no material changes from the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2006. 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 September 30, 2007.

In connection with contracts with financial institutions that supply cash to ATMs in the EFT Processing Segment, the Company is responsible for the loss of network cash that, generally, is not recorded on the Company’s consolidated balance sheet, because the cash remains the property of the financial institutions while in the ATMs. As of September 30, 2007, the balance of ATM network cash for which the Company was responsible was $300 million. The Company maintains insurance policies to mitigate this exposure;

CONTRACTUAL OBLIGATIONS

The following table summarizes our contractual obligations as of September 30, 2007:

Payments due by period

Less than 1 More than 5

(in thousands) Total year 1-3 years 4-5 years years

Long-term debt obligations, less current maturities, including interest
$ 624,841 $ 22,089 $ 186,176 $ 43,427 $ 373,149

Short-term debt obligations and current maturities of long-term debt obligations, including interest
5,924 5,924 — — —

Estimated contingent acquisition obligations
22,500 — 21,250 1,250 —

Obligations under capital leases
19,884 6,790 9,743 3,082 269

Obligations under operating leases
59,064 14,900 26,518 13,222 4,424

Vendor purchase obligations
7,105 5,732 872 488 13

Total
$ 739,318 $ 55,435 $ 244,559 $ 61,469 $ 377,855

For the purposes of the above table, our $140 million convertible debentures issued in December 2004 are considered due during 2009, and our $175 million convertible debentures issued in October 2005 are considered due during 2012, representing the first years in which holders have the right to exercise their put option. Additionally, the above table only includes interest on these convertible debentures up to these dates.

Estimated contingent acquisition obligations as of September 30, 2007 include: 1) $20 million in cash and/or Euronet Common Stock to be provided to the sellers of RIA upon the assumed settlement of the CVRs and SARs during October 2008; and 2) additional

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consideration to be settled in cash or Euronet Common Stock that we may have to pay during 2009 and 2010 in connection with the acquisition of Brodos, totaling up to $2.5 million. See Note 4 — Acquisitions to the unaudited consolidated financial statements included elsewhere in this report for a more complete description of these acquisitions.

Purchase obligations include contractual amounts for ATM maintenance, cleaning, telecommunication and cash replenishment operating expenses. While contractual payments may be greater or less based on the number of ATMs and transaction levels, the purchase obligations listed above are estimated based on the current levels of such business activity.

Our total liability for uncertain tax positions under FIN 48 was $3.5 million as of September 30, 2007. We are not able to reasonably estimate the amount by which the liability will increase or decrease over time; however, at this time, the Company does not expect a significant payment related to these obligations within the next year. See Note 14 — Income Taxes to the unaudited consolidated financial statements included elsewhere in this report for additional information.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

During 2005, the Financial Accounting Standards Board (“FASB”) issued an exposure draft that would amend SFAS No. 141, “Business Combinations.” During redeliberations, the FASB has reaffirmed certain decisions including, among other things: 1) measuring and recognizing contingent consideration at fair value as of the acquisition date and recording adjustments to liabilities as adjustments in earnings; 2) identifiable intangible assets acquired in a business combination should be measured at a current exchange value rather than at an entity-specific value; 3) the acquiring company should measure and recognize the acquiree’s identifiable assets and liabilities and goodwill in a step or partial acquisition at 100 percent of their acquisition date fair values; and 4) accounting for transaction related costs as expenses in the period incurred, rather than capitalizing these costs as a component of the respective purchase price. The FASB has not yet reaffirmed decisions on other items. The FASB expects to issue the final statement during the fourth quarter 2007, which will be effective for us beginning in 2009. If adopted, the changes described above, as well as other possible changes, would likely have a significant impact on the accounting treatment for acquisitions occurring on or after January 1, 2009.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 expands the use of fair value accounting but does not affect existing standards which require assets or liabilities to be carried at fair value. Under SFAS 159, a company may elect to use fair value to measure accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees and issued debt. Other eligible items include firm commitments for financial instruments that otherwise would not be recognized at inception and non-cash warranty obligations where a warrantor is permitted to pay a third party to provide the warranty goods or services. If the use of fair value is elected, any upfront costs and fees related to the item must be recognized in earnings and cannot be deferred, such as deferred financing costs. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. At the adoption date, unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings. Subsequent to the adoption of SFAS 159, changes in fair value are recognized in earnings. SFAS 159 will be effective beginning in our first quarter 2008. We are currently determining whether fair value accounting is appropriate for any of our eligible items and cannot estimate the impact, if any, which SFAS 159 will have on our consolidated results of operations and financial condition.

FORWARD-LOOKING STATEMENTS

This document 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. All statements other than statements of historical facts included in this document are forward-looking statements, including statements regarding the following:

• trends affecting our business plans, 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;

• business strategy;

• government regulatory action;

• 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. Forward-looking statements are typically identified by the words believe, expect, anticipate, intend, estimate and similar expressions.

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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, those 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, 2006 and Part II, Item 1A — Risk Factors of this report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign currency exchange rate risk

For the nine-months ended September 30, 2007, 76% of our revenues were generated in non-U.S. dollar countries compared to 84% for the nine-months ended September 30, 2006. The decrease in revenues from non-U.S. dollar countries, compared to the prior year is due primarily to the second quarter 2007 acquisition of RIA, as well as increased revenues of our U.S.-based Prepaid Processing Segment operations. 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. We estimate that, depending on the net foreign currency working capital position at a selected point in time, a 10% fluctuation in these foreign currency exchange rates would have the combined annualized effect on reported net income and working capital of up to approximately $15 million to $20 million. This effect is estimated by segregating revenues, expenses and working capital by currency and applying a 10% currency depreciation and appreciation to the non-U.S. dollar amounts. 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 have been positively impacted by the weakening of the U.S. dollar. Additionally, our debt obligations are primarily in U.S. dollars, therefore, as foreign currency exchange rates fluctuate, the amount available for repayment of debt will also increase or decrease.

We are also exposed to foreign currency exchange rate risk in our Money Transfer Segment. A majority of the money transfer business involves 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. This spread provides some protection against currency fluctuations that occur while we are holding the foreign currency. Our exposure to changes in foreign currency exchange rates is limited by the fact that disbursement occurs for the majority of transactions shortly after they are initiated. Additionally, we enter into foreign currency forward contracts to help offset foreign currency exposure related to the notional value of money transfer transactions collected in currencies other than the U.S. dollar. As of September 30, 2007, we had foreign currency forward contracts outstanding with a notional value of $41.0 million, primarily in euros that were not designated as hedges and mature in a weighted average of 6 days. The fair value of these forward contracts as of September 30, 2007 was an unrealized loss of approximately $0.6 million, which was partially offset by the unrealized gain on the related foreign currency receivables.

Interest rate risk

In connection with completing the acquisition of RIA during the second quarter, we entered into a $290 million secured syndicated credit facility consisting of a $190 million seven-year term loan, which was fully drawn at closing, and a $100 million five-year revolving credit facility, which accrue interest at variable rates. This revolving credit facility replaces our $50 million revolving credit facility. The credit facility may be expanded by up to an additional $150 million in term loan and up to an additional $25 million for the revolving line of credit, subject to satisfaction of certain conditions including pro forma debt covenant compliance. This facility substantially increases our interest rate risk.

As of September 30, 2007, our total outstanding debt was $524.9 million. Of this amount, $315 million, or 60% of our total debt obligations, relates to contingent convertible debentures having fixed coupon rates. Our $175 million contingent convertible debentures, issued in October 2005, accrue interest at a rate of 3.50% per annum. The $140 million contingent convertible debentures, issued in December 2004 accrue interest at a rate of 1.625% per annum. Based on quoted market prices, as of September 30, 2007 the fair value of our fixed rate convertible debentures was $328.1 million, compared to a carrying value of $315 million.

Through the use of interest rate swap agreements covering the period from June 1, 2007 to May 29, 2009, $50.0 million of our variable rate term debt has been effectively converted to a fixed rate of 7.3%. As of September 30, 2007, the unrealized loss on the interest rate swap agreements was less than $0.6 million. Interest expense, including amortization of deferred debt issuance costs, for our total $365.0 million in fixed rate debt totals approximately $13.7 million per year, or a weighted average interest rate of 3.8% annually. Additionally, approximately $17.8 million, or 3% of our total debt obligations, relate to capitalized leases with fixed payment and interest terms that expire between 2007 and 2011.

The remaining $142.1 million, or 27% of our total debt obligations, relates to debt that accrues interest at variable rates. If we were to maintain these borrowings for one year, and maximize the potential borrowings available under the revolving credit facility for one year, including the $25.0 million in potential additional expanded borrowings, a 1% increase in the applicable interest rate would result in

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additional interest expense to the Company of approximately $2.1 million. This computation excludes the $50.0 million relating to the interest rate swap discussed above and the potential $150.0 million in potential expanded term loan because of the limited circumstances under which the additional amounts would be available to us for borrowing.

Our excess cash is invested in instruments with original maturities of three months or less; therefore, as investments mature and are reinvested, the amount we earn will increase or decrease with changes in the underlying short term interest rates.

ITEM 4. CONTROLS AND PROCEDURES

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 September 30, 2007. 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 has been no change in our internal control over financial reporting during the third quarter 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

The discussion in Part I, Item 1. Financial Statements, Note 12 — Commitments, Litigation and Contingencies to the unaudited consolidated financial statements included elsewhere in this report, regarding litigation is incorporated herein by reference.

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

ITEM 1A. RISK FACTORS

You should carefully consider the risks described in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 as updated in our subsequent filings with the SEC, including this Quarterly Report on Form 10-Q, before making an investment decision. The risks and uncertainties described in our Annual Report on Form 10-K, as updated by any subsequent Quarterly Reports on Form 10-Q, are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

If any of the risks identified in our Annual Report on Form 10-K, as updated by any subsequent Quarterly Reports on Form 10-Q, actually occurs, our business, financial condition or results of operations could be materially adversely affected. In that case, the trading price of our Common Stock could decline substantially.

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

Other than as set forth below, there have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the SEC.

Risks Related to Our Business

We may be required to prepay our obligations under the $290 million secured syndicated credit facility.

Prepayment in full of the obligations under the $290 million secured syndicated credit facility (the “Credit Facility”) may be required six months prior to any required repurchase date under our $140 million 1.625% Convertible Senior Debentures Due 2024 or our $175 million 3.5% Convertible Debentures Due 2025, unless we are able to demonstrate that either: (i) we could borrow unsubordinated funded debt equal to the principal amount of the applicable convertible debentures while remaining in compliance with the financial covenants in the Credit Facility or (ii) we will have sufficient liquidity (as determined by the administrative agent and the lenders). Holders of the $140

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million 1.625% debentures have the option to require us to purchase their debentures at par on December 15, 2009, 2014 and 2019, and upon a change in control of the Company. Holders of the $175 million 3.50% debentures have the option to require us to purchase their debentures at par on October 15, 2012, 2015 and 2020, or upon a change in control of the Company.

The Credit Facility contains three financial covenants that become more restrictive between now and September 30, 2008, including: (1) total debt to EBITDA ratio, (2) senior secured debt to EBITDA ratio and (3) EBITDA to fixed charge coverage ratio. Because these covenant thresholds will become more restrictive through September 30, 2008, to remain in compliance with our debt covenants we will be required to increase EBITDA, repay debt, or both. We cannot assure you that we will have sufficient assets, liquidity or EBITDA to meet or avoid these obligations, which could have an adverse impact on our financial condition.

Increases in interest rates will adversely impact our results from operations.

We have entered into interest rate swap agreements covering the period from June 1, 2007 through May 29, 2009 for a notional amount of $50 million that effectively converts a portion of our $190 million variable rate term loan to a fixed interest rate of 7.3% per annum. For the remaining outstanding balance of the term loan, as well as borrowings incurred under our revolving credit facility and other variable rate borrowing arrangements, increases in variable interest rates will increase the amount of interest expense that we pay for our borrowings and have a negative impact on our results from operations.

If we are unable to maintain our money transfer agent network, our business may be adversely affected.

Our money transfer based revenue is primarily generated through our agent network. Transaction volumes at existing agent locations may increase over time and new agents provide us with additional revenue. If agents decide to leave our network or if we are unable to sign new agents, our revenue and profit growth rates may be adversely affected. Our agents are also subject to a wide variety of laws and regulations that vary significantly, depending on the legal jurisdiction. Changes in these laws and regulations could adversely affect our ability to maintain our agent network or the cost of providing money transfer services. In addition, agents may generate fewer transactions or less revenue due to various factors, including increased competition. Because our agents are third parties that may sell products and provide services in addition to our money transfer services, our agents may encounter business difficulties unrelated to the provision of our services, which may cause the agents to reduce their number of locations or hours of operation, or cease doing business altogether.

If consumer confidence in our money transfer business or brands declines, our business may be adversely affected.

Our money transfer business relies on consumer confidence in our brands and our ability to provide efficient and reliable money transfer services. A decline in consumer confidence in our business or brands, or in traditional money transfer providers as a means to transfer money, may adversely impact transaction volumes which would in turn be expected to adversely impact our business.

Our money transfer service offerings are dependent on financial institutions to provide such offerings.

Our money transfer business involves transferring funds internationally and is dependent upon foreign and domestic financial institutions, including our competitors, to execute funds transfers and foreign currency transactions. Changes to existing regulations of financial institution operations, such as those designed to combat terrorism or money laundering, could require us to alter our operating procedures in a manner that increases our cost of doing business or to terminate certain product offerings. In addition, as a result of existing regulations and/or changes to those regulations, financial institutions could decide to cease providing the services on which we depend, requiring us to terminate certain product offerings.

We are subject to the risks of liability for fraudulent bankcard and other card transactions involving a breach in our security systems, breaches of our information security policies or safeguards, as well as for ATM theft and vandalism.

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

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

We also collect, transfer and retain consumer data as part of our money transfer business. These activities are subject to certain consumer privacy laws and regulations in the U.S. and in other jurisdictions where our money transfer services are offered. We maintain technical

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and operational safeguards designed to comply with applicable legal requirements. Despite these safeguards, there remains a risk that these safeguards could be breached resulting in improper access to, and disclosure of, sensitive consumer information. Breaches of our security policies or applicable legal requirements resulting in a compromise of consumer data could expose us to regulatory enforcement action, subject us to litigation, limit our ability to provide money transfer services and/or cause harm to our reputation.

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

Our money transfer and prepaid mobile airtime top-up businesses may be susceptible to fraud and/or credit risks occurring at the retailer and/or consumer level.

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

With respect to our money transfer business, our business is primarily conducted through our agent network, which provides money transfer services directly to consumers at retail locations. Our agents collect funds directly from the consumers and in turn we collect from the agents the proceeds due us resulting from the money transfer transactions. Therefore, we have credit exposure to our agents. The failure of agents owing us significant amounts to remit funds to us or to repay such amounts could adversely affect our business, financial condition and results of operations.

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

A recessionary economic environment or other outside factors could have a negative impact on mobile phone operators, retailers and our customers and could reduce the level of transactions, which could, in turn, negatively impact our financial results. If mobile phone operators and financial institutions experience decreased demand for their products and services or if the locations where we provide services decrease in number, we will process fewer transactions, resulting in lower revenue. In addition, a recessionary economic environment could reduce the level of transactions taking place on our networks, which will have a negative impact on our business.

Our experience is that the level of transactions on our networks is also subject to substantial seasonal variation. Transaction levels have consistently been much higher in the fourth quarter of the fiscal year due to increased use of ATMs, prepaid mobile airtime top-ups and money transfer services during the holiday season. Generally, the level of transactions drops in the first quarter, during which transaction levels are generally the lowest we experience during the year, which reduces the level of revenues that we record. Additionally, in the Money Transfer Segment, we experience increased transaction levels during the April through September timeframe coinciding with the increase in worker migration patterns. As a result of these seasonal variations, our quarterly operating results may fluctuate materially and could lead to volatility in the price of our shares.

Additionally, economic or political instability, civil unrest, terrorism and natural disasters may make money transfers to, from or within a particular country more difficult. The inability to timely complete money transfers could adversely affect our business.

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

Our money transfer business primarily focuses on workers who migrate to foreign countries in search of employment and then send a portion of their earnings to family members in their home countries. Our ability to continue complying with the requirements of OFAC, BSA, FINCEN, the PATRIOT Act and other regulations (both U.S. and foreign) is important to our success in achieving growth and an inability to do this could have an adverse impact on our revenues and earnings. Changes in U.S. and foreign government policies or enforcement toward immigration may have a negative affect on immigration in the U.S. and other countries, which could also have an adverse impact on our money transfer revenues.

Future growth and profitability depend upon expansion within the markets in which we currently operate and the development of new markets for our money transfer services. Our expansion into new markets is dependent upon our ability to successfully integrate RIA into our existing operations, to apply our existing technology or to develop new applications to satisfy market demand. We may not have

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adequate financial and technological resources to expand our distribution channels and product applications to satisfy these demands, which may have an adverse impact on our ability to achieve expected growth in revenues and earnings.

Developments in electronic financial transactions could materially reduce our transaction levels and revenues.

Certain developments in the field of electronic financial transactions may reduce the need for ATMs, prepaid mobile phone POS terminals and money transfer agents. These developments may reduce the transaction levels that we experience on our networks in the markets where they occur. Financial institutions, retailers and agents could elect to increase fees to their customers for using our services, which may cause a decline in the use of our services and have an adverse effect on our revenues. If transaction levels over our existing network of ATMs, POS terminals, agents and other distribution methods do not increase, growth in our revenues will depend primarily on increased capital investment for new sites and developing new markets, which reduces the margin we realize from our revenues.

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

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

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

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

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

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

Our software solutions business has multiple types of competitors that compete across all EFT software components in the following areas: (i) ATM, network and POS software systems, (ii) Internet banking software systems, (iii) credit card software systems, (iv) mobile banking systems, (v) mobile operator solutions, (vi) telephone banking and (vii) full EFT software. Competitive factors in the software solutions business include price, technology development and the ability of software systems to interact with other leading products.

Prepaid Processing Segment— We face competition in the prepaid business in all of our markets. A few multinational companies operate in several of our markets, and we therefore compete with them in a number of countries. In other markets, our competition is from

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smaller, local companies. Major retailers with high volumes are in a position to demand a larger share of commissions, which may compress our margins.

Money Transfer Segment— Our primary competitors in the money transfer and bill payment business include other independent processors and electronic money transmitters, as well as certain major national and regional banks, financial institutions and independent sales organizations. Our competitors include Western Union, MoneyGram, Global Payments and others, some of which are larger than we are and have greater resources and access to capital for expansion than we have. This may allow them to offer better pricing terms to customers, which may result in a loss of our current or potential customers or could force us to lower our prices. Either of these actions could have an adverse impact on our revenues. In addition, our competitors may have the ability to devote more financial and operational resources than we can to the development of new technologies that provide improved functionality and features to their product and service offerings. If successful, their development efforts could render our product and services offerings less desirable, resulting in the loss of customers or a reduction in the price we could demand for our services. In addition to traditional money payment services, new technologies are emerging that may effectively compete with traditional money payment services, such as stored-value cards, debit networks and web-based services. Our continued growth depends upon our ability to compete effectively with these alternative technologies.

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

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

Our Money Transfer Segment is subject to foreign currency exchange risks because our customers deposit funds in one currency at our retail and agent locations worldwide and we typically deliver funds denominated in a different, destination country currency. Although we use foreign currency forward contracts to mitigate a portion of this risk, we cannot eliminate all of the exposure to the impact of changes in foreign currency exchange rates for the period between collection and disbursement of the money transfers.

An additional 12.5 million shares of Common Stock, representing 26% of the shares outstanding as of September 30, 2007, could be added to our total Common Stock outstanding through the exercise of options or the issuance of additional shares of our Common Stock pursuant to existing convertible debt and other agreements. Once issued, these shares of Common Stock could be traded into the market and result in a decrease in the market price of our Common Stock.

As of September 30, 2007, we had an aggregate of 3.0 million options and restricted stock awards outstanding held by our directors, officers and employees, which entitles these holders to acquire an equal number of shares of our Common Stock upon exercise. Of this amount, 1.4 million options are vested and exercisable as of September 30, 2007. Approximately 0.3 million additional shares of our Common Stock may be issued in connection with our employee stock purchase plan. Another 8.5 million shares of Common Stock could be issued upon conversion of the Company’s Convertible Debentures issued in December 2004 and October 2005. Additionally, based on current trading prices for our Common Stock, we expect to issue approximately 0.7 million shares of our Common Stock to the sellers of RIA in settlement of the contingent value and stock appreciation rights.

Accordingly, based on current trading prices of our Common Stock, approximately 12.5 million shares could potentially be added to our total current Common Stock outstanding through the exercise of options or the issuance of additional shares, which could adversely impact the trading price for our stock. The actual number of shares issuable could be higher depending upon our stock price at the time of payment (i.e. more shares could be issuable if our share price declines).

Of the 3.0 million total options and restricted stock awards outstanding, an aggregate of 1.4 million options and restricted shares are held by persons who may be deemed to be our affiliates and who would be subject to Rule 144. Thus, upon exercise of their options or sale of shares for which restrictions have lapsed, these affiliates’ shares would be subject to the trading restrictions imposed by Rule 144. The remainder of the common shares issuable under option and restricted stock arrangements would be freely tradable in the public market. Over the course of time, all of the issued shares have the potential to be publicly traded, perhaps in large blocks.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITES AND USE OF PROCEEDS

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Stock repurchases

The following table sets forth information with respect to shares of Company Common Stock purchased by us during the three months ended September 30, 2007 (all purchases occurred during September 2007).

Total Number of Maximum Number of

Average Shares Purchased Shares that May Yet

Total Number Price Paid as Part of Publicly Be Purchased Under

of Shares Per Share Announced Plans the Plans or

Period Purchased (1) (2) or Programs Programs

September 1 - September 30
136 $ 26.19 — —

Total
136 $ 26.19 — —

(1) For the three months ended September 30, 2007, the Company purchased, in accordance with the 2006 Stock Incentive Plan (Amended and Restated) 136 shares of its common stock for participant income tax withholding in conjunction with the lapse of restrictions on stock awards, as requested by the participants.

(2) The price paid per share is the closing price of the shares on the vesting date.

ITEM 6. EXHIBITS

a) Exhibits

The exhibits that are required to be filed or incorporated herein by reference are listed on the Exhibit Index below.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

November 8, 2007

Euronet Worldwide, Inc.

By:
/s/ MICHAEL J. BROWN

Michael J. Brown

Chief Executive Officer

By:
/s/ RICK L. WELLER

Rick L. Weller

Chief Financial Officer

44

EXHIBITS

Exhibit Index

Exhibit Description

4.1
Form of Contingent Value Rights Agreement, entered into April 4, 2007 with each of the Irving Barr Living Trust and the Fred Kunik Family Trust, granting each contingent value rights associated with 1,842,549 shares of common stock (with an “Initial FMV” of $27.136333, a “Target FMV” of $32.563599 and “Nasdaq Cap” of 7,420,990 shares) (filed as Exhibit B to the Stock Purchase Agreement attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 28, 2006 and incorporated by reference herein).

4.2
Form of Stock Appreciation Rights Agreement, entered into April 4, 2007 with each of the Irving Barr Living Trust and the Fred Kunik Family Trust, granting each stock appreciation rights with respect to 1,842,549 shares of common stock (with an “Initial Fair Market Value” of $27.136333 and “Nasdaq Cap” of 7,420,990 shares) (filed as Exhibit C to the Stock Purchase Agreement attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 28, 2006 and incorporated by reference herein).

12.1(1)
Computation of Ratio of Earnings to Fixed Charges

31.1(1)
Section 302 — Certification of Chief Executive Officer

31.2(1)
Section 302 — Certification of Chief Financial Officer

32.1(1)
Section 906 — Certifications of Chief Executive Officer and Chief Financial Officer

(1) Filed herewith.

45


										1.625%		3.50%
	Revolving									Convertible		Convertible
	Credit			Other Debt			Capital			Debentures		Debentures
(in thousands)	Facilities			Obligations			Leases			Due 2024		Due 2025		Term Loan			Total
Balance at January 1, 2007	$	34,073		$	4,378		$	20,001		$	140,000	$	175,000	$	—		$	373,452
Increases (decreases):
Net borrowings (repayments)		(10,762	)		(1,045	)		(5,051	)		—		—		165,000			148,142
Capital lease interest		—			—			1,301			—		—		—			1,301
Foreign exchange gain (loss)		222			265			1,523			—		—		—			2,010

Balance at September 30, 2007		23,533			3,598			17,774			140,000		175,000		165,000			524,905

Less — current maturities		—			(3,598	)		(5,514	)		—		—		(1,900	)		(11,012	)

Long-term obligations at September 30, 2007	$	23,533		$	—		$	12,260		$	140,000	$	175,000	$	163,100		$	513,893

	1)		Through the EFT Processing Segment, the Company processes transactions for a network of ATMs and POS terminals across Europe, Asia and Africa. The Company provides comprehensive electronic payment solutions consisting of ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing and electronic recharge services for prepaid mobile airtime. Through this segment, the Company also offers a suite of integrated electronic financial transaction (“EFT”) software solutions for electronic payment, merchant acquiring, card issuing and transaction delivery systems.


	2)		Through the Prepaid Processing Segment, the Company provides distribution of prepaid mobile airtime and other prepaid products and collection services in the U.S., Europe, Africa and Asia Pacific.

	3)		Through the Money Transfer Segment, the Company provides global money transfer and bill payment services through a sending network of agents and Company-owned stores primarily in North America, the Caribbean, Europe and Asia Pacific, disbursing money transfers through a worldwide payer network.


	For the Three Months Ended September 30, 2007
							Corporate
							Services,
	EFT		Prepaid		Money		Eliminations
(in thousands)	Processing		Processing		Transfer		and Other			Consolidated
Total revenues	$	48,113	$	144,631	$	53,573	$	—		$	246,317

Operating expenses:
Direct operating costs		18,644		118,038		28,397		—			165,079
Salaries and benefits		10,616		7,081		10,784		3,956			32,437
Selling, general and administrative		3,981		4,879		6,777		1,252			16,889
Depreciation and amortization		4,641		4,230		4,205		402			13,478


Total operating expenses		37,882		134,228		50,163		5,610			227,883


Operating income (loss)	$	10,231	$	10,403	$	3,410	$	(5,610	)	$	18,434


	For the Nine Months Ended September 30, 2007
							Corporate
							Services,
	EFT		Prepaid		Money		Eliminations
(in thousands)	Processing		Processing		Transfer		and Other			Consolidated
Total revenues	$	135,844	$	414,442	$	103,581	$	—		$	653,867

Operating expenses:
Direct operating costs		53,335		337,516		55,303		—			446,154
Salaries and benefits		30,427		20,486		21,207		10,035			82,155
Selling, general and administrative		12,933		14,845		14,047		3,279			45,104
Depreciation and amortization		12,733		11,976		9,101		523			34,333


Total operating expenses		109,428		384,823		99,658		13,837			607,746


Operating income (loss)	$	26,416	$	29,619	$	3,923	$	(13,837	)	$	46,121


Total assets as of September 30, 2007	$	182,735	$	712,695	$	682,197	$	227,276		$	1,804,903


(in thousands)
Year ending December 31,
2007 (three months)	$	4,666
2008		15,689
2009		15,210
2010		12,754
2011		7,420
thereafter		3,325

Total minimum lease payments	$	59,064

	•		Cash in various ATM networks — $24.6 million over the terms of the cash supply agreements.

	•		Performance guarantees — $26.7 million over the terms of the agreements with the customers.

	•		In connection with contracts with financial institutions that supply cash to ATMs in the EFT Processing Segment, the Company is responsible for the loss of network cash that, generally, is not recorded on the Company’s consolidated balance sheet, because the cash remains the property of the financial institutions while in the ATMs. As of September 30, 2007, the balance of ATM network cash for which the Company was responsible was approximately $300 million. The Company maintains insurance policies to mitigate this exposure;

	•		In connection with the license of proprietary systems to customers, Euronet 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 our 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 made by Euronet, the Company has agreed to indemnify the seller against third party claims made against the seller relating to the subject subsidiary, 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;


	•		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 the carrying out of their respective duties under such agreements; and

	•		The Company has issued surety bonds in compliance with money transfer licensing requirements of certain states.


Poland		1999 through 2006
U.S. (Federal)		2000 through 2006
Spain		2002 through 2006
Australia		2003 through 2006
U.K.		2004 through 2006
Germany		2004 through 2006

	•		An EFT Processing Segment, which processes transactions for a network of 10,516 ATMs and more than 48,000 POS terminals across Europe, Asia and Africa. We provide comprehensive electronic payment solutions consisting of ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing and electronic recharge services for prepaid mobile airtime. Through this segment, we also offer a suite of integrated EFT software solutions for electronic payment, merchant acquiring, card issuing and transaction delivery systems.


	•		A Prepaid Processing Segment, which provides distribution of prepaid mobile airtime and other prepaid products and collection services for various prepaid products, cards and services. Including terminals operated by unconsolidated subsidiaries, we operate a network of approximately 370,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services in the U.S., Europe, Africa and Asia Pacific.

	•		A Money Transfer Segment, which provides global money transfer and bill payment services through a sending network of agents and Company-owned stores primarily in North America, the Caribbean, Europe and Asia-Pacific, disbursing money transfers through a worldwide payer network.

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

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

	•		the ability to develop products or services to drive increases in transactions;

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

	•		the entrance into additional card acceptance and ATM management agreements with banks;

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

	•		the availability of financing for expansion;

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

	•		the successful entry into the cross-border merchant processing and acquiring business;

	•		the successful entry into the card issuing and outsourcing business; and

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

	•		the ability to negotiate new agreements in additional markets with mobile phone operators, agent financial institutions and retailers;

	•		the ability to use existing expertise and relationships with mobile operators and retailers to our advantage;

	•		the continuation of the trend towards conversion from scratch card solutions to electronic processing solutions for prepaid mobile airtime among mobile phone users and the continued use of third party providers such as ourselves to supply this service;

	•		the development of mobile phone networks in these markets and the increase in the number of mobile phone users;

	•		the overall pace of growth in the prepaid mobile phone market;

	•		our market share of the retail distribution capacity;

	•		the level of commission that is paid to the various intermediaries in the prepaid mobile airtime distribution chain;

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

	•		the ability to take advantage of cross-selling opportunities with our Money Transfer Segment, including providing money transfer services through our prepaid locations;

	•		the availability of financing for further expansion; and

	•		our ability to successfully integrate newly acquired operations with our existing operations.

	•		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 the immigration developments occurring in the U.S. during 2006 and 2007;

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

	•		the ability to develop products or services at competitive prices to drive increases in transactions;

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

	•		the ability to strengthen our brands;

	•		our ability to fund working capital requirements;

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

	•		the ability to take advantage of cross-selling opportunities with our Prepaid Processing Segment, including providing prepaid services through RIA’s stores and agents worldwide;

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

	•		our ability to successfully integrate RIA with our existing operations.


	Revenues for the Three
	Months Ended									Revenues for the Nine Months
	September 30,				Year-over-Year Change					Ended September 30,				Year-over-Year Change
					Increase		Increase							Increase		Increase
(in thousands)	2007		2006		Amount		Percent			2007		2006		Amount		Percent
EFT Processing	$	48,113	$	40,539	$	7,574		19	%	$	135,844	$	116,166	$	19,678		17	%
Prepaid Processing		144,631		120,240		24,391		20	%		414,442		343,957		70,485		20	%
Money Transfer		53,573		874		52,699		6030	%		103,581		2,303		101,278		4398	%


Total	$	246,317	$	161,653	$	84,664		52	%	$	653,867	$	462,426	$	191,441		41	%


	Operating Income for the												Operating Income for the
	Three Months Ended												Nine Months Ended
	September 30,						Year-over-Year Change						September 30,						Year-over-Year Change
							Increase			Increase									Increase		Increase
							(Decrease)			(Decrease)									(Decrease)		(Decrease)
(in thousands)	2007			2006			Amount			Percent			2007			2006			Amount		Percent
EFT Processing	$	10,231		$	9,140		$	1,091			12	%	$	26,416		$	25,830		$	586		2	%
Prepaid Processing		10,403			9,561			842			9	%		29,619			27,640			1,979		7	%
Money Transfer		3,410			(838	)		4,248			n/m			3,923			(2,017	)		5,940		n/m

Total		24,044			17,863			6,181			35	%		59,958			51,453			8,505		17	%

Corporate services		(5,610	)		(4,857	)		(753	)		16	%		(13,837	)		(14,052	)		215		(2	%)


Total	$	18,434		$	13,006		$	5,428			42	%	$	46,121		$	37,401		$	8,720		23	%


	Results for the Three									Results for the Nine
	Months Ended September 30,				Year-over-Year Change					Months Ended September 30,				Year-over-Year Change
														Increase		Increase
					Increase		Increase							(Decrease)		(Decrease)
(dollar amounts in thousands)	2007		2006		Amount		Percent			2007		2006		Amount		Percent
Total revenues	$	48,113	$	40,539	$	7,574		19	%	$	135,844	$	116,166	$	19,678		17	%

Operating expenses:
Direct operating costs		18,644		14,674		3,970		27	%		53,335		41,531		11,804		28	%
Salaries and benefits		10,616		8,964		1,652		18	%		30,427		26,643		3,784		14	%
Selling, general and administrative		3,981		3,970		11		0	%		12,933		11,513		1,420		12	%
Depreciation and amortization		4,641		3,791		850		22	%		12,733		10,649		2,084		20	%


Total operating expenses		37,882		31,399		6,483		21	%		109,428		90,336		19,092		21	%


Operating income	$	10,231	$	9,140	$	1,091		12	%	$	26,416	$	25,830	$	586		2	%


Transactions processed (in millions)		156.4		119.1		37.3		31	%		434.0		335.9		98.1		29	%
ATMs as of September 30		10,516		8,491		2,025		24	%		10,516		8,491		2,025		24	%
Average ATMs		10,296		8,351		1,945		23	%		9,664		7,837		1,827		23	%


	Results for the Three									Results for the Nine
	Months Ended September									Months Ended September
	30,				Year-over-Year Change					30,				Year-over-Year Change
					Increase		Increase							Increase		Increase
(dollar amounts in thousands)	2007		2006		Amount		Percent			2007		2006		Amount		Percent
Total revenues	$	144,631	$	120,240	$	24,391		20	%	$	414,442	$	343,957	$	70,485		20	%


Operating expenses:
Direct operating costs		118,038		97,294		20,744		21	%		337,516		276,708		60,808		22	%
Salaries and benefits		7,081		5,488		1,593		29	%		20,486		17,038		3,448		20	%
Selling, general and administrative		4,879		4,338		541		12	%		14,845		12,048		2,797		23	%
Depreciation and amortization		4,230		3,559		671		19	%		11,976		10,523		1,453		14	%


Total operating expenses		134,228		110,679		23,549		21	%		384,823		316,317		68,506		22	%


Operating income	$	10,403	$	9,561	$	842		9	%	$	29,619	$	27,640	$	1,979		7	%


Transactions processed (in millions)		162.4		121.7		40.7		33	%		462.1		325.8		136.3		42	%


	As Reported
	Results for the Three					Year-over-		Results for the Nine					Year-over-
	Months Ended September 30,					Year Change		Months Ended September 30,					Year Change
						Increase							Increase
(dollar amounts in thousands)	2007		2006			Amount		2007		2006			Amount
Total revenues	$	53,573	$	874		$	52,699	$	103,581	$	2,303		$	101,278


Operating expenses:
Direct operating costs		28,397		520			27,877		55,303		1,363			53,940
Salaries and benefits		10,784		631			10,153		21,207		1,570			19,637
Selling, general and administrative		6,777		455			6,322		14,047		1,128			12,919
Depreciation and amortization		4,205		106			4,099		9,101		259			8,842


Total operating expenses		50,163		1,712			48,451		99,658		4,320			95,338


Operating income (loss)	$	3,410	$	(838	)	$	4,248	$	3,923	$	(2,017	)	$	5,940


Transactions processed (in millions)		4.0		0.1			3.9		7.9		0.2			7.7


	Results for the Three Months						Results for the Nine Months
	Ended September 30,						Ended September 30,
(dollar amounts in thousands)	2007			2006			2007			2006
Income from continuing operations before income taxes and minority interest	$	23,154		$	14,173		$	50,536		$	42,112
Minority interest		(599	)		(243	)		(1,551	)		(716	)

Income from continuing operations before income taxes		22,555			13,930			48,985			41,396
Income tax expense		6,634			3,599			15,451			10,712

Income from continuing operations	$	15,921		$	10,331		$	33,534		$	30,684

Effective income tax rate		29.4	%		25.8	%		31.5	%		25.9	%


Income from continuing operations before income taxes	$	22,555		$	13,930		$	48,985		$	41,396
Adjust: Foreign exchange gain, net		8,561			1,090			10,302			5,420

Income from continuing operations before income taxes and foreign exchange gain, net	$	13,994		$	12,840		$	38,683		$	35,976

Effective income tax rate, excluding foreign exchange gain, net		47.4	%		28.0	%		39.9	%		29.8	%


			Payments due by period
			Less than 1						More than 5
(in thousands)	Total		year		1-3 years		4-5 years		years
Long-term debt obligations, less current maturities, including interest	$	624,841	$	22,089	$	186,176	$	43,427	$	373,149
Short-term debt obligations and current maturities of long-term debt obligations, including interest		5,924		5,924		—		—		—
Estimated contingent acquisition obligations		22,500		—		21,250		1,250		—
Obligations under capital leases		19,884		6,790		9,743		3,082		269
Obligations under operating leases		59,064		14,900		26,518		13,222		4,424
Vendor purchase obligations		7,105		5,732		872		488		13


Total	$	739,318	$	55,435	$	244,559	$	61,469	$	377,855


(1)		For the three months ended September 30, 2007, the Company purchased, in accordance with the 2006 Stock Incentive Plan (Amended and Restated) 136 shares of its common stock for participant income tax withholding in conjunction with the lapse of restrictions on stock awards, as requested by the participants.

(2)		The price paid per share is the closing price of the shares on the vesting date.


By:		/s/ MICHAEL J. BROWN
		Michael J. Brown
		Chief Executive Officer

By:		/s/ RICK L. WELLER
		Rick L. Weller
		Chief Financial Officer


Exhibit		Description

4.1		Form of Contingent Value Rights Agreement, entered into April 4, 2007 with each of the Irving Barr Living Trust and the Fred Kunik Family Trust, granting each contingent value rights associated with 1,842,549 shares of common stock (with an “Initial FMV” of $27.136333, a “Target FMV” of $32.563599 and “Nasdaq Cap” of 7,420,990 shares) (filed as Exhibit B to the Stock Purchase Agreement attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 28, 2006 and incorporated by reference herein).

4.2		Form of Stock Appreciation Rights Agreement, entered into April 4, 2007 with each of the Irving Barr Living Trust and the Fred Kunik Family Trust, granting each stock appreciation rights with respect to 1,842,549 shares of common stock (with an “Initial Fair Market Value” of $27.136333 and “Nasdaq Cap” of 7,420,990 shares) (filed as Exhibit C to the Stock Purchase Agreement attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 28, 2006 and incorporated by reference herein).

12.1(1)		Computation of Ratio of Earnings to Fixed Charges

31.1(1)		Section 302 — Certification of Chief Executive Officer

31.2(1)		Section 302 — Certification of Chief Financial Officer

32.1(1)		Section 906 — Certifications of Chief Executive Officer and Chief Financial Officer