• 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. We are one of the largest international providers of prepaid mobile airtime processing. Including terminals operated by unconsolidated subsidiaries, we operate a network of approximately 470,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services in Europe, the Middle East, Asia Pacific and North America.

• A Money Transfer Segment, which provides global consumer to consumer money transfer services. We offer this service through a sending network of agents and Company-owned stores primarily in Europe and North America, disbursing money transfers through a worldwide payer network. Bill payment services are offered primarily in the U.S. Based on revenues and volumes, we are the third-largest global money transfer company. The Money Transfer Segment originates and terminates transactions through a network of approximately 79,200 locations, which include sending agents and Company-owned stores, and an extensive payer network in more than 100 countries.

We have five processing centers in Europe, two in Asia Pacific and two in North America. We have 23 principal offices in Europe, seven in North America, five in Asia Pacific and one in the Middle East. Our executive offices are located in Leawood, Kansas, USA. With approximately 74% of our revenues denominated in currencies other than the U.S. dollar, any significant changes in currency exchange rates will likely have a significant impact on our growth in revenues, operating income and diluted earnings per share.
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 - Revenues in the EFT Processing Segment, which represented approximately 19% of total consolidated revenues for the first half of 2009, are 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. Revenues in this segment are 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 revenues represent 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 - Revenues in the Prepaid Processing Segment, which represented approximately 58% of total consolidated revenues for the first half of 2009, are primarily derived from commissions or processing fees received from telecommunications service providers for the sale and distribution of prepaid mobile airtime. We also generate revenues 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 profit 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, bill payment, money transfer and prepaid mobile content such as music, ringtones and games.
Money Transfer Segment - Revenues in the Money Transfer Segment, which represented approximately 23% of total consolidated revenues for the first half of 2009, are primarily derived from charging 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 Europe and North America and a worldwide network of correspondent agents, consisting primarily of financial institutions in the transfer destination countries. Origination and correspondent 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; 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 our 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 our Prepaid Processing Segment, including providing prepaid services through RIA's stores and agents worldwide;

• the ability to leverage our banking and merchant/retailer relationships to expand money transfer corridors to Europe, Asia and Africa, 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 existing operations.

Corporate Services, Eliminations and Other - In addition to operating in our principal business segments described above, our "Corporate Services, Elimination and Other" category 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.

SEGMENT SUMMARY RESULTS OF OPERATIONS
Revenues and operating income by segment for the three- and six-month periods
ended June 30, 2009 and 2008 are summarized in the tables below:

                                   Revenues for the Three                                                 Revenues for the Six
                                   Months Ended June 30,              Year-over-Year Change               Months Ended June 30,               Year-over-Year Change
                                                                     Decrease           Decrease                                            Decrease            Decrease
(dollar amounts in thousands)       2009             2008             Amount             Percent           2009             2008             Amount              Percent
EFT Processing                  $      45,592      $  52,361     $         (6,769 )       (13%)       $        91,798     $ 100,597     $         (8,799 )        (9%)
Prepaid Processing                    145,253        152,633               (7,380 )       (5%)                279,776       296,858              (17,082 )        (6%)
Money Transfer                         57,769         59,456               (1,687 )       (3%)                110,737       111,788               (1,051 )        (1%)

Total                           $     248,614      $ 264,450     $        (15,836 )       (6%)        $       482,311     $ 509,243     $        (26,932 )        (5%)


                                  Operating Income (Loss)                                                Operating Income (Loss)
                                    for the Three Months                                                for the Six Months Ended
                                       Ended June 30,                 Year-over-Year Change                     June 30,                      Year-over-Year Change
                                                                     Increase                                                               Increase            Increase
                                                                    (Decrease)          Increase                                           (Decrease)          (Decrease)
(dollar amounts in thousands)       2009             2008             Amount             Percent           2009             2008             Amount              Percent
EFT Processing                  $       9,799      $   9,039     $            760          8%         $        21,709     $  19,184     $          2,525           13%
Prepaid Processing                     12,111         11,420                  691          6%                  22,987        21,754                1,233           6%
Money Transfer                          2,681          2,558                  123          5%                  (5,190 )       4,509               (9,699 )         n/m

Total                                  24,591         23,017                1,574          7%                  39,506        45,447               (5,941 )        (13%)
Corporate services                     (6,567 )       (5,719 )               (848 )        15%                (11,784 )     (14,918 )              3,134          (21%)

Total                           $      18,024      $  17,298     $            726          4%         $        27,722     $  30,529     $         (2,807 )        (9%)

n/m - Not meaningful.

Impact of changes in foreign currency exchange rates During the first half of 2009, the U.S. dollar was significantly stronger compared to most of the currencies of the countries in which we operate than it was in the first half of 2008. Because our revenues and local expenses are recorded in the functional currencies of our operating entities, amounts we earned for the first half of 2009 are negatively impacted by the stronger U.S. dollar. We estimate that, depending on the mix of countries and currencies, our consolidated operating income for the first half of 2009 was diminished by approximately 25% to 30% when compared to the first half of 2008 as a result of changes in foreign currency exchange rates. If applicable, we will refer to the impact of fluctuation in foreign currency exchange rates in our comparison of operating segment results for the six- and three-month periods ended June 30, 2009 and 2008. To provide further perspective on the impact of foreign currency exchange rates, the following table shows the changes in values relative to the U.S. dollar from the first half of 2008 to the first half of 2009 of the currencies of the countries in which we have our most significant operations:

                                     Average Translation Rate
                              Six Months Ended      Six Months Ended     Decrease
         Currency              June 30, 2009         June 30, 2008       Percent
         Australian dollar     $       0.713         $        0.924         (23 %)
         British pound                 1.495                  1.975         (24 %)
         euro                          1.335                  1.531         (13 %)
         Indian rupee                  0.020                  0.025         (20 %)
         Polish zloty                  0.299                  0.438         (32 %)

COMPARISON OF OPERATING RESULTS FOR THE THREE- AND SIX-MONTH PERIODS ENDED JUNE
30, 2009 AND 2008
EFT PROCESSING SEGMENT
The following table presents the results of operations for the three- and
six-month periods ended June 30, 2009 and 2008 for our EFT Processing Segment:

                                         Three Months Ended                                                Six Months Ended
                                              June 30,                  Year-over-Year Change                  June 30,                  Year-over-Year Change
                                                                     Increase           Increase                                      Increase            Increase
                                                                    (Decrease)         (Decrease)                                    (Decrease)          (Decrease)
(dollar amounts in thousands)             2009          2008          Amount             Percent          2009         2008            Amount             Percent
Total revenues                         $   45,592     $ 52,361     $      (6,769 )             (13 %)   $ 91,798     $ 100,597     $       (8,799 )               (9 %)


Operating expenses:
Direct operating costs                     19,656       24,625            (4,969 )             (20 %)     38,611        46,362             (7,751 )              (17 %)
Salaries and benefits                       7,443        9,113            (1,670 )             (18 %)     14,455        17,021             (2,566 )              (15 %)
Selling, general and administrative         4,157        4,610              (453 )             (10 %)      8,304         8,388                (84 )               (1 %)
Depreciation and amortization               4,537        4,974              (437 )              (9 %)      8,719         9,642               (923 )              (10 %)


Total operating expenses                   35,793       43,322            (7,529 )             (17 %)     70,089        81,413            (11,324 )              (14 %)


Operating income                       $    9,799     $  9,039     $         760                 8 %    $ 21,709     $  19,184     $        2,525                 13 %


Transactions processed (in millions)        179.3        168.6              10.7                 6 %       338.8         337.0                1.8                  1 %
ATMs as of June 30                          9,336       10,160              (824 )              (8 %)      9,336        10,160               (824 )               (8 %)
Average ATMs                                9,280        9,962              (682 )              (7 %)      9,339        10,867             (1,528 )              (14 %)

Revenues
Our revenues for the first half of 2009 decreased when compared to the first half of 2008 primarily due to the strengthening of the U.S. dollar in the first half of 2009 compared to the first half of 2008 relative to most of the currencies of the countries in which we operate. Because our revenues are recorded in the functional currencies of our operating entities, amounts we earn in foreign currencies are negatively impacted by the strengthening of the U.S. dollar. Additionally, the decrease in the number of ATMs operated, which is primarily due to the expiration or termination of ATM services contracts discussed in more detail in the following paragraphs, contributed to our revenue decrease. Partly offsetting these decreases were contract termination fees totaling $4.4 million and increases in revenues primarily associated with our operations in India and our software business.
Average monthly revenue per ATM was $1,638 for the second quarter and first half of 2009, compared to $1,752 for the second quarter and $1,543 for the first half of 2008. The decrease in the second quarter of 2009 from the second quarter of 2008 is mainly driven by the impact of the stronger U.S. dollar. The improvement in the first half of 2009 from the same period in 2008 is generally the result of the non-recurring contract termination fees discussed above and the expiration of an ATM services contract in the U.K. at the end of the first quarter 2008. The U.K. contract involved processing services only with very little associated costs and, therefore, had lower-than-average revenue per ATM. Revenue per transaction was $0.25 for the second quarter and $0.27 for the first half of 2009, compared to $0.31 for the second quarter and $0.30 for the first half of 2008. These decreases are primarily the result of the impact of the stronger U.S. dollar and the growth of transactions in India and China, where revenues per transaction have been historically lower than Central and Eastern Europe (due to lower labor costs). During the first half of 2009, transactions on Euronet's shared network in India, Cashnet, increased 138% when compared to the first half of 2008.

Our contracts in the EFT Processing Segment tend to cover large numbers of ATMs, so significant increases and decreases in our pool of managed ATMs may 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.
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 to be regularly engaged in discussions with one or more of our customer banks to either renew or restructure our ATM outsourcing agreements. During the fourth quarter 2008 and first quarter 2009, certain customer contracts were terminated or expired, resulting in a decrease of approximately 1,700 ATMs. Most of the ATM reductions resulted from bank customers shifting their processing to related processing subsidiaries in contemplation of selling the subsidiaries to raise capital, rather than the loss of contracts to competitors. The reduction in the number of ATMs from contract terminations or expirations was partially offset during the first half of 2009 by increases in ATMs driven under new contracts, expansion of ATMs under existing contracts and the deployment of ATMs in markets where we operate Euronet-branded ATMs. For contracts that we are able to renew, as was the case for contract renewals in Romania and Greece in prior years, 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 originally entered into the contracts. Excluding the expired or terminated contracts discussed above, we have been able to renew or extend most of the remaining contracts that were due to expire in 2009. While we have been successful in many cases in obtaining new terms that preserve the same level of earnings arising from the agreements, we have not been successful in all cases and, therefore, we expect to experience reductions in revenues in future quarters arising from the expiration or restructuring of agreements. For the contracts that expired during the fourth quarter 2008 and first quarter 2009, excluding the substantial termination fees described above, we estimate that the impact to 2009 will be a reduction in revenues of approximately $15 million to $16 million, resulting in reduced operating income of approximately $3 million to $4 million. 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 decrease in direct operating cost for the first half of 2009, compared to the first half of 2008, is attributed to the impact of the stronger U.S. dollar and the decrease in the number of ATMs under operation. Gross profit
Gross profit, which is calculated as revenues less direct operating costs, decreased to $25.9 million for the second quarter and $53.2 million for the first half of 2009 from $27.7 million for the second quarter and $54.2 million for the first half of 2008. These decreases are mainly attributable to the impact of the stronger U.S. dollar, partly offset by the contract termination fee revenues discussed above. Gross margin was 57% for the second quarter and 58% for the first half of 2009 compared to 53% for the second quarter and 54% for the first half of 2008. The increases in gross margin are primarily due to the previously mentioned contract termination fees and gross margin improvements in India and our cross-border merchant processing and acquiring business. Salaries and benefits
The decrease in salaries and benefits for the first half of 2009 compared to the first half of 2008 is primarily due to the impact of the stronger U.S. dollar discussed above. As a percentage of revenues these costs decreased to 16% of revenues for the first half of 2009 compared to 17% for the first half of 2008. Selling, general and administrative
Selling, general and administrative expenses were flat for the first half of 2009 compared to the first half of 2008, reflecting increased expenses incurred in connection with growth in India and China and in our cross-border merchant processing and acquiring business being largely offset by the impact of the stronger U.S. dollar. The growth in selling, general and administrative expense associated with the cross-border merchant processing and acquiring business was less pronounced in the second quarter of 2009 than in the first half of 2009 compared to same periods in 2008 as the business launched in the second quarter of 2008. As a percentage of revenue, selling, general and administrative . . .