Back to GetFilings.com

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

Commission File Number 000-22167

EURONET WORLDWIDE, INC.

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

4601 COLLEGE BOULEVARD

SUITE 300

LEAWOOD, KANSAS 66211

(913) 327-4200

(Address and telephone number of the Registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.02 par value

Preferred Stock Purchase Rights

Indicate by check mark whether the Registrant (i) 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 (ii) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  Yes  x    No  ¨

As of June 30, 2004 the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant was approximately $594 million. The aggregate market value was determined based on the closing price of the Common Stock on June 30, 2004.

At February 28, 2005, the Registrant had 33,874,561 shares of common stock (the “Common Stock”) outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for its Annual Meeting of Shareholders in 2005, which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2004, are incorporated by reference into Part III.

- 1 -

Table of Contents

Table of Contents

- 2 -

Table of Contents

PART I

OVERVIEW

Euronet Worldwide, Inc. (“Euronet” or the “Company”) is an industry leader in processing secure electronic financial transactions. Euronet operates the largest independent pan-European automated teller machine (“ATM”) network and the largest shared ATM network in India. Our software solutions are used in more than 65 countries around the world. As of December 31, 2004, we had 12 principal offices in Europe, four in the Asia-Pacific region, two in the U.S. and one in Egypt.

As of December 31, 2004, we operated in three principal business segments:

The first company in the Euronet group was established in 1994 as a Hungarian limited liability company. We began operations in 1995, setting up a processing center and installing our first ATMs in Budapest, Hungary. We commenced operations in Poland and Germany in 1995 and 1996, respectively. The Euronet group was reorganized on March 6, 1997 in connection with its initial public offering, and at that time the operating entities of the Euronet group became wholly owned subsidiaries of Euronet Services, Inc., a Delaware corporation. We changed our name from Euronet Services, Inc. to Euronet Worldwide, Inc. in August 2001.

Until December 1998, we devoted substantially all of our resources establishing and expanding our ATM network and outsourced ATM management services business in Central Europe (including Hungary, Poland, the Czech Republic and Croatia) and Germany. In December 1998, we acquired Arkansas Systems, Inc. (now known as Euronet USA), a U.S.-based company that produces electronic payment systems software for retail banks internationally and was a leading electronic payment software system for the IBM iSeries (formerly AS/400) platform. As a result of this acquisition, we were able to offer a broader and more complete line of services and solutions to the retail banking market, including software solutions related not only to ATMs, but also to POS devices, credit and debit card operations, the Internet, and telephone and mobile banking. We have invested in software research, development and delivery capabilities and have integrated our EFT Processing Segment and Software Solutions Segment. These two complementary segments present strong cross-selling opportunities within our combined customer base. Also, since this software is used in our operations center, opportunities exist to leverage the core infrastructure and software to provide innovative value-added e-commerce products and services. As a component of the software acquisition, Euronet acquired 33.3% of the shares of DASH, a U.S.-based ATM Processing business.

Between 1999 and 2001, we expanded our presence to Egypt and to Western and Southern Europe including Greece, France and, in particular, the U.K., where we established a sizeable independent ATM network. We opened offices in each of these countries, and began to deploy Euronet-branded ATMs in addition to selling ATM outsourcing and network participation products and services. In 1999, we also acquired the remaining 66.7% of the DASH shares.

Throughout 2001 and 2002, Euronet focused on product developments that would add transaction functionality via new and existing products, including mobile banking and event messaging. Another new product line, the Electronic Recharge line, was added, which enabled customer purchases of prepaid mobile airtime from ATMs, POS terminals and directly from the mobile handset. Unlike in the U.S., where mobile phones companies have historically promoted postpaid plans, mobile phone companies in other countries generally promote prepaid plans. Thus, we saw processing prepaid transactions as a large opportunity.

In 2002, we opened a small office in Slovakia to support expanding efforts in Central Europe and began to sell ATM outsourcing to banks in that country. We also entered India, one of the largest emerging markets for ATM and card growth potential, by establishing the first and now the largest national shared ATM network, called CashNet, and then began to sell ATM outsourcing. In the Indian market, we are focusing on ATM outsourcing and electronic recharge products for replenishing prepaid mobile airtime.

- 3 -

Table of Contents

Euronet has progressively shifted its strategy from operating Euronet-owned ATMs to managing outsourced ATMs for banks. In January 2003, we sold our U.K. ATM network and simultaneously signed an ATM outsourcing agreement with the buyer. From that date forward, we have operated the ATMs in that network under a five year outsourcing agreement (See Note 14 - Gain On Disposition Of U.K. ATM Network to the Consolidated Financial Statements). Additionally, in September 2003 we sold our 272 ATMs in Hungary to an established Hungarian financial institution. In connection with the sale, we concurrently entered into a long-term outsourcing agreement and cash sponsorship arrangement with the financial institution. We sold our ATM operations in France in May 2002 due to the imposition of stringent new safety requirements for the operation of ATMs, which made it difficult to operate ATMs profitably in that market (See Note 25 - Discontinued Operations and Assets Held for Sale to the Consolidated Financial Statements). In January 2002, we sold DASH, our U.S.-based ATM Processing business, to focus our efforts on more profitable processing endeavors in emerging markets (See Note 25 - Discontinued Operations and Assets Held for Sale to the Consolidated Financial Statements).

Also in 2003, Euronet complemented its existing two segments by acquiring a third business, e-pay, that focuses on processing transactions for prepaid services, primarily prepaid mobile airtime. We acquired e-pay in February 2003 and began reporting its results in a new segment called the Prepaid Processing Segment. With this acquisition, we gained offices in London and Sydney. Subsequent to this acquisition, e-pay expanded its operations into New Zealand, Ireland, Spain and Poland. Additionally, e-pay owns 40% of the shares of e-pay Malaysia, a company that offers electronic top-up in Malaysia and, through a 51.5% subsidiary of e-pay Malaysia, in Indonesia. e-pay has agreements with mobile operators in those markets under which it supports the distribution of airtime to their subscribers through POS terminals. For more information on the e-pay acquisitions, see Note 4 – Acquisitions to the Consolidated Financial Statements.

Throughout 2003 and 2004, we expanded the Prepaid Processing Segment with acquisitions in Germany, Spain and the U.S. In November 2003, we acquired the German company, Transact Elektronische Zahlungssysteme GmbH (“Transact”), the market leader in electronic processing of prepaid mobile airtime top-up services in Germany. With this acquisition, we acquired an office in Munich. In November 2004, we established a Spanish entity, of which we hold 80%, which purchased all of the prepaid processing and distribution assets from Grupo Meflur Corporacion (Meflur), a Spanish telecommunications distribution company. With this acquisition we gained an office in Monzon, Spain. In the U.S. prepaid business, we enhanced our wholly owned subsidiary, PaySpot, Inc. (PaySpot), with four acquisitions of U.S.-based prepaid companies. In September 2003, we purchased all of the assets and assumed certain liabilities of Austin International Marketing and Investments, Inc. (“AIM”). In January 2004, PaySpot acquired 100% of the shares of Prepaid Concepts, Inc. (“Precept”). In May 2004, PaySpot acquired 100% of the assets of Electronic Payment Solutions (“EPS”). In July 2004, PaySpot also acquired 100% of the shares of Call Processing, Inc (“CPI”). For more information on these acquisitions, see Note 4 – Acquisitions to the Consolidated Financial Statements.

In 2004, we expanded our EFT Segment by increasing our Romanian office to support ATM outsourcing services and by establishing small administrative offices in Bulgaria and Russia to evaluate market opportunities in those countries.

BUSINESS SEGMENT OVERVIEW

For discussion of the amount of total revenue contributed by each segment, please see Note 20 - Business Segment Information to the Consolidated Financial Statements.

EFT PROCESSING SEGMENT

EFT Processing Segment Overview

Our EFT Processing Segment provides outsourcing and network services to banks and mobile phone companies primarily in the developing markets of Central and Southern Europe (Hungary, Poland, the Czech Republic, Croatia, Romania, Slovakia, Kosovo, Albania, Serbia and Greece), Egypt and India, as well as in developed countries of Western Europe (Germany and the U.K.). We provide these services either through our Euronet-owned ATMS or through contracts under which we operate bank’s ATMs. Although all of these markets present market opportunities for expanding the sales of our services, we believe opportunities for transaction growth in the ATM services business are greater in the developing countries.

The major source of revenue generated by our ATM network is recurring monthly management fees and transaction-based revenue. We receive fixed monthly fees under many of our outsourced management contracts. This element of revenue has been increasing over the last few years. Revenue sources of the EFT Processing Segment also include prepaid mobile phone recharge revenue from ATM or mobile phone handsets and advertising revenue. The number of ATMs we operated increased from 3,350 at December 31, 2003 to 5,742 ATMs at December 31, 2004.

We monitor the number of transactions made by cardholders on our network. These include cash withdrawals, balance inquiries, deposits, mobile phone airtime recharge purchases and certain denied (unauthorized) transactions. We do not bill certain transactions

- 4 -

Table of Contents

on our network to banks, and we have excluded these transactions for reporting purposes. The number of transactions processed over our entire ATM network has increased over the last five years as follows: total transactions per year were 44 million in 2000, 57 million in 2001, 79 million in 2002, 115 million in 2003, and 232 million in 2004. The number of transactions processed monthly grew from approximately 11 million in December 2003 to approximately 26 million in December 2004.

Our processing centers for the EFT Processing Segment are located in Budapest, Hungary and Mumbai, India. They are staffed 24 hours a day, seven days a week and consist of production IBM iSeries computers, which run the Euronet GoldNet ATM software package. The Budapest operations center has an off-site real-time back up iSeries computer. The India center has a stand-by back-up system, which is located on-site. This back up consists of a replicate of our existing data center which would be used to bring up our system using data from our principal processing center in the event of failure. The processing centers’ data back-up systems are designed to prevent the loss of transaction records due to power failure and permit the orderly shutdown of the switch in an emergency. Our software is a state-of-the-art software package that conforms to all relevant industry standards and has been installed in at least 60 countries worldwide. The processing centers’ computers operate our ATMs and interface with the local bank and international transaction authorization centers, including 63 host-to-host connections with bank and card organizations. Our EFT processing centers have been certified by a number of transaction exchange entities, such as Visa, LINK and Europay/MasterCard.

For a discussion of revenues, operating profits and total assets of the EFT Processing Segment during each of the last three fiscal years, please see Note 20 – Business Segment Information to the Consolidated Financial Statements and Item 7– Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Operating Results for the Years Ended December 31, 2004, 2003 and 2002 - By Business Segment.

EFT Processing Products and Services

Outsourced Management Solutions

Euronet offers outsourced management services to banks and other organizations using our processing centers’ electronic financial transaction processing software. Our outsourced management services include management of existing bank networks of ATMs, development of new ATM networks on a complete turn-key basis, management of POS networks, management of credit and debit card databases and other financial processing services. These services include 24-hour monitoring from our processing centers of each individual ATM’s status and cash condition, coordinating the cash delivery and management of cash levels in the ATM and automatic dispatch for necessary service calls. They also include real-time transaction authorization, advanced monitoring, network gateway access, network switching, 24-hour customer services, maintenance services, settlement, cash forecasting and reporting. We already provide these services to existing customers and we have invested in the necessary infrastructure to support many additional transactions. As a result, any new outsourced management services agreements should provide additional revenue with lower incremental cost.

Our outsourced management agreements, other than in Germany, generally provide for fixed monthly management fees and in most cases fees payable for each transaction. The transaction fees under these agreements are generally lower than under card acceptance agreements, described below. The fees payable under our outsourced management agreements in Germany are purely transaction based and include no fixed component.

Euronet-Branded ATM Transaction Processing

Euronet has a network of ATMs in central European countries that are branded as Euronet ATMs. To manage this ATM network, our operations center uses our Software Solutions Segment’s Integrated Transaction Management core software solution. The ATMs in our networks are able to process transactions for holders of credit and debit cards issued by or bearing the logos of banks and international card organizations such as American Express, Diners Club International, Visa, MasterCard and Europay. This ability is accomplished through our agreements and relationships with these banks, international credit and debit card issuers and international associations of card issuers.

In a typical ATM transaction, the transaction is routed from the ATM to our processing center, and then to the card issuer for authorization. Once authorization is received, the authorization message is routed back to the ATM and the transaction is completed. The card issuer is responsible for authorizing ATM transactions processed on our ATMs.

When a bank cardholder conducts a transaction on a Euronet-owned ATM, we receive a fee from the cardholder’s bank for that transaction. The bank pays us this fee either directly or indirectly through a central switching and settlement network. When paid indirectly, this fee is referred to as the “interchange fee.” All of the banks in a shared ATM and POS switching system establish the amount of the interchange fee by agreement. We receive transaction-processing fees for successful transactions and, in certain circumstances, for transactions that are not completed because they fail to receive authorization. The fees paid to us by the card issuers are independent of any fees charged by the card issuers to cardholders in connection with the ATM transactions. We do not charge cardholders a transaction or access fee for using our ATMs.

- 5 -

Table of Contents

We generally receive fees from our customers for four types of transactions that are processed on our ATMs:

Card Acceptance or Sponsorship Agreements

Our agreements with banks and international card organizations generally provide that all credit and debit cards issued by the customer bank or organization may be used at all ATM machines we operate in a given market. In most markets, we have agreements with a bank under which we are designated as a service provider (which we refer to as “sponsorship agreements”) for the acceptance of cards bearing international logos, such as Visa and MasterCard. These card acceptance or sponsorship agreements allow us to receive transaction authorization directly from the card issuing bank or international card organization. Our agreements generally provide for a term of three to seven years and are automatically renewed unless either party provides notice of non-renewal prior to the termination date. In some cases, the agreements are terminable by either party upon six months notice. We are generally able to connect a bank to our network within 30 to 90 days of signing a card acceptance agreement. Generally, the bank provides the cash needed to complete transactions on the ATM, although we have contracted for cash supply with a cash supply bank in the Czech Republic. Under our card acceptance agreements, the ATM transaction fees we charge vary depending on the type of transaction and the number of transactions attributable to a particular card issuer. Our agreements generally provide for payment in local currency. Transaction fees are sometimes denominated in U.S. dollars or are adjusted for inflation. Transaction fees are billed to banks and card organizations with payment terms no longer than one month.

Other Products and Services

Our network of owned or operated ATMs allows for the sale of financial and other products or services at a low incremental cost. We have developed value-added services in addition to basic cash withdrawal and balance inquiry transactions. These new services include bill payment, “mini-statement” and recharge (purchasing prepaid airtime from ATM and mobile phone devices) transactions. We are committed to the ongoing development of innovative new products and services to offer our EFT processing customers and intend to implement additional services as markets develop.

In Poland, Hungary, Croatia, Romania, the Czech Republic, the U.K., Egypt, India and Indonesia, we have established electronic connections to some or all of the major mobile phone operators. These connections permit us to transmit to them electronic requests to recharge mobile phone accounts. We have either established or adapted networks of ATMs in these markets to offer customers of the mobile operators the ability to credit their prepaid mobile phone accounts. We began to distribute prepaid mobile telephone vouchers on our networks in Hungary and Poland in November 1999. In May and October 2000, we added this service to our Czech Republic and Croatian ATM networks, respectively. In Poland, Hungary, Croatia and Indonesia, we have contracts with all of the local mobile operators.

We include transaction fees payable under the electronic recharge solutions that we distribute through our ATMs in EFT Processing Segment revenues. Fees for recharge transactions vary substantially from market to market and are based on the specific prepaid solution and the denomination of prepaid usage purchased. Any or all of these fees may come under pricing pressure in the future.

In an automatic ATM recharge transaction, our ATM prompts a consumer through a series of ATM screens, during which the customer’s credit or debit card is used to make payment for the recharge transaction. The card transaction is processed and settled to us in the same fashion as a typical ATM transaction. We then send a signal to the mobile operator requesting credit to the customer’s account in the amount of the transaction. The credit takes place automatically, and the customer receives a message confirming the transaction. Our Mobile Recharge transaction follow the same pattern, but the transaction occurs with screens directly on the mobile phone. These recharge transactions are similar to “top up” transactions in our new Prepaid Processing Segment, but since they are transmitted from our ATMs or mobile phone handsets and proceed through our ATM operations center and managed by our ATM operations group, they will continue to be reported in the EFT Processing Segment.

Our agreements with mobile operators for the ATM recharge business vary in term from one to five years. They provide for the maintenance of the electronic connection necessary to provide recharge transactions to customers and define operational and commercial terms regarding the method by which we will provide that transaction (ATM and mobile phone), settlement and the liability for transactions processed.

We have expanded our outsourced management solutions beyond ATMs to include card management and additional services, such as POS terminal management, bill payment and prepaid mobile operator solutions. We support these services using our proprietary software products.

Since 1996, we have been selling advertising on our network. Advertising clients can display their advertisements on the video screens of our ATMs, on the receipts issued by the ATMs and on coupons dispensed with cash from the ATMs.

- 6 -

Table of Contents

EFT Processing Segment Strategy

We believe banks in both the developing and developed markets are becoming more receptive to outsourcing the operation of their ATMs and POS networks. The operation of these devices requires expensive hardware and software and specialized personnel. We have these resources available and offer them to banks under outsourcing contracts. The expansion and enhancement of our outsourced management solutions, both in existing markets and new markets, will remain an important business strategy for Euronet. We believe increasing the number of bank-owned ATMs that we operate under management agreements will provide continued growth while minimizing the capital we place at risk.

We continually strive to make our own ATM networks more efficient by eliminating the underperforming ATMs and installing ATMs in more desirable locations.

This ATM and Mobile Recharge line of services has been substantially strengthened through complementary services obtained by our acquisitions of e-pay, Transact, AIM and Precept. We can now provide top-up services through POS terminals. We intend to expand our technology and business methods into other markets where we operate and hope to leverage our relationships with mobile phone companies and banks in those markets to cross-sell and to facilitate that expansion.

Seasonality

Our experience is that the level of transactions on our networks is subject to seasonal variation. Transactions per ATM tend to drop in the first quarter, as compared to the preceding fourth quarter, to the lowest levels we experience during the year, primarily due to a drop in post-holiday travel and spending. Since revenues of the EFT Processing Segment are more weighted toward transactions, this segment is directly affected by this seasonality. In years prior to 2004, we believe our aggressive rollout of ATMs lessened the impact of seasonal variations on our overall transaction levels and revenues, as transactions from new ATMs compensated for the reduction in overall transaction levels.

Segment Significant Customers And Government Contracts

No individual customer makes up greater than 10% of the consolidated total revenue in the EFT Processing Segment. We do not have any government contracts in this segment.

EFT Processing Segment Competition

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 to banks and independent ATM deployers. Large, well-financed companies that operate ATMs offer ATM network and outsourcing services also compete with us in various markets. None of these competitors have dominant market share. Competitive factors in our EFT Processing Segment include network availability and response time, price to both the bank and to its customers, ATM location and access to other networks.

Certain independent (non bank-owned) companies provide electronic recharge on ATMs in markets in which we provide this service. We are not aware of any independent companies providing electronic recharge on ATMs across multiple markets in which we provide this service. In this area, we believe competition will come principally from banks providing such services on their own ATMs through relationships with mobile operators or from card transaction switching networks that add recharge transaction capabilities to their offerings (as is the case in the U.K. through the LINK network).

PREPAID PROCESSING SEGMENT

Prepaid Processing Segment Overview

Through our Prepaid Processing Segment, we are one of largest providers of prepaid processing, or “top-up,” services for prepaid mobile phone airtime. Our Prepaid Processing Segment provides electronic top-up services for prepaid mobile airtime in the U.K., Germany, Spain, Poland, Ireland, Australia, New Zealand, Malaysia, Indonesia and in the U.S. The Prepaid Processing Segment now supports top-up transactions at more than 175,000 points of sale in 85,000 locations across ten countries.

We began reporting the results of this new segment in the first quarter of 2003. In February 2003, we acquired the U.K.-based company, e-pay Limited, which had offices in U.K. and Australia. During 2003, we expanded our prepaid services to Poland, Ireland and New Zealand. In the second half of 2003, Euronet expanded the Prepaid Processing Segment with acquisitions of AIM in the U.S. and Transact in Germany. In 2004, we further expanded this segment with the acquisition of Movilcarga (which owns prepaid assets) from Grupo Meflur Corporacion (Meflur), a prepaid company in Spain, and we expanded our wholly-owned subsidiary, PaySpot, Inc., through the acquisition of the shares or assets three U.S.-based prepaid companies:

- 7 -

Table of Contents

For a discussion of revenues, operating profits and total assets of the Prepaid Processing Segment during each of the last three fiscal years, please see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Operating Results for the Years Ended December 31, 2004, 2003 and 2002 - By Business Segment and Note 20 - Business Segment Information to the Consolidated Financial Statements.

The major source of revenue generated by our Prepaid Processing Segment is commissions received from mobile operators for the processing and sale of prepaid airtime for mobile phones.

Customers using mobile phones pay for their usage in two ways:

Although operators in the U.S. and certain European countries have provided service principally through postpaid accounts, the trend in Europe and other countries offering wireless services has shifted toward prepaid accounts. This shift is driven, according to Oftel (the U.K. telecommunications regulator) surveys, by customers’ belief that prepaid products better meet their needs and enable them to better control their monthly wireless expenditures. Moreover, the mobile operators in developing markets favor prepaid because they do not take the credit risk with respect to payment for airtime usage. In certain developing markets, the majority of mobile phones are prepaid.

Currently, two principal methods are available to credit prepaid accounts (referred to as “top-up” of accounts). The first is through the purchase of “scratch cards” bearing a PIN (personal identification number) that, when entered into a customer’s mobile phone account, credit the account by the value of airtime purchased. Scratch cards are sold predominantly through retail outlets. The second is through various electronic means of crediting accounts using POS terminals. Electronic top-up (or “e-top-up”) methods have several advantages over scratch cards, primarily because electronic methods do not require the cost of creation, distribution and management of a physical inventory of cards or involve the risk of losses stemming from fraud and theft.

Prior to 2004, scratch cards were the predominant method of crediting mobile phone accounts in most developed markets. However, a shift has occurred in these markets away from usage of scratch cards to more efficient e-top-up methods. In the U.K., for example, we estimate that in early 2000 approximately 10% of all top-ups were performed through e-top-ups and 90% through scratch cards. By December 2004, we estimate that as much as 75% of all U.K. top-ups were performed through e-top-ups and only 25% through scratch cards.

Our Prepaid Processing Segment processes the distribution of prepaid mobile phone minutes to consumers through networks of POS terminals and direct connections to the electronic payment systems of retailers. In some markets, we enter into agreements with mobile phone operators and connect directly to their back-office systems. In other markets (such as Germany, Poland and the U.S.), we distribute mobile phone time by connecting directly to the mobile operators or by purchasing PINs that enable airtime top-up from third party sources who have negotiated with the mobile operator. We then distribute the mobile phone time electronically through POS terminals, either via a direct credit from the mobile operator to the mobile phone, or via the sales of PINs. The business has grown rapidly over the past year as new retailers have been added and prepaid airtime has switched from scratch cards to distribution by electronic means.

In our prepaid markets, we expand our distribution networks through the signing of new contracts with retailers, and in some markets through acquisition of existing networks. We also seek to improve our results of our existing networks through the addition of new mobile operators in markets where we do not already distribute all of the available prepaid time. In addition, in the U.S. we are expanding our sales presence in all sales segments. We are continuing to focus on our growing network of distributors, generally referred to as Independent Sales Organizations (ISOs), that are paid a commission for delivering us contracts with retailers in their network to distribute PINs from their terminals. Given the role of the ISOs we typically classify this as indirect sales. In addition to indirect sales, we are increasing our focus on direct relationships with independent convenient store retailers and chains, where we can negotiate direct agreements with the merchant on a multiyear basis.

To distribute PINs, we establish an electronic connection with the POS terminals and maintain systems that monitor transaction levels at each terminal. As sales to customers of mobile phone time are completed, the customer pays the retailer and the retailer becomes obligated to make settlement to us of the principal amount of the phone time sold. At e-pay, these amounts are deposited in accounts that are held in trust for the mobile operators. In Germany and the U.S., retailer accounts are directly debited on a contractually defined basis. No trust arrangements currently are required in Germany or the U.S. with respect to amounts settled to us. We maintain systems that permit us to monitor the payment practices of each retailer.

Prepaid Processing Products and Services

Prepaid Mobile Airtime Transaction Processing

We process prepaid mobile airtime top-up transactions for two types of clients, distributors and retailers, across the ten countries where we currently process POS transactions through retail shops. Both types of client transactions start with a consumer in a

- 8 -

Table of Contents

- 9 -

merchant shop. The consumer uses a specially programmed POS terminal in the shop or the retailer’s electronic cash register system that is connected to our network. The customer will select a predefined amount of prepaid airtime from the carrier of his choice, and the retailer enters the selection into the POS terminal. The consumer will pay that amount to the retailer (in cash or other payment methods accepted by the retailer). The POS device then transmits the selected transaction to our data center. Using the electronic connection we maintain with the mobile operator or drawing from an inventory of PINs, the purchased amount of airtime will be either credited directly to the account of the consumer’s account or delivered via PIN printed by the terminal and given to the customer. In the case of PINs printed by the terminal, the customer must then call a mobile operator’s toll free number to activate the purchased airtime to this customer’s mobile account.

One difference in our relationships with various retailers and distributors is in how we charge for our services. For distributors and certain very large retailers, we charge a processing fee. However, the majority of our transactions occur with smaller retailer clients. With these clients, we receive a commission on each transaction that is withheld from the payments made to the mobile operator, and we share that commission with the retailers.

We monitor the number of transactions made on our prepaid network. Total transactions processed by the Prepaid Processing Segment in 2004 were 229 million, a 124% increase over the 102 million transactions processed during 2003. This transaction count includes transactions from Precept starting in January 2004, from EPS starting in May 2004, from CPI starting in July 2004, and from Movilcarga starting in November 2004. As of December 2004, the Prepaid Processing Segment processed approximately 22 million electronic prepaid transactions per month at more than 175,000 POS terminals across more than 85,000 retailer locations in the U.S., Europe and Asia Pacific.

Retailer And Distributor Contracts

We provide our prepaid services over networks installed in retail outlets or, in the case of major retailers, through direct connections to their electronic cash register systems. The POS terminals or the register systems are connected to our processing centers. In markets where we operate e-pay technology (the U.K., Australia, Poland, Ireland, New Zealand, Spain and the U.S.), we own and maintain the POS terminals. In Germany, the terminals are sold to the retailers or to distributors who service the retailer. In all cases, we have contracts with the retailers. Our agreements with major retailers for the POS business typically have two or three-year terms. These agreements include terms regarding the connection of our networks to the respective retailer’s registers or payment terminals or the maintenance of POS terminals, and obligations concerning settlement and liability for transactions processed. Generally, our agreements with individual or small retailers have shorter terms and provide that either party can terminate the agreement upon six months’ notice.

In Germany, distributors have historically controlled the sale of mobile phone scratch cards, and they now are key intermediaries in the sale of e-top-up. Our business in Germany is substantially concentrated in and dependent upon relationships with our major distributors. The termination of any of our agreements with major distributors could materially and adversely affect our business in Germany. However, we are engaged in the process of establishing agreements with independent retailers in order to diversify our exposure to such distributors.

Other Products And Services

Our POS network can be used for the distribution of other products and services. Although prepaid mobile airtime is the primary product distributed through our Prepaid Processing Segment, additional products include prepaid long distance calling card plans, prepaid Internet plans and prepaid mobile content, such as ring tones and games. In certain locations, the terminals used for prepaid services can also be used for electronic funds transfer (EFT) to process credit and debit card payments for retail merchandise.

Prepaid Processing Segment Strategy

We plan to expand our prepaid mobile phone top-up business in our existing markets and new markets by taking advantage of our existing relationships with mobile phone operators and retailers. Although all of these markets present market opportunities for expanding the sales of our services, we believe opportunities for transaction growth in the Prepaid Processing Segment are greater in Poland, Germany and the U.S., where there is significant organic growth in the prepaid markets or a shift is occurring from scratch cards to electronic top-up. We also anticipate potential transaction growth opportunities in Spain through the addition of certain mobile operator agreements.

Seasonality

Our experience is that the level of transactions on our networks is subject to seasonal variation. Transaction levels tend to drop in the first quarter, as compared to the preceding fourth quarter, to the lowest levels we experience during the year, primarily due to a drop in post-holiday travel and spending. Since revenues of the Prepaid Processing Segment are primarily transaction-based, this segment is directly affected by this seasonality. We believe that the rapid growth in total POS terminals and transaction volume has lessened the impact of seasonal variations on our overall transaction levels and revenues, as transactions from new POS terminals compensated for the reduction in overall transaction levels.

Significant Customers and Government Contracts

No individual customer makes up greater than 10% of the consolidated total revenue of the Prepaid Processing Segment. This Segment does not have any government contracts in any country.

Table of Contents

Prepaid Processing Segment Competition

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 smaller, local companies. None of these companies is dominant in any of the markets where we do business.

We have approximately 40% of the POS top-up market in the U.K., 60% in Germany and 40% in Australia. In addition, we offer complementary ATM and mobile recharge solutions through our EFT processing centers.

The principal competitive factors in this area include price (that is, the level of commission charged for each recharge transaction) and up time offered on the system. Major retailers with high volumes are in a position to demand a larger share of the commission, which increases the amount of competition among service providers.

SOFTWARE SOLUTIONS SEGMENT

Software Solutions Segment Overview

Through our Software Solutions Segment, we offer an integrated suite of card and retail transaction delivery applications for the IBM iSeries platform and some applications on NT server environments. These applications are generally referred to as Euronet Software. The core system of this product, called “Integrated Transaction Management” (ITM), provides for transaction identification, transaction routing, security, transaction detail logging, network connections, authorization interfaces and settlement. Front-end systems in this product support ATM and POS management, telephone banking, Internet banking, mobile banking and event messaging. These systems provide a comprehensive solution for ATM, debit or credit card management and bill payment facilities. We also offer increased functionality to authorize, switch and settle transactions for multiple banks through our GoldNet module. We use GoldNet for our own EFT requirements, processing transactions across multiple European countries and in India.

Although our Software Solutions Segment is headquartered in the U.S., the majority of our software customers is international and, in particular, located in developing markets. This international customer mix is largely because our software products, based on the Integrated Transaction Management (“ITM”) core system, consist of relatively small and inexpensive packages that are appropriate for smaller banks with up to $10 billion in assets and various transaction processing needs. Euronet Software is the preferred transaction-processing software for banks that operate their back office using the IBM iSeries platform, which is also a relatively inexpensive, expandable hardware platform. We believe demand will continue for our software from banks in many markets and throughout the developing world as new banks are established. Once a customer purchases our software and installs the core system, we provide a series of modules, upgrades and maintenance services that often result in recurring revenues.

Our customer services support “follow-the-sun” initiatives, which represent the Company’s commitment to providing same time zone support for our customers worldwide. We have three centers covering EMEA, the Americas and Asia-Pacific. This coverage presents several benefits to our customers, including immediate access to live technical support, infrastructure expansion to aid in faster problem resolution and a more in-depth knowledge and allowance for the uniqueness of conducting business in the various regions.

For a discussion of revenues, operating losses and total assets of the Software Solutions Segment during each of the last three fiscal years, please see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Operating Results for the Years Ended December 31, 2004, 2003 and 2002 - By Business Segment and Note 20 - Business Segment Information to the Consolidated Financial Statements.

Software Solutions Segment Strategy

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 found significant opportunities for cross-selling processing services to our software solutions customers and that our ability to develop, adapt and control our own software gives us credibility with our processing services customers. 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 contribution permits us to enter new markets without significant cash outlay. Therefore, although revenues from our Software Solutions Segment are not currently growing significantly, we view it as a valuable element of our overall business strategy. Our software is used by our Budapest and India processing centers in our EFT Processing Segment, resulting in cost savings and added value compared to third-party license and maintenance options.

Our strategy in the Software Solutions Segment in 2004 included improvement of the application functionality for our core debit and credit solutions, Internet and telephone banking. Our software was upgraded to become compliant with certain new mandates of the international card organizations, involving initiatives such as EMV (Europay, MasterCard and Visa) chip card support and Triple DES (Data Encryption Standard) support. EMV standards define the technology required for issuance and acceptance of chip cards. Triple DES security standards represent a significant strengthening of encryption requirements to further protect sensitive data that is transmitted in transactions. The three major card associations have jointly developed these emerging industry standards, and we

- 10 -

Table of Contents

believe they will have a significant influence over EFT-related hardware and software decisions throughout the next five years. Our ability to support mandated initiatives such as EMV and Triple DES has provided significant opportunities to sell updated software to our existing customers and may enable Euronet to replace competitors’ non-compliant solutions.

In the last four years, we also undertook a strategy of signing customers to extended long-term software maintenance agreements. We continue to invest in emerging markets and technologies that complement our processing and software solutions.

Seasonality

The Software Solutions Segment is not materially affected by seasonality.

Significant Customers and Government Contracts

No individual consumer makes up greater than 10% of the consolidated total revenue of the Software Solutions Segment. This Segment does not have any government contracts with any country.

Backlog

We define “software sales backlog” as fees specified in contracts, which have been executed by us and for which we expect recognition of the related revenue within one year. At December 31, 2004, the revenue backlog was $4.3 million, as compared to December 31, 2003, when the revenue backlog was $5.3 million and at December 31, 2002, when the revenue backlog was $4.9 million. The average backlog for 2003 was $5.0 million, and for 2004 was $4.9 million. We intend to continue to focus on expediting the delivery and implementation of software in an effort to deliver existing backlog sales, while simultaneously replenishing the backlog through continuing product sales growth.

Software Solutions Segment Competition

We are the leading supplier of electronic financial transaction processing software for the IBM iSeries (formerly AS/400) 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. Other industry suppliers service the software requirements of large mainframe systems and UNIX-based platforms, and accordingly are not considered competitors. We have specific target customers consisting of financial institutions that operate their back office systems with the IBM iSeries.

The Software Solutions Segment has several types of competitors. Competitors of the Software Solutions Segment 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.

RESEARCH AND DEVELOPMENT

We have made an ongoing commitment to the development, maintenance and enhancement of our products and services. We regularly engage in research and development activities in each of our business segments aimed at the development and delivery of new products, services and processes to our customers, including bill payment and presentment, telephone and Internet banking products, applications for mobile devices and wireless banking software products. We are also making significant improvements to our core software products.

Our research and development costs for software products to be sold, leased or otherwise marketed totaled $2.7 million in 2004, $4.1 million for 2003 and $5.0 million for 2002. Of these amounts, as of December 31, 2004, $1.5 million was capitalized and is included on our Consolidated Balance Sheet in other long-term assets, net of accumulated amortization of $3.1 million. These costs were capitalized under our accounting policy requiring the capitalization of development costs on a product-by-product basis once technological feasibility is established through the completion of a detailed program design or the creation of a working model of the product. Technological feasibility of computer software products is established when we have completed all planning, designing, coding, and testing activities necessary to establish that the product can be produced to meet its design specifications including functions, features, and technical performance requirements. See Note 24 - Research and Development to the Consolidated Financial Statements for a more detailed summary of the prior three years research and development capitalized costs and related amortization expense.

- 11 -

Table of Contents

FINANCIAL INFORMATION BY GEOGRAPHIC AREA

For a discussion of revenues; property, plant & equipment; and total assets by geographic location, please see Note 20—Business Segment Information to the Consolidated Financial Statements.

EMPLOYEES

Our business is highly automated and we outsource many of its specialized, repetitive functions such as ATM maintenance and installation, cash delivery and security. As a result, our labor requirements for ongoing operation of our EFT and prepaid networks are relatively modest and are centered on monitoring activities to ensure service quality and cash reconciliation and control. We also have customer service departments in all divisions to interface, investigate and resolve reported problems in processing transactions. We have technical service departments to implement connections with banks and mobile operators and adapt POS terminals to our central processing centers.

We had 385 and 548 employees as of December 31, 2002 and 2003, respectively. As of December 31, 2004, the number of employees has increased to 651, due to acquisitions and additional administrative and implementation staff to address our large contracts. We believe our future success will depend in part on our ability to continue to recruit, retain and motivate qualified management, technical and administrative employees.

Currently, no union represents any of our employees. We have never experienced any work stoppages or strikes by our workforce.

GOVERNMENT REGULATION

Our business activities do not constitute “financial activities” subject to licensing in any of our current markets. Any expansion of our activity into areas that are qualified as “financial activity” under local legislation may subject us to licensing and we may be required to comply with various conditions to obtain such licenses. Moreover, the interpretations of bank regulatory authorities as to the activity we currently conduct might change in the future. We monitor our business for compliance with applicable laws or regulations regarding financial activities.

Under German law, only licensed financial institutions may operate ATMs in Germany. Therefore, we may not operate our own ATM network in Germany. In that market, we act only as a subcontractor providing certain ATM-related services to a sponsor bank. As a result, our activities in the German market currently are entirely dependent upon the continuance of our agreement with our sponsor bank, or the ability to enter into a similar agreement with another bank in the event of the termination of such agreement. In January 2004, we entered into a new sponsorship agreement with Bankhaus August Lenz (“BAL”) canceling an agreement with DiBa Bank, our previous sponsor bank. We believe, based on our experience, we should be able to find a replacement for BAL if the agreement with BAL is terminated for any reason. The inability to maintain the BAL agreement or to enter into a similar agreement with another bank upon a termination of the BAL agreement could have a material adverse effect on our operations in Germany.

INTELLECTUAL PROPERTY

We have registered or applied for registration of our trademarks including the names “Euronet” and “Bankomat” and/or the blue diamond logo in most markets in which we use those trademarks. Certain trademark authorities have notified us that they consider the trademarks “Euronet” and “Bankomat” to be generic and therefore not protected by trademark laws. This determination does not affect our ability to use the Euronet trademark in those markets but it would prevent us from stopping other parties from using it in competition with Euronet. We have purchased a registration of the “Euronet” trademark in the class of ATM machines in Germany, the U.K. and certain other Western European countries. We have registered the “e-pay logo” trademark in the U.K., Australia, and Malaysia and will be extending such registration as we expand that business to new markets. We cannot be sure that we will be entitled to use the e-pay trademark in any markets other than those in which we have registered the trademark. Other trademarks Euronet has registered or has registrations pending in various countries include Integrated Transaction Management; ITM; PaySpot; Arksys; Cashnet; Bank24 and Bank Access 24.

During 2000 and 2001, we filed patent applications for a number of our new software products and our new processing technology, including our recharge services and a browser-based ATM operating system. In 2003, we filed a patent application with the U.S. Patent Office for our POS recharge products in support of e-pay and PaySpot technology. As of the date of this report, these patents are still pending. Technology in the areas in which we operate is developing very rapidly and we are aware that many other companies have filed patent applications for similar products. The procedures of the U.S. patent office make it impossible for us to predict whether our patent applications will be approved or will be granted priority dates that are earlier than other patents that have been filed for similar products or services. If other applicants are granted priority dates that are earlier than ours, and if their patents are considered to cover technology that has been incorporated into our systems, we may be required to obtain licenses and pay royalties to the holders of such patents to continue to use the affected technology or be prohibited from continuing the offering of such services if licenses are not obtained. This could materially and adversely affect our business.

- 12 -

Table of Contents

EXECUTIVE OFFICERS OF THE REGISTRANT

The name, age, period of service and position held by each of our Executive Officers as of March 15, 2005 are as follows:

AVAILABILITY OF REPORTS, CERTAIN COMMITTEE CHARTERS AND OTHER INFORMATION

Our website addresses are www.euronetworldwide.com and www.eeft.com. We make all Securities and Exchange Commission (SEC) public filings, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act available on our website free of charge as soon as reasonably practicable after these documents are electronically filed with, or furnished to, the SEC. The information on our website is not, and shall not be deemed to be a part of this report or incorporated into any other filings we make with the SEC. In addition, the SEC maintains an internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding Euronet.

The charters for our Audit, Compensation, and Corporate Governance and Nominating Committees, as well as the Code of Ethics for our employees, including our Chief Executive Officer and Senior Financial Officer, are available on our website at www.euronetworldwide.com or the SEC website at www.sec.gov. We will also provide printed copies of these materials to any stockholder, upon request to Euronet Worldwide, Inc., 4601 College Boulevard, Suite 300, Leawood, Kansas, U.S.A. 66211, Attention: Investor Relations.

Our executive offices are located in Leawood, Kansas, U.S.A. As of December 31, 2004, we also maintained principal offices in Little Rock, Arkansas, U.S.A.; Warsaw, Poland; Zagreb, Croatia; Prague, Czech Republic; Berlin, Germany; Bucharest, Romania; Bratislava, Slovakia; Athens, Greece; Cairo, Egypt; Jakarta, Indonesia; Sydney, Australia; and Albany, New Zealand. We have processing centers in Budapest, Hungary; Mumbai, India; Basildon, U.K.; Munich, Germany; Monzon, Spain; and Leawood, Kansas, U.S.A. All of our offices, including our operations centers, are leased. Our office leases provide for initial terms of 24 to 84 months.

Our processing centers for the EFT Processing Segment are located in Budapest, Hungary and Mumbai, India. The Budapest operations center has an off-site real time back up iSeries computer. The back up system provides high availability in the event of a failure of production iSeries computers. The Budapest processing center also includes an iSeries computer used for product and connection testing and development. The India backup system is warm, and is located on-site.

Our processing centers for the Prepaid Segment are located in four countries. Our Basildon, U.K. operations center has a secondary data center in Laindon, U.K. The primary and secondary centers both process transactions simultaneously and are load balanced. In the event that one of the centers experiences a disaster each center is capable of processing all of e-pay’s business. Our Munich, Germany operations center has a backup location being commissioned in Speyer, Germany. All critical servers are stored in a data safe, which also protects vouchers against fraud or damage. Our Monzon, Spain operations center and our operations center in Leawood, Kansas, U.S.A. both have data back-up systems that are designed to prevent the loss of transaction records due to power failure and permit the orderly shutdown of the switch in an emergency.

The Company is from time to time a party to litigation arising in the ordinary course of its business. Currently, there are no legal proceedings against the Company that management believes would have a material adverse effect upon the consolidated results of operations or financial condition of the Company.

- 13 -

Table of Contents

PART II

MARKET INFORMATION

From March 1997 to November 1999, our common stock, par value $0.02 per share (“Common Stock”) was quoted on the Nasdaq National Market under the symbol EEFT. On November 8, 1999, our listing was shifted to the Nasdaq SmallCap Market. On July 3, 2002, our listing was again transferred to the Nasdaq National Market. The following table sets forth the high and low daily closing prices during the quarter for our Common Stock for the quarters ended:

DIVIDENDS

Since our inception, no dividends have been paid on our Common Stock. We do not intend to distribute dividends for the foreseeable future. Certain of our credit facilities contain restrictions on the payment of dividends.

HOLDERS

At December 31, 2004, there were 103 record holders of our Common Stock.

PRIVATE PLACEMENTS AND ISSUANCES OF EQUITY

During 2004 we issued the following securities, which were not registered at the time of issuance under the Securities Act of 1933 (the “Act”):

In December 2004, 257,160 warrants that were issued in connection with the 1998 placement of 12 3/8% Senior Discount Notes were exchanged for 277,269 shares of the Company’s Common Stock.

On December 15, 2004, the Company closed the sale of $140 million in aggregate principal amount of 1.625% Contingent Convertible Senior Debentures Due 2024 (“Convertible Debentures”). The net proceeds, after fees totaling $4.4 million, were $135.6 million paid in cash. The $4.4 million in fees has been deferred and will be amortized over five years, the term of the initial put option by the holders of the Convertible Debentures. The Convertible Debentures have an annual interest rate of 1.625% and are convertible into shares of Euronet Common Stock at a conversion price of $33.63 per share only upon the occurrence of certain events. The Convertible Debentures and the Common Stock issuable upon conversion of the debentures have not been registered under the Securities Act of 1933, as amended, or any state securities law. Accordingly, the Convertible Debentures are being offered and sold in a private placement through Banc of America Securities LLC only to “qualified institutional buyers” (as defined in Rule 144A under the Securities Act of 1933, as amended).

In July 2004, we issued 281,916 shares of our Common Stock to the former shareholders of Call Processing, Inc. (“CPI”), a company based in Texas in exchange for all the capital stock of CPI. The total purchase price was approximately $6.6 million, of which $0.7 million was paid in cash. Of the issued shares of Common Stock, 65,104 shares are held in escrow for release on July 1, 2005 and 60,690 shares are held in escrow for release on June 30, 2006, subject to certain performance criteria. Based on representations from each of the former shareholders of CPI that he was an “accredited investor” as contemplated by Regulation D under the Act, the issuance of our Common Stock in the transaction was exempt from registration pursuant to the exemptions provided in Section 4(2) and Regulation D of the Act. However, in accordance with our obligations under the CPI purchase agreement, we filed a registration statement with the SEC to enable the public resale of the Common Stock received by the former shareholders of CPI, which was declared effective by the SEC in August 2004.

In May 2004, we issued 107,911 shares of our Common Stock, valued at approximately $2.2 million, in partial consideration for the purchase of the net assets of Electronic Payment Solutions (“EPS”), a company based in Texas. There is a potential earn-out payment payable in Common Stock, one-half of which will be paid in March 2005, subject to certain performance criteria. The remaining one-half of the shares of Common Stock issued as part of the earn-out payment will be held in escrow for 12 months from the date of issuance. Based on representations from the seller of EPS that he was an “accredited investor” as contemplated by Regulation D under the Act, the issuance of our Common Stock in the transaction was exempt from registration pursuant to the exemptions provided in Section 4(2) and Regulation D of the Act. However, in accordance with our obligations under the EPS purchase agreement, we filed a registration statement with the SEC to enable the public resale of the Common Stock received by the Seller of EPS, which was declared effective by the SEC in July 2004.

- 14 -

Table of Contents

In May 2004, we issued 125,590 shares of our Common Stock, valued at $2.9 million, in exchange for 10% of the shares of ATX Software Ltd. (“ATX”), a provider of electronic prepaid voucher solutions headquartered in the U.K. Euronet was granted an option to purchase an additional 41% of the shares of ATX at any time prior to April 1, 2005. Based on representations from the seller that he was an “accredited investor” as contemplated by Regulation D under the Act, the issuance of our Common Stock in the transaction was exempt from registration pursuant to the exemptions provided in Section 4(2) and Regulation D of the Act. However, in accordance with our obligations under the ATX purchase agreement, we filed a registration statement with the SEC to enable the public resale of the Common Stock received by the Seller, which was declared effective by the SEC in July 2004.

In January 2004, we issued 527,180 shares of our Common Stock to the former shareholders of Precept Concepts, Inc. (“Precept”) in exchange for all the capital stock of Precept, a company based in California. The total purchase price was approximately $17.8 million, of which $8.0 million was paid in cash and promissory notes. Of the issued shares of Common Stock, 160,000 shares were held in escrow and a portion were released in March 2005, with the remaining shares valued at $1.4 million retained in escrow until August 25, 2005, subject to any indemnification claims. Based on representations from each former shareholder of Precept that he was an “accredited investor” as contemplated by Regulation D under the Act, the issuance of our Common Stock in this transaction was exempt from registration pursuant to the exemptions provided in Section 4(2) and Regulation D of the Act. However, in accordance with our obligations under the Precept purchase agreement, we filed a registration statement with the SEC to enable the public resale of the Common Stock received by the former shareholders of Precept, which was declared effective by the SEC in February 2004.

In November 2003, we issued 643,048 shares of Common Stock to the former owners of Transact as partial consideration for 100% of the shares of Transact. Because the offer and sale of our Common Stock was made in an “offshore transaction” as contemplated by Regulation S under the Act, the issuance of our Common Stock in this transaction was exempt from registration pursuant to the exemption provided by Regulation S of the Act. However, in accordance with our obligations under the Transact purchase agreement, we filed a registration statement with the SEC to enable the public resale of the Common Stock received by the former shareholders of Transact, which was declared effective by the SEC in February 2004. In January 2005 an additional earn-out payment, based on Transact’s EBITDA for the third quarter of 2004, was paid to the former owners of Transact through a combination of cash of €18.7 million (approximately $24.5 million) and issuance of 598,302 shares of Common Stock.

In September 2003, we issued 114,374 shares, or approximately $1.2 million in value, of Common Stock to two individuals as partial consideration for all the assets of Austin International Marketing and Investments, Inc. (AIM). The assets of AIM were initially purchased on an earn-out basis, with $2.0 million of the purchase price paid at closing in cash and Common Stock and the remainder to be paid 30% in cash and 70% in Common Stock. In September 2004, the purchase agreement was modified to pay the remaining consideration through the issuance of 283,976 shares of Common Stock. Of these issued shares, 168,068 will be held in escrow; 110,114 of the shares will be released on September 30, 2005 and are not subject to any performance criteria, and the remaining 57,954 shares are restricted shares and will be released on December 31, 2006, subject to certain performance criteria. Based on representations from each of the AIM shareholders that he was an “accredited investor” as contemplated by Regulation D under the Act, the issuance of these shares was exempt from registration pursuant to the exemptions provided in Section 4(2) and Regulation D of the Act.

EQUITY COMPENSATION PLAN INFORMATION

The table below sets forth information with respect to shares of Common Stock that may be issued under our equity compensation plans as of December 31, 2004.

- 15 -

Table of Contents

The summary consolidated financial data set forth below has been derived from, and are qualified by reference to, our audited Consolidated Financial Statements and the notes thereto, prepared in conformity with generally accepted accounting principles as applied in the U.S. (“U.S. GAAP”), which have been audited by KPMG LLP, in the U.S. for 2004 and 2003, and KPMG Polska Sp. z o.o. in Poland for all prior periods. We believe that the period-to-period comparisons of our financial results are not necessarily meaningful due to our significant transactions in 2003 and 2004, and should not be relied upon as an indication of future performance. These significant transactions include the acquisitions of Precept, EPS, CPI and Movilcarga during 2004 and the sale of our U.K. subsidiary and the acquisitions of e-pay, Transact and AIM during 2003. The following information should be read in conjunction with Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

- 16 -

Table of Contents

- 17 -

Table of Contents

COMPANY OVERVIEW

Euronet Worldwide is an electronic transaction processor, offering ATM and POS outsourcing services, integrated electronic financial transaction (EFT) software, network gateways, and electronic prepaid top-up services to financial institutions, mobile operators and retailers. We operate the largest independent pan-European ATM network and the largest national shared ATM network in India, and are one of the largest providers of prepaid processing, or top-up services, for prepaid mobile airtime. We have processing centers in the U.S., Europe and Asia, and process electronic top-up transactions at more than 175,000 point of sale (POS) terminals across approximately 85,000 locations in the U.S., Europe and Asia Pacific. Euronet’s corporate headquarters are in Leawood, Kansas, U.S.A., and it has 19 offices worldwide, serving clients in more than 65 countries.

ECONOMIC FACTORS, INDUSTRY FACTORS AND RISKS

Our company faces certain economic and industry-wide factors that could materially affect our business. We are an international company, and face economic, political, technology infrastructure and legal issues in every country in which we operate could have a positive or negative impact, and therefore are considered risks. Some of the more significant factors that our management is focused on include the following:

LINES OF BUSINESS, GEOGRAPHIC LOCATIONS AND PRINCIPAL PRODUCTS AND SERVICES

We operate in three principal business segments:

As of December 31, 2004, we had 12 principal offices in Europe, four in the Asia-Pacific region, two in the U.S. and one in Egypt. The Company’s 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, professional services, software licensing fees and software maintenance agreements. Each business segment’s sources revenue are described below.

EFT Processing Segment - Of total segment revenue, for the year ended December 31, 2004 approximately 37% was derived from ATMs we owned (excluding those leased by us in connection with outsourcing agreements). We believe our shift from a largely proprietary, Euronet-owned ATM network to a greater focus on ATMs operated under outsourcing agreements will provide higher marginal returns on investments. On our proprietary network, we generally charge fees for four types of ATM transactions that are processed on our ATMs:

- 18 -

Table of Contents

We include in EFT Processing Segment revenues transaction-based fees payable for mobile pone recharge time that we distribute through our ATMs. Fees for recharge transactions vary significantly from market to market and are based on the specific prepaid solution and the denomination of prepaid usage purchased. Any or all of these fees may come under pricing pressure in the future.

Customer-owned ATMs operated under outsource service agreements require a nominal up-front capital investment because we do not purchase the ATMs. We typically, but not in all cases, charge a per ATM management fee and a transaction fee for each ATM managed under our outsourcing agreements. Additionally, in many instances operating costs are the responsibility of the owner and, therefore, recurring operating expenses per ATM are lower.

Prepaid Processing Segment - The significant growth in the revenue and operating income in our Prepaid Processing Segment is the result of the acquisitions of Precept, EPS, CPI and Movilcarga together with the significant growth rates experienced at each of these businesses. During 2003, e-pay established contractual relationships with many large retailers to distribute mobile top-up services through POS terminals, which were all implemented by the beginning of 2004, resulting in significant transaction growth throughout the year. While the Company has benefited from acquired streams of revenue, approximately 70% of the Prepaid Processing Segment’s 2004 revenue growth over 2003 was from the acquired entities’ growth subsequent to the date of acquisition. We do not expect these growth rate levels to continue.

Revenue is recognized based on commissions or 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 and other telecommunication products. Due to certain provisions in our mobile phone operator agreements, the operators have the ability to reduce the overall commission paid on each top-up transaction. However, by virtue of the Company’s contracts with retailers in certain markets, not all of these reductions are absorbed by Euronet. In those markets, when mobile phone operators reduce overall commissions, the effect is to reduce revenues and reduce our direct operating costs resulting in only a small impact, if any, on gross margin and operating income. In Australia, certain retailers negotiate directly with the mobile phone operators for their own commission rates. Our maintenance of agreements with mobile operators is important to the success of our business, because these agreements permit us to distribute top-up to the mobile operators’ customers. The loss of any agreements with mobile operators in any market could materially and adversely affect our results.

Growth in our prepaid business in any given market is driven by a number of factors, including the extent to which conversion from scratch cards to electronic distribution solutions is occurring or has been completed, the overall pace of growth in the prepaid mobile telephone market, the Company’s market share of the retail distribution capacity and the level of commission that is paid to the various intermediaries in prepaid mobile airtime distribution chain. In mature markets, such as the U.K, Australia and Ireland, the conversion from scratch cards to electronic forms of distribution is either complete or nearing completion, therefore, this factor will cease to provide the historic organic increases in the number of transactions per terminal. Also in mature markets, competition among prepaid distributors results in the reduction of commissions and margins by mobile operators as well as retailer churn. In other markets in which we operate, such as Poland, Germany and the U.S., many of the factors that may contribute to rapid growth (conversion from scratch cards to electronic distribution, growth in the prepaid market and rapid roll out of our network of retailers) remain present.

Software Solutions Segment – The revenues from the Software Solutions Segment are derived from software license fees, professional service fees for providing customization, installation and consulting services to customers, ongoing software maintenance fees and hardware sales.

OPPORTUNITIES, CHALLENGES AND RISKS

Our expansion plans and opportunities are focused on three primary areas: (i) outsourced ATM management contracts; (ii) our prepaid mobile phone airtime top-up processing services; and (iii) transactions processed on our network of owned and operated ATMs.

The continued expansion and development of our ATM business will depend on various factors including the following:

- 19 -

Table of Contents

We carefully monitor the revenue and transactional growth of our ATM networks in each of our markets, and we adjust our plans depending on local market conditions, such as variations in the transaction fees we receive, competition, overall trends in ATM-transaction levels and performance of individual ATMs.

We consistently evaluate and add prospects to our list of potential ATM outsource customers. However, we cannot predict the increase or decrease in the number of ATMs we manage under outsourcing agreements, because this depends largely on the willingness of banks to enter into outsourcing contracts with us. Due to the thorough internal reviews and extensive negotiations conducted by existing and prospective banking customers in choosing outsource vendors, the process of entering into or renewing outsourcing agreements can take approximately nine months to more than one year. The process is further complicated by the legal and regulatory considerations of local countries as well as language differences. These agreements tend to cover large numbers of ATMs, so significant increases and decreases in our pool of managed ATMs could result from signature or termination of these management contracts. Therefore, the timing of both current and new contract revenues is uncertain and unpredictable.

We plan to expand our prepaid mobile phone top-up business, which is currently focused on the U.K., Germany, the U.S., Ireland, Poland, New Zealand, Spain and Australia, into our other markets by taking advantage of our expertise together with existing relationships with mobile phone operators and retailers. This expansion will depend on various factors, including the following:

In addition, our continued expansion may involve acquisitions that could divert our resources and management time and require integration of new assets with our existing networks and services. Our ability to effectively manage our rapid expansion will require us to expand our operating systems and employee base in 2005, particularly at the management level, which may reduce our operating income. An inability to do this could have a material adverse effect on our business, growth, financial condition or results of operations. Inadequate technology and resources would impair our ability to maintain current processing technology and efficiencies as well as deliver new and innovative services to compete in the marketplace.

SUMMARY OF 2004 ANNUAL RESULTS

The following description of our operating results compares the fiscal year ended December 31, 2004 with prior periods.

Our 2004 annual consolidated revenues were $381.1 million, an increase of 86% over 2003 revenues of $204.4 million, reflecting strong growth in both the EFT Processing and Prepaid Processing Segments, the acquisitions of Precept, EPS, CPI and Movilcarga during 2004 and the full-year benefit of the results of the 2003 acquisition of e-pay, Transact and AIM. Growth in the EFT Processing Segment was the result of a 71% increase in ATMs under management and 103% increase in transactions processed. Growth in the Prepaid Processing Segment reflects a 124% increase in transactions processed. The increase for 2003 over 2002 was the result of 2003 Prepaid Processing Segment acquisitions. The increase in consolidated revenues from 2003 to 2004 reflects a 103% increase in ATM transactions processed, due to a 51% increase in average ATMs under operation and a 35% growth in transactions per average ATM.

Operating income increased to $35.3 million for 2004 compared to operating income of $13.3 million for 2003 and an operating loss of $0.4 million for 2002. These increases were the result of growth in revenues, the impact of acquisitions and leveraging the Company’s cost structure, particularly in the EFT Processing Segment.

Net income for 2004 was $18.4 million, or $0.55 per share, compared to net income of $11.8 million, or $0.41 per share for 2003 and a net loss of $6.5 million, or a $0.28 per share loss, for 2002. Net income for 2004 includes foreign exchange translation losses of $0.4 million and a loss on early retirement of debt of $0.9 million. Net income for the year 2003 included a gain on the sale of the Company’s U.K. ATM network of $18.0 million, foreign exchange translation losses of $9.7 million and losses from discontinued operations of $0.2 million. Net income for the year 2002 included foreign exchange translation losses of $4.2 million, loss on early retirement of debt of $1.0 million and income from discontinued operations of $3.1 million.

Significant Transactions. During the last three years, we have entered into certain transactions that will have a significant impact on the Company’s future operations and financial results. These transactions are described below.

- 20 -

Table of Contents

Contingently Convertible Debenture. In December 2004, the Company issued $140 million 1.625% aggregate principal amount of convertible senior debentures due 2024. The net proceeds (after fees) totaling approximately $135.6 million were used to repay outstanding debt and the remainder will be used for working capital needs, acquisitions and general corporate purposes. The debentures are convertible under specified circumstances into shares of the Company’s Common Stock at $33.63 per share. For additional information about these debentures, please see Note 12 — Debt Obligations to the Consolidated Financial Statements.

Acquisitions. During 2004, Euronet purchased the share capital of Precept and CPI, all of the assets of EPS and established an 80% owned subsidiary that purchased all of the Movilcarga prepaid assets of Grupo Meflur Corporacion. During 2003, we purchased all of the share capital of e-pay and 96% of the share capital of Transact, and substantially all of the assets of AIM. For additional information about these acquisitions, please see Note 4 — Acquisitions to the Consolidated Financial Statements.

Dispositions. During 2003, we sold our U.K. ATM network and simultaneously signed an outsourcing contract for those ATMs. During 2002, we sold substantially all of the assets of our ATM processing business in the U.S., known as DASH. During 2002, we also sold substantially all of the non-current assets and capital lease obligations of our processing business in France. For additional information about these dispositions, please see Note 14 — Gain on Disposition of U.K. ATM Network and Note 25 — Discontinued Operations and Assets Held for Sale to the Consolidated Financial Statements.

BUSINESS SEGMENT INFORMATION

Summary

As of December 31, 2004, we operated in three principal business segments:

We also operate a “Corporate Services Segment” that provides our three business segments with corporate and other administrative services that are not directly identifiable with any of the Company’s operating segments. The accounting policies of each segment are the same as those referenced in the summary of significant accounting policies. We evaluate performance of our segments based on income or loss from continuing operations before income taxes, foreign exchange gain (loss), and minority interest, excluding nonrecurring gains and losses.

All operating amounts, ATM counts, transaction numbers and statistics reported in this filing exclude discontinued ATM operations in France and the U.S. We have reclassified prior period segment information to conform to the current period’s presentation (see Note 20 - Business Segment Information to the Consolidated Financial Statements).

SEGMENT REVENUES AND OPERATING INCOME FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

- 21 -

Table of Contents

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002—BY BUSINESS SEGMENT

EFT PROCESSING SEGMENT

2004 Compared to 2003

The following table summarizes the results of operations for the EFT Processing Segment for the years ended December 31, 2004 and 2003:

Revenues

Revenues for 2004 increased 47% over 2003 as a result of the increase in number of ATMs operated and the number of transactions processed compared to 2003, as a result of ATM management agreements in Poland, Romania and India. Revenue per average ATM was $16,334 in 2004, compared to $16,728 in 2003, or a 2% decrease. Revenue per transaction decreased 27% to $0.33 for the year ended December 31, 2004 from $0.46 for the year ended December 31, 2003. Generally, these decreases are the result of a continued shift from Euronet proprietarily owned ATMs to ATMs managed under outsourcing agreements. Under outsourcing agreements, the Company primarily earns revenue based on a fixed recurring monthly management fee, with less dependence on transactions because incremental transactions have little impact on the fixed or variable costs of managing ATMs. The more significant decrease in revenue per transaction is due to an overall increase in the number of transactions on ATMs that are managed under outsourcing agreements. Since revenue from these arrangements is derived primarily from a fixed monthly management fee, an increase in the number of transactions processed does not generate commensurate increases in related revenue. As of December 31, 2004, the Company owned 16% of the ATMs operated (excluding those leased by us in connection with outsourcing agreements) and operated the remaining 84% under management outsourcing agreements, compared to 25% and 75%, respectively, as of December 31, 2003.

Of total segment revenue, approximately 37% was from ATMs we owned (excluding those leased by us in connection with outsourcing agreements) for the year ended December 31, 2004 compared to 51% for the year ended December 31, 2003. We believe our shift from a largely proprietary, Euronet-owned ATM network to operating ATMs under outsourcing arrangements is a positive development in the long run and will provide higher marginal returns on investment. Customer-owned ATMs operated under service agreements require a nominal up-front capital investment because we do not purchase the ATMs, nor do we incur the start-up costs typically incurred in the early life cycle of Euronet-owned ATM. Additionally, in many instances operating costs are the responsibility of the owner and, therefore, recurring operating expenses per ATM are lower.

Operating Expenses

Total segment operating expenses increased 36% from 2003 to 2004, primarily due to the increase in the number of ATMs under operation. However, as a percentage of revenues, operating expenses decreased to 81% of revenues in 2004 from 87% in 2003,

- 22 -

Table of Contents

reflecting improved leverage, efficiency and scalability. The increase in ATMs operated under outsourcing arrangements with lower operating costs compared to Company owned ATMs also contributed to the expense decrease in relation to revenues.

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 processing center’s facility related costs and other processing center related expenses. As discussed in Note 2 – Basis of Preparation, to the Consolidated Financial Statements, Euronet changed the manner in which it reports EFT Processing Segment direct costs, salaries and benefits and sales, general and administrative (SG&A) expenses. In prior periods, processing center costs were charged to and then allocated from SG&A to direct costs on the basis of a standard rate per transaction. We have evaluated this approach and believe that the specific assignment of processing center salaries and related costs together with other costs directly attributable to the center is a preferred method and more appropriately reflects the variable and non-variable nature of our operating expenses. Prior periods have been reclassified to conform to the current year presentation. This change does not impact consolidated operating income or net income for any period presented.

Direct operating costs increased to 44% of revenue for the year ended December 31, 2004 from 42% for the year ended December 31, 2003. Direct operating costs per ATM were $7,185 and $6,973 for 2004 and 2003, respectively. The increase for 2004 is attributed to a gain of $0.8 million recorded as an offset to direct operating expenses during 2003 for the sale of 272 Hungarian ATMs.

Direct operating costs per transaction have decreased to $0.15 per transaction during 2004 from $0.19 per transaction during 2003. The improvement in direct operating costs per transaction was the result of increasing transaction volumes at existing sites, without commensurate increases in direct operating costs; costs associated with these sites increase at a slower rate, or not at all, compared to transaction volumes. Additional improvements resulted from installing outsourced ATMs whose direct costs per ATM and on an average per transaction basis were lower than the existing installed base of ATMs. As discussed under “Revenues” above, the number of ATMs that we operate under ATM management outsourcing agreements has increased as compared to ATMs that we own and operate. Outsourced ATMs generally have lower direct operating expenses (telecommunications, cash delivery, security, maintenance and site rental) because, depending on the customer, the customer retains the responsibility for certain operational costs.

Gross margin per ATM, which is revenue less direct operating costs, was $9,148 and $9,755 for the years ended December 31, 2004 and 2003, respectively. Gross margin per transaction was $0.19 and $0.27 for the years ended December 31, 2004 and 2003, respectively. The decreases in gross margin per ATM and gross margin per transaction is the result of a non-recurring $0.8 million gain on the sale of Hungarian ATMs in 2003 recognized as a reduction in direct operating costs and as a result of a significant increase in transactions related to ATMs managed under outsourcing agreements where the average number of transactions per ATM was significantly higher than the average transactions per ATM of the existing installed base.

Salaries and benefits increased by 21%, and selling, general and administrative expenses increased by 14%, during 2004 compared to 2003 due to Euronet’s growing business in Asian markets, staffing for the outsourcing agreement in Romania and certain incentive compensation payments earned based on meeting or exceeding performance plans and general merit increases awarded to employees. Certain staffing increases were also necessary due to the larger number of ATMs under operation and transactions processed. These expenses as a percentage of revenue, however, continued to trend downward during 2004 decreasing to a total of 26% for 2004 compared to 32% for 2003. This decrease as a percentage of revenue reflects the leverage and scalability associated with increases in revenue without commensurate increases in salaries and benefits and selling, general and administrative expenses.

Depreciation and amortization expense for 2004 increased 16% compared to 2003. This increase is due to additional depreciation on more than 700 ATMs under capital lease arrangements related to an outsourcing agreement in Poland implemented in the first half of 2004, additional processing center computer equipment necessary to handle increased transaction volumes and technology upgrades to certain of our owned ATMs during 2004. Management expects that depreciation levels in the future will grow at slower rates as more ATMs reach the end of their depreciable lives (and ATMs are not replaced), and we continue to move towards increasing the number of ATMs that we operate under ATM management agreements rather than as owner/operators.