• A Prepaid Processing Segment, which provides distribution of prepaid mobile airtime and other prepaid products and collection services for various prepaid products, cards and services in the U.S., Europe, Africa, Asia Pacific and the Middle East. Including terminals operated by unconsolidated subsidiaries, we operate a network of approximately 409,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services in the U.S., Europe, and Asia Pacific.

• A Money Transfer Segment, which provides global money transfer and bill payment services through a sending network of agents and Company-owned stores primarily in North America, the Caribbean, Europe and Asia Pacific, disbursing money transfers through a worldwide payer network. Bill payment services are offered primarily in the U.S. The Money Transfer Segment originates and terminates transactions through a network of approximately 73,000 locations, which include sending agents and Company-owned stores, and an extensive payer network across 100 countries.

We have five processing centers in Europe, two in Asia and two in the U.S. We have 23 principal offices in Europe, five in the Asia Pacific region, four in the U.S., two in Latin America and one in the Middle East. Our executive offices are located in Leawood, Kansas, USA.
SOURCES OF REVENUES AND CASH FLOW
Euronet earns revenues and income based on ATM management fees, transaction fees and commissions, professional services, software licensing fees and software maintenance agreements. Each business segment's sources of revenue are described below.
EFT Processing Segment - Revenue in the EFT Processing Segment, which represented approximately 19% of total consolidated revenue for the first nine months of 2008, is derived from fees charged for transactions effected by cardholders on our proprietary network of ATMs, as well as fixed management fees and transaction fees we charge to banks for operating ATMs and processing credit cards under outsourcing agreements. Through our proprietary network, we generally charge fees for four types of ATM transactions: i) cash withdrawals,
ii) balance inquiries, iii) transactions not completed because the relevant card issuer did not give authorization, and iv) prepaid telecommunication recharges. Revenue in this segment is also derived from license fees, professional services and maintenance fees for software and sales of related hardware. Software license fees are the fees we charge to license our proprietary application software to customers. Professional service fees consist of charges for customization, installation and consulting services to customers. Software maintenance revenue represents the ongoing fees charged for maintenance and support for customers' software products. Hardware sales are derived from the sale of computer equipment necessary for the respective software solution. Prepaid Processing Segment - Revenue in the Prepaid Processing Segment, which represented approximately 59% of total consolidated revenue for the first nine months of 2008, is primarily derived from commissions or processing fees received from telecommunications service providers for the sale and distribution of prepaid mobile airtime. We also generate revenue from commissions earned from the distribution of other prepaid 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 our agreements with retailers (distributors where POS terminals are located) in certain markets, not all of these reductions are absorbed by us because we are able to pass a significant portion of the reductions to retailers. Accordingly, under certain retailer agreements, the effect is to reduce revenues and reduce our direct operating costs resulting in only a small impact on gross margin and operating income. In some markets, reductions in commissions can significantly impact our results as it may not be possible, either contractually or commercially in the concerned market, to pass a reduction in commissions to the retailers. In Australia, certain retailers negotiate directly with the mobile phone operators for their own commission rates, which also limits our ability to pass through reductions in commissions. Agreements with mobile operators are important to the success of our business. These agreements permit us to distribute prepaid mobile airtime to the mobile operators'

customers. Other products offered by this segment include prepaid long distance calling card plans, prepaid internet plans, prepaid debit cards, prepaid gift cards and prepaid mobile content such as ring tones and games.
Money Transfer Segment - Revenue in the Money Transfer Segment, which represents approximately 22% of total consolidated revenue for the first nine months of 2008, is primarily derived through the charging of a transaction fee, as well as the difference between purchasing foreign currency at wholesale exchange rates and selling the foreign currency to consumers at retail exchange rates. We have an origination network in place comprised of agents and Company-owned stores primarily in North America, the Caribbean, Europe and Asia Pacific and a worldwide network of distribution agents, consisting primarily of financial institutions in the transfer destination countries. Origination and distribution agents each earn fees for cash collection and distribution services. These fees are recognized as direct operating costs at the time of sale.
OPPORTUNITIES AND CHALLENGES
EFT Processing Segment - The continued expansion and development of our EFT Processing Segment business will depend on various factors including, but not necessarily limited to, the following:
• the impact of competition by banks and other ATM operators and service providers in our current target markets;

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

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

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

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

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

• the availability of financing for expansion;

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

• the ability to renew existing contracts at profitable rates;

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

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

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

Prepaid Processing Segment - The continued expansion and development of the Prepaid Processing Segment business will depend on various factors, including, but not necessarily limited to, the following:
• the ability to negotiate new agreements in additional markets with mobile phone operators, agent financial institutions and retailers;

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

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

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

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

• our market share of the retail distribution capacity;

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

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

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

• the availability of financing for further expansion.

Money Transfer Segment - The expansion and development of our money transfer business will depend on various factors, including, but not necessarily limited to, the following:
• the continued growth in worker migration and employment opportunities;

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

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

• the ability to maintain our agent and correspondent networks;

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

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

• the ability to strengthen our brands;

• our ability to fund working capital requirements;

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

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

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

• the availability of financing for further expansion; and

• our ability to continue to successfully integrate RIA with our other operations.

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

SEGMENT SUMMARY RESULTS OF OPERATIONS
Revenue and operating income by segment for the three- and nine-month periods
ended September 30, 2008 and 2007 are summarized in the tables below:

                                  Revenues for the Three                                       Revenues for the Nine
                                  Months Ended September                                      Months Ended September
                                            30,                   Year-over-Year Change                 30,                   Year-over-Year Change
                                                                 Increase        Increase                                     Increase       Increase
(dollar amounts in thousands)       2008            2007          Amount         Percent        2008            2007           Amount        Percent
EFT Processing                  $     54,408      $  43,521     $    10,887        25%      $     155,005     $ 124,210     $     30,795       25%
Prepaid Processing                   166,784        144,631          22,153        15%            463,642       414,442           49,200       12%
Money Transfer                        59,511         53,573           5,938        11%            171,299       103,581           67,718       65%


Total                           $    280,703      $ 241,725     $    38,978        16%      $     789,946     $ 642,233     $    147,713       23%




                                  Operating Income (Loss)                                        Operating Income (Loss)
                                    for the Three Months                                        for the Nine Months Ended
                                    Ended September 30,            Year-over-Year Change              September 30,                Year-over-Year Change
                                                                  Increase        Increase                                        Increase
                                                                 (Decrease)      (Decrease)                                      (Decrease)       Increase
(dollar amounts in thousands)       2008             2007          Amount         Percent          2008              2007          Amount         Percent
EFT Processing                  $      8,256       $   9,356     $    (1,100 )     (12%)      $       27,440       $  25,008     $     2,432        10%
Prepaid Processing                    12,615          10,403           2,212        21%               34,369          29,619           4,750        16%
Money Transfer                         3,152           3,410            (258 )      (8%)               7,661           3,923           3,738        95%

Total                                 24,023          23,169             854         4%               69,470          58,550          10,920        19%

Corporate services                    (5,255 )        (5,610 )           355        (6%)             (20,173 )       (13,837 )        (6,336 )      46%


Total                           $     18,768       $  17,559     $     1,209         7%       $       49,297       $  44,713     $     4,584        10%

Impact of changes in foreign currency exchange rates Approximately 76% of Euronet's revenues are generated in non-U.S. dollar currencies. Throughout 2007 and into the first half of 2008, the U.S. dollar weakened compared to most of the currencies of the countries in which we operate. Despite strengthening in the third quarter of 2008, the U.S. dollar was weaker on average during the third quarter and first nine months of 2008 compared to the same periods in 2007. Because our revenues and local expenses are recorded in the functional currencies of our operating entities, our profits in 2008 are positively impacted by the weaker U.S. dollar. We estimate that, depending on the mix of countries and currencies, our operating income for the third quarter and first nine months of 2008 benefited by approximately 5% to 10% and 10% to 15%, respectively, when compared to the same periods in 2007. During the third quarter of 2008 and subsequently, the currencies of most of the countries in which we operate have weakened substantially against the U.S. dollar. If these currencies remain weaker than prior periods, or deteriorate further, we expect that

comparisons with prior periods will be negatively impacted during the fourth quarter 2008. On average, for a 5% weakening of our foreign currency based results, we expect a reduction to operating income of approximately $1 million per quarter.

COMPARISON OF OPERATING RESULTS FOR THE THREE- AND NINE-MONTH PERIODS ENDED
SEPTEMBER 30, 2008 AND 2007
EFT PROCESSING SEGMENT
The following table presents the results of operations for the three- and
nine-month periods ended September 30, 2008 and 2007 for our EFT Processing
Segment:

                                     Three Months Ended                                                Nine Months Ended
                                        September 30,                Year-over-Year Change               September 30,                Year-over-Year Change
                                                                   Increase          Increase                                       Increase          Increase
                                                                  (Decrease)        (Decrease)                                     (Decrease)        (Decrease)
(dollar amounts in thousands)        2008            2007           Amount           Percent         2008            2007            Amount           Percent
Total revenues                    $   54,408       $ 43,521       $    10,887          25%         $ 155,005       $ 124,210       $    30,795          25%


Operating expenses:
Direct operating costs                26,000         18,537             7,463          40%            72,362          53,043            19,319          36%
Salaries and benefits                  8,518          8,184               334           4%            25,539          23,431             2,108           9%
Selling, general and
administrative                         6,508          3,274             3,234          99%            14,896          10,850             4,046          37%
Depreciation and amortization          5,126          4,170               956          23%            14,768          11,878             2,890          24%


Total operating expenses              46,152         34,165            11,987          35%           127,565          99,202            28,363          29%


Operating income                  $    8,256       $  9,356       $    (1,100 )       (12%)        $  27,440       $  25,008       $     2,432          10%


Transactions processed (in
millions)                              182.3          156.4              25.9          17%             519.3           434.0              85.3          20%
ATMs as of September 30               10,384         10,516              (132 )        (1%)           10,384          10,516              (132 )        (1%)
Average ATMs                          10,321         10,296                25           0%            10,685           9,348             1,337          14%

Discontinued operations
During the second quarter 2008, we decided to sell Euronet Essentis Limited ("Essentis"), a U.K. software entity previously included in the EFT Processing Segment, in order to narrow the focus of our investments and resources on our transaction processing businesses. We are in the process of locating a buyer and expect to complete a sale before June 30, 2009. Accordingly, the results of operations for Essentis are shown as discontinued operations in the Unaudited Consolidated Statements of Income and Comprehensive Income (Loss) for all periods presented and have been removed from the table above. Revenues
Our revenues for the third quarter and first nine months of 2008 increased when compared to the third quarter and first nine months of 2007 primarily due to increases in the average number of ATMs operated and the number of transactions processed. These increases were attributable to many of our operations, but primarily our operations in Poland, India and Euronet Card Services Greece. Additionally, for the third quarter and first nine months of 2008, the U.S. dollar has been weaker on average than during the third quarter and first nine months of 2007 relative to the currencies of most of the countries in which we operate. Because our revenues are recorded in the functional currencies of our operating entities, foreign currency amounts reported in U.S. dollars are positively impacted by the weakening of the U.S. dollar. Partially offsetting these improvements were decreases in revenue associated with our operations in Romania due to a decrease in the per transaction fee structure with a customer that was granted in exchange for an extension of the contract term and the expiration of an ATM services contract discussed in more detail in the following paragraph.
Average monthly revenue per ATM was $1,757 for the third quarter and $1,612 for the first nine months of 2008, compared to $1,409 for the third quarter and $1,476 for the first nine months of 2007. Revenue per transaction was $0.30 for the third quarter and first nine months of 2008, compared to $0.28 for the third quarter and $0.29 for the first nine months of 2007. These improvements are generally the result of the expiration of an ATM services contract in the U.K. at the end of the first quarter 2008 that involved processing services only, with very little associated costs and, therefore, had lower-than-average revenue per ATM and revenues per transaction. As of September 30, 2007 and March 31, 2008, when the contract expired, we were providing processing services for approximately 2,000 and

2,400 ATMs, respectively, under this contract. Partly offsetting this improvement is the addition of ATMs in China and India, where revenues per ATM have been historically lower than Central and Eastern Europe generally due to lower labor costs.
Our contracts in the EFT Processing Segment tend to cover large numbers of ATMs, so significant increases and deceases in our pool of managed ATMs could result from entry into or termination of these management contracts. Banks have historically been very deliberate in negotiating these agreements and have evaluated a wide range of matters when deciding to choose an outsource vendor. Generally, the process of negotiating a new agreement is subject to extensive management analysis and approvals and the process typically takes six to twelve months or longer. Increasing consolidation in the banking industry could make this process less predictable.
Moreover, our existing contracts generally have terms of five to seven years and a number of them will expire or be up for renewal each year for the next few years. As a result, we expect in future quarters to be regularly engaged in discussions with one or more of our customer banks to either obtain renewal of, or restructure, our ATM outsourcing agreements. As was the case for contract renewals in Romania and Greece in prior years, during renegotiation or restructuring, we expect customers to seek rate concessions or up-front payments because of the greater availability of alternative processing solutions in many of our markets now, as compared to when we entered into the contracts. While we have been successful in many cases in obtaining new terms that preserve some or all of the earnings arising from the agreements, we have not been successful in all cases, and therefore we expect to experience reductions in revenue arising from the expiration or restructuring of agreements in future quarters. Although it is difficult to quantify the financial impact of such expirations or renewals, in general we expect them to reduce future revenues. We cannot be sure we will have sufficient revenues from new contracts to offset potential revenue reductions from expired or restructured agreements. Direct operating costs
Direct operating costs consist primarily of site rental fees, cash delivery costs, cash supply costs, maintenance, insurance, telecommunications and the cost of data center operations-related personnel, as well as the processing centers' facility related costs and other processing center related expenses. The increase in direct operating cost for the first nine months of 2008, compared to the first nine months of 2007, is attributed to the increase in the average number of ATMs under operation, particularly the growing number of independently deployed ATMs in new markets, and the launch of our cross-border merchant acquiring business. Throughout 2007 and the first nine months of 2008, we have incurred substantial capital and operating expenditures in anticipation of entering the cross-border merchant acquiring business after we entered into an agreement for these services with a large petrol retailer in Central Europe. The revenues recorded after launching this business in 2008 have not been significant; however, the cost structure is largely in place and is contributing to the increase in direct operating costs and certain other expenses discussed below, particularly in the third quarter of 2008 which was the first full quarter of operations after the initial launch. Gross margin
Gross margin, which is calculated as revenues less direct operating costs, increased to $28.4 million for the third quarter and $82.6 million for the first nine months of 2008 from $25.0 million for the third quarter and $71.2 million for the first nine months of 2007. These increases are attributable to the increases in revenues discussed above. Gross margin as a percentage of revenues was 52% for the third quarter and 53% for the first nine months of 2008 compared to 57% for the third quarter and first nine months of 2007. The decreases in gross margin as a percentage of revenues are primarily due to the impact of the expiration of the ATM services contract in the U.K. and launching the cross-border merchant acquiring business. Salaries and benefits
The increases in salaries and benefits for the third quarter and first nine months of 2008 compared to the third quarter and first nine months of 2007 are due to staffing costs to support growth in average ATMs managed and transactions processed and for new products, such as POS, card processing and cross-border merchant processing and acquiring. Salaries and benefits also increased as a result of general merit increases awarded to employees. As a percentage of revenues, however, these costs decreased to 16% of revenues for the third quarter and first nine months of 2008 compared to 19% for the third quarter and first nine months of 2007.
Selling, general and administrative
Selling, general and administrative expenses for the first nine months of 2007 include a $1.2 million arbitration loss awarded by a tribunal in Budapest, Hungary arising from a claim by a former cash supply contractor in Central Europe. Excluding the impact of the arbitration loss, as a percentage of revenues, selling, general and administrative expenses increased to 12% for the third quarter and 10% for the first nine months of 2008 compared to 8% for the third quarter and first nine months of 2007. These increases in selling, general and administrative expenses for the 2008 periods compared to the 2007 periods are due primarily to the launch of our cross-border merchant acquiring business that occurred during the second quarter 2008. As explained above, the revenues recorded after launching this business have not been significant; however, the cost structure is in place to support this new business. Depreciation and amortization

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