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 June 30, 2007

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

EURONET WORLDWIDE, INC.

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

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 July 31, 2007 was 48,488,003 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			17
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			34
ITEM 4.		CONTROLS AND PROCEDURES			35
PART II—OTHER INFORMATION					35
ITEM 1.		LEGAL PROCEEDINGS			35
ITEM 1A.		RISK FACTORS			36
ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			40
ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			40
ITEM 6.		EXHIBITS			41

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 June				As of
		30, 2007				December
		(unaudited)				31, 2006
ASSETS
Current assets:
Cash and cash equivalents		$	282,293			$	321,058
Restricted cash			130,535				80,703
Inventory - PINs and other			51,447				49,511
Trade accounts receivable, net of allowances for doubtful accounts of $5,246 at June 30, 2007 and $2,137 at December 31, 2006			264,135				212,631
Deferred income taxes, net			10,337				9,356
Prepaid expenses and other current assets			24,274				15,212
Total current assets			763,021				688,471
Property and equipment, net of accumulated depreciation of $106,442 at June 30, 2007 and $91,883 at December 31, 2006			69,882				55,174
Goodwill			706,876				278,743
Acquired intangible assets, net of accumulated amortization of $28,832 at June 30, 2007 and $20,696 at December 31, 2006			160,823				47,539
Deferred income taxes, net			20,022				19,004
Other assets, net of accumulated amortization of $11,825 at June 30, 2007 and $10,542 at December 31, 2006			24,672				19,208
Total assets		$	1,745,296			$	1,108,139
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable		$	307,321			$	269,212
Accrued expenses and other current liabilities			135,738				99,039
Current installments on capital lease obligations			5,986				6,592
Short-term debt obligations and current maturities of long-term debt obligations			7,008				4,378
Income taxes payable			23,422				9,463
Deferred income taxes			6,471				4,108
Deferred revenue			12,184				11,318
Total current liabilities			498,130				404,110
Debt obligations, net of current portion			542,943				349,073
Capital lease obligations, excluding current installments			12,860				13,409
Deferred income taxes			56,018				43,071
Other long-term liabilities			2,164				1,811
Minority interest			8,072				8,350
Total liabilities			1,120,187				819,824
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; 48,686,117 and 37,647,782 issued at June 30, 2007 and December 31, 2006, respectively			974				749
Additional paid-in-capital			649,349				338,216
Treasury stock, at cost, 210,441 and 207,755 shares at June 30, 2007 and December 31, 2006, respectively			(269	)			(196	)
Subscriptions receivable			(546	)			(170	)
Accumulated deficit			(40,295	)			(58,480	)
Restricted reserve			812				780
Accumulated other comprehensive income			15,084				7,416
Total stockholders’ equity			625,109				288,315
Total liabilities and stockholders’ equity		$	1,745,296			$	1,108,139

See accompanying notes to the 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 June 30,								Six Months Ended June 30,
		2007				2006				2007				2006
Revenues:
EFT Processing Segment		$	45,684			$	39,618			$	87,731			$	75,627
Prepaid Processing Segment			142,230				113,352				269,811				223,717
Money Transfer Segment			49,219				833				50,008				1,429
Total revenues			237,133				153,803				407,550				300,773
Operating expenses:
Direct operating costs			160,411				105,761				281,075				207,114
Salaries and benefits			30,789				19,454				49,718				37,488
Selling, general and administrative			17,413				9,277				28,215				17,713
Depreciation and amortization			12,571				7,063				20,521				13,882
Total operating expenses			221,184				141,555				379,529				276,197
Operating income			15,949				12,248				28,021				24,576
Other income (expense):
Interest income			4,096				3,387				8,441				6,109
Interest expense			(7,782	)			(3,656	)			(11,363	)			(7,253	)
Income from unconsolidated affiliates			636				187				876				358
Foreign currency exchange gain, net			1,308				2,772				1,741				4,330
Other income, net			(1,742	)			2,690				(305	)			3,544
Income from continuing operations before income taxes and minority interest			14,207				14,938				27,716				28,120
Income tax expense			(4,990	)			(3,599	)			(8,923	)			(7,169	)
Minority interest			(599	)			(212	)			(952	)			(473	)
Income from continuing operations			8,618				11,127				17,841				20,478
Gain from discontinued operations, net			—				—				344				—
Net income			8,618				11,127				18,185				20,478
Translation adjustment			6,356				2,118				7,697				1,515
Unrealized loss on interest rate swaps			(29	)			—				(29	)			—
Comprehensive income		$	14,945			$	13,245			$	25,853			$	21,993
Earnings per share - basic:
Continuing operations		$	0.18			$	0.30			$	0.42			$	0.56
Discontinued operations			—				—				0.01				—
Total		$	0.18			$	0.30			$	0.43			$	0.56
Basic weighted average shares outstanding			47,638,963				37,030,289				42,379,086				36,792,719
Earnings per share - diluted:
Continuing operations		$	0.17			$	0.28			$	0.40			$	0.52
Discontinued operations			—				—				0.01				—
Total		$	0.17			$	0.28			$	0.41			$	0.52
Diluted weighted average shares outstanding			49,359,226				42,748,568				47,929,754				42,414,161

See accompanying notes to the consolidated financial statements.

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

		Six Months Ended June 30,
		2007				2006
Net income		$	18,185			$	20,478
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			20,521				13,882
Share-based compensation			3,726				3,838
Unrealized foreign exchange gain, net			(264	)			(3,685	)
Loss (gain) on disposal of property and equipment			25				(189	)
Gain on discontinued operations			(344	)			—
Deferred income tax benefit			(1,910	)			(2,318	)
Income assigned to minority interest			952				473
Income from unconsolidated affiliates			(876	)			(358	)
Amortization of debt obligations issuance expense			767				1,131
Changes in working capital, net of amounts acquired:
Income taxes payable, net			3,052				2,019
Restricted cash			(7,272	)			(10,279	)
Inventory - PINs and other			771				(6,826	)
Trade accounts receivable			5,321				22,381
Prepaid expenses and other current assets			(4,868	)			(3,759	)
Trade accounts payable			17,532				(27,042	)
Deferred revenue			501				2,025
Accrued expenses and other current liabilities			(56,655	)			4,091
Other, net			1,799				(251	)
Net cash provided by operating activities			963				15,611
Cash flows from investing activities:
Acquisitions, net of cash acquired			(313,462	)			(2,312	)
Acquisition escrow			(26,000	)			—
Proceeds from sale of property and equipment			82				669
Purchases of property and equipment			(12,174	)			(10,818	)
Purchases of other long-term assets			(2,773	)			(1,526	)
Other, net			500				—
Net cash used in investing activities			(353,827	)			(13,987	)
Cash flows from financing activities:
Proceeds from issuance of shares			163,541				11,685
Borrowings from short-term debt obligations and revolving credit agreements			408,663				505
Payments on short-term debt obligations and revolving credit agreements			(438,310	)			—
Proceeds from long-term debt obligations			190,000				—
Repayment of long-term debt			(475	)			—
Repayment of capital lease obligations			(5,308	)			(3,084	)
Debt issuance costs			(3,827	)			—
Proceeds received from minority interest stockholders			188				—
Cash dividends paid to minority interest stockholders			(1,572	)			—
Other, net			145				(180	)
Net cash provided by financing activities			313,045				8,926
Effect of exchange differences on cash			1,054				2,241
Increase in cash and cash equivalents			(38,765	)			12,791
Cash and cash equivalents at beginning of period			321,058				219,932
Cash and cash equivalents at end of period		$	282,293			$	232,723
Interest paid during the period		$	10,407			$	6,245
Income taxes paid during the period			9,156				5,237

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, India and China. The Money Transfer Segment, comprised primarily of the Company’s RIA Envia, Inc. (“RIA”) subsidiary and its operating subsidiaries, is the third-largest global money transfer company 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 June 30, 2007, the results of its operations for the three- and six-month periods ended June 30, 2007 and cash flows for the six-month periods ended June 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 six-month periods ended June 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.

(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 June 30, 2007, the Company’s money transfer settlement obligations were $24.4 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. 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 Income Statement 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 8, 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. This interpretation also requires expanded disclosures about fair value measurements.

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 13, 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 June 30,								Six Months Ended June 30,
(dollar amounts in thousands)		2007				2006				2007				2006
Reconciliation of net income to earnings available to earnings available to common stockholders:
Net income		$	8,618			$	11,127			$	18,185			$	20,478
Add: interest expense of 1.625% convertible debentures, if dilutive			—				797				1,534				1,594
Earnings available to common stockholders		$	8,618			$	11,924			$	19,719			$	22,072
Computation of diluted weighted average shares outstanding:
Basic weighted average shares outstanding			47,638,963				37,030,289				42,379,086				36,792,719
Additional shares from assumed conversion of 1.625% convertible debentures			—				4,163,488				4,163,488				4,163,488
Weighted average shares issuable in connection with acquisition obligations (See Note 4 - Acquisitions)			673,636				91,285				338,679				73,028
Incremental shares from assumed conversion of stock options and restricted stock			1,046,627				1,463,506				1,048,501				1,384,926
Diluted weighted average shares outstanding			49,359,226				42,748,568				47,929,754				42,414,161

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 six-month periods ended June 30, 2007, the table does not include 532,985 stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding. For the six-month period ended June 30, 2006, the table does not include 22,500 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 June 30, 2006, the assumed conversion of all stock options and restricted stock outstanding was dilutive to the Company’s diluted earnings per share.

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 anti-dilutive for the three-month period ended June 30, 2007 and dilutive for the three-month period ended June 30, 2006 and six-month periods ended June 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 six-month periods ended June 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 $503.9 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 $4.6 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					73,210
Trademarks and trade names		20 years					37,150
Software		5 years					1,610
Non-compete agreements		3 years					270
Other non-current assets							1,396
Goodwill		Indefinite					402,839
Assets acquired							605,549
Current liabilities							(85,190	)
Non-current liabilities							(1,574	)
Deferred income tax liability							(14,852	)
Net assets acquired						$	503,933

Pursuant to the terms of the Stock Purchase Agreement, as amended, $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, as amended. 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. Between the CVRs and SARs, the sellers are entitled 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; 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 six-months ended June 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 June 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 11, 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 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- and six- months ended June 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 for the Three								Pro Forma for the Six
		Months Ended June 30,								Months Ended June 30,
(in thousands, except per share data)		2007				2006				2007				2006
Revenues		$	239,606			$	200,143			$	453,739			$	387,072
Operating income		$	16,829			$	14,896			$	29,056			$	27,176
Net income		$	8,650			$	7,412			$	11,010			$	10,551
Per share data:
Net income per share-basic		$	0.18			$	0.20			$	0.26			$	0.29
Net income per share-diluted		$	0.17			$	0.17			$	0.24			$	0.25

(5) PROPERTY AND EQUIPMENT, NET

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

		June 30,				December
(in thousands)		2007				31, 2006
ATMs		$	81,322			$	75,568
POS terminals			27,965				25,473
Vehicles and office equipment			20,673				8,990
Computers and software			46,364				37,026
			176,324				147,057
Less accumulated depreciation and amortization			(106,442	)			(91,883	)
Total		$	69,882			$	55,174

(6) GOODWILL AND INTANGIBLE ASSETS

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

		Amortizable								Total
		Intangible								Intangible
(in thousands):		Assets				Goodwill				Assets
Balance as of January 1, 2007		$	47,539			$	278,743			$	326,282
Increases (decreases):
Acquisition of RIA			112,240				402,839				515,079
Other 2007 acquisitions			8,366				20,264				28,630
Adjustment to 2006 acquisition			(116	)			—				(116	)
Amortization			(8,349	)			—				(8,349	)
Other (primarily changes in foreign currency exchange rates)			1,143				5,030				6,173
Balance as of June 30, 2007		$	160,823			$	706,876			$	867,699

Estimated annual amortization expense on intangible assets with finite lives, before income taxes, as of June 30, 2007, is expected to total $20.1 million for 2007, $23.3 million for 2008, $23.3 million for 2009, $23.0 million for 2010, $19.3 million for 2011 and $16.1 million for 2012.

The Company’s annual goodwill impairment test for the year ended December 31, 2006 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) DEBT OBLIGATIONS

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

														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)			6,192				748				(2,769	)			—				—				189,525				193,696
Capital lease interest			—				—				880				—				—				—				880
Foreign exchange gain (loss)			53				(18	)			734				—				—				—				769
Balance at June 30, 2007			40,318				5,108				18,846				140,000				175,000				189,525				568,797
Less - current maturities			—				(5,108	)			(5,986	)			—				—				(1,900	)			(12,994	)
Long-term obligations at June 30, 2007		$	40,318			$	—			$	12,860			$	140,000			$	175,000			$	187,625			$	555,803

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 the previous $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 June 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 new agreements 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 $4.3 million have been deferred and are being amortized over the terms of the respective loans.

(8) 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 June 30, 2007, the Company has recorded a liability of less than $0.1 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 June 30, 2007, the Company had foreign currency forward contracts outstanding with a notional value of $29.8 million, $3.0 million and $2.7 million in euros, British pounds and other currencies, respectively, that were not designated as hedges and had in a weighted average maturity of 17 days.

(9) 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 estimated expenses, were approximately $154.3 million.

(10) 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 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 previously reported within the Prepaid Processing Segment. Previously reported amounts have been restated 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 gift 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 six-month periods ended June 30, 2007 and 2006:

		For the Three Months Ended June 30, 2007
														Corporate
														Services,
		EFT				Prepaid				Money				Eliminations
(in thousands)		Processing				Processing				Transfer				and Other				Consolidated
Total revenues		$	45,684			$	142,230			$	49,219			$	—			$	237,133
Operating expenses:
Direct operating costs			17,768				116,248				26,395				—				160,411
Salaries and benefits			10,557				7,020				9,833				3,379				30,789
Selling, general and administrative			4,088				5,389				6,819				1,117				17,413
Depreciation and amortization			4,024				3,694				4,792				61				12,571
Total operating expenses			36,437				132,351				47,839				4,557				221,184
Operating income (loss)		$	9,247			$	9,879			$	1,380			$	(4,557	)		$	15,949

		For the Three Months Ended June 30, 2006
														Corporate
														Services,
		EFT				Prepaid				Money				Eliminations
(in thousands)		Processing				Processing				Transfer				and Other				Consolidated
Total revenues		$	39,618			$	113,352			$	833			$	—			$	153,803
Operating expenses:
Direct operating costs			13,991				91,290				480				—				105,761
Salaries and benefits			9,441				5,705				500				3,808				19,454
Selling, general and administrative			3,825				4,200				337				915				9,277
Depreciation and amortization			3,466				3,465				87				45				7,063
Total operating expenses			30,723				104,660				1,404				4,768				141,555
Operating income (loss)		$	8,895			$	8,692			$	(571	)		$	(4,768	)		$	12,248

		For the Six Months Ended June 30, 2007
														Corporate
														Services,
		EFT				Prepaid				Money				Eliminations
(in thousands)		Processing				Processing				Transfer				and Other				Consolidated
Total revenues		$	87,731			$	269,811			$	50,008			$	—			$	407,550
Operating expenses:
Direct operating costs			34,691				219,478				26,906				—				281,075
Salaries and benefits			19,811				13,405				10,423				6,079				49,718
Selling, general and administrative			8,952				9,966				7,270				2,027				28,215
Depreciation and amortization			8,092				7,412				4,896				121				20,521
Total operating expenses			71,546				250,261				49,495				8,227				379,529
Operating income (loss)		$	16,185			$	19,550			$	513			$	(8,227	)		$	28,021
Total assets as of June 30, 2007		$	172,365			$	703,481			$	624,576			$	244,874			$	1,745,296

		For the Six Months Ended June 30, 2006
														Corporate
														Services,
		EFT				Prepaid				Money				Eliminations
(in thousands)		Processing				Processing				Transfer				and Other				Consolidated
Total revenues		$	75,627			$	223,717			$	1,429			$	—			$	300,773
Operating expenses:
Direct operating costs			26,857				179,414				843				—				207,114
Salaries and benefits			17,679				11,550				939				7,320				37,488
Selling, general and administrative			7,544				7,710				673				1,786				17,713
Depreciation and amortization			6,858				6,783				153				88				13,882
Total operating expenses			58,938				205,457				2,608				9,194				276,197
Operating income (loss)		$	16,689			$	18,260			$	(1,179	)		$	(9,194	)		$	24,576
Total assets as of December 31, 2006		$	172,191			$	672,936			$	18,387			$	244,625			$	1,108,139

(11) 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 June 30, 2007 are:

(in thousands)
Year ending December 31,
2007 (six months)		$	7,668
2008			14,797
2009			12,216
2010			11,284
2011			8,042
thereafter			6,265
Total minimum lease payments		$	60,272

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.

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 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 plans to claim refunds for amounts paid during this period. As of June 30, 2007, the refund claim had not been quantified. 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.”

(12) GUARANTEES

As of June 30, 2007, the Company had $33.4 million of bank guarantees issued on its behalf, of which $14.2 million are collateralized by cash deposits held by the respective issuing banks and $4.4 million are supported by stand-by letters of credit issued against the Company’s revolving credit facility.

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

	•		Cash in various ATM networks — $20.7 million over the terms of the cash supply agreements.
	•		Other vendor supply agreements — $3.1 million over the term of the vendor agreements.
	•		Performance guarantees — $19.3 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 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 into 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;
	•		The Company has issued surety bonds in compliance with money transfer licensing requirements of certain states; and
	•		The Company is 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 June 30, 2007 or December 31, 2006.

(13) INCOME TAXES

The Company’s effective tax rate, after consideration of minority interest, was 36.7% and 24.4% for the three-month periods ended June 30, 2007 and 2006, respectively, and was 33.3% and 25.9% for the six-month periods ended June 30, 2007 and 2006, respectively. The

increase in the effective tax rate largely relates to the acquisition of RIA, which operates in jurisdictions that have tax rates that are higher than the Company’s historical effective tax rate, and the recognition of a deferred tax benefit in Poland during 2006. Since the Company is in a net operating loss position for its U.S. operations, valuation allowances have been recorded in instances in which 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 are not currently being recognized. During the second quarter 2007, the Company recognized $1.3 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 Envia. Goodwill arising from certain business combinations involving the Company’s U.S. operations is amortized as an expense for tax purposes over 15 years but not for financial reporting purposes. The Company recorded deferred income tax expense and a deferred tax liability related to the tax-deductible goodwill. The deferred tax liability will remain on the Company’s balance sheet indefinitely unless there is an impairment of goodwill for financial reporting purposes or the related business entity is disposed of through a sale. Moreover, during the second quarter 2007, the Company reversed $2.7 million in valuation allowances on deferred tax assets related to U.S. federal and state net operating losses. The Company has 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 utilize tax-planning strategies in the event its net operating losses were to expire.

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, largely attributable to share-based compensation. 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 June 30, 2007. The following tax years remain open in the Company’s major jurisdictions as of January 1, 2007 and June 30, 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

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 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 six-months ended June 30, 2007, the Company’s unrecognized tax benefits increased by $0.5 million and the amount that would impact the Company’s provision for income taxes, if recognized, increased by $0.3 million. These increases were primarily due to a 1% increase in the estimated effective federal tax rate in the U.S. as a result of the second quarter 2007 acquisition of RIA.

(14) 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 June 30, 2007 or December 31, 2006.

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. (“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, India and China. We are one of the largest providers of prepaid mobile airtime processing. Based on revenues and volumes, our second quarter 2007 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 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 restated 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 9,858 ATMs and more than 45,000 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 gift 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 owned by unconsolidated subsidiaries, we operate a network of approximately 358,000 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 22% of total consolidated revenue for the first half of 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 66% of total consolidated revenue for the first half of 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 12% of total consolidated revenue for the first half of 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 in North America, the Caribbean, 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 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 – We plan to expand this business by taking advantage of our existing expertise and our relationships with mobile phone operators and retailers. Expansion 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 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 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 acquisition 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. RIA processes approximately $4.5 billion in money transfers annually, originates transactions through a network of approximately 10,000 sending agents, including Company-owned stores, located throughout 13 countries in North America, the Caribbean, Europe and Asia-Pacific and disburses money transfers through a payer network of approximately 42,000 locations in 88 countries. This acquisition makes Euronet the third-largest global money transfer company. 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;
	•		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;
	•		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.
	•		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, with certain limited exceptions related to grants of restricted stock to key members of management that vest based on the achievement of performance criteria by our subsidiaries.

SEGMENT SUMMARY RESULTS OF OPERATIONS

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

		Revenues for the Three																Revenues for the Six Months
		Months Ended June 30,								Year-over-Year Change								Ended June 30,								Year-over-Year Change
																										Increase				Increase
										Increase				Increase												(Decrease)				(Decrease)
(in thousands)		2007				2006				Amount				Percent				2007				2006				Amount				Percent
EFT Processing		$	45,684			$	39,618			$	6,066				15%			$	87,731			$	75,627			$	12,104				16%
Prepaid Processing			142,230				113,352				28,878				25%				269,811				223,717				46,094				21%
Money Transfer			49,219				833				48,386				5809%				50,008				1,429				48,579				3400%
Total		$	237,133			$	153,803			$	83,330				54%			$	407,550			$	300,773			$	106,777				36%

		Operating Income for
		the Three Months Ended																Operating Income for the Six Months
		June 30,								Year-over-Year Change								Ended June 30,								Year-over-Year Change
																										Increase				Increase
										Increase				Increase												(Decrease)				(Decrease)
(in thousands)		2007				2006				Amount				Percent				2007				2006				Amount				Percent
EFT Processing		$	9,247			$	8,895			$	352				4%			$	16,185			$	16,689			$	(504	)			(3%)
Prepaid Processing			9,879				8,692				1,187				14%				19,550				18,260				1,290				7%
Money Transfer			1,380				(571	)			1,951				n/m				513				(1,179	)			1,692				n/m
Total			20,506				17,016				3,490				21%				36,248				33,770				2,478				7%
Corporate services			(4,557	)			(4,768	)			211				(4%)				(8,227	)			(9,194	)			967				(11%)
Total		$	15,949			$	12,248			$	3,701				30%			$	28,021			$	24,576			$	3,445				14%

n/m - not meaningful

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

EFT PROCESSING SEGMENT

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

		Results for the Three														Results for the Six
		Months Ended June 30,														Months Ended June 30,								Year-over-Year Change
										Year-over-Year Change														Increase				Increase
										Increase				Increase										(Decrease)				(Decrease)
(dollar amounts in thousands)		2007				2006				Amount				Percent		2007				2006				Amount				Percent
Total revenues		$	45,684			$	39,618			$	6,066			15%		$	87,731			$	75,627			$	12,104			16%
Operating expenses:
Direct operating costs			17,768				13,991				3,777			27%			34,691				26,857				7,834			29%
Salaries and benefits			10,557				9,441				1,116			12%			19,811				17,679				2,132			12%
Selling, general and administrative			4,088				3,825				263			7%			8,952				7,544				1,408			19%
Depreciation and amortization			4,024				3,466				558			16%			8,092				6,858				1,234			18%
Total operating expenses			36,437				30,723				5,714			19%			71,546				58,938				12,608			21%
Operating income		$	9,247			$	8,895			$	352			4%		$	16,185			$	16,689			$	(504	)		(3%)
Transactions processed (in millions)			146.9				113.6				33.3			29%			277.6				216.7				60.9			28%
ATMs as of June 30			9,858				7,866				1,992			25%			9,858				7,866				1,992			25%
Average ATMs			9,655				7,766				1,889			24%			9,348				7,580				1,768			23%