10-Q 1 gpn-20220331.htm 10-Q gpn-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             

Commission file number: 001-16111
gpn-20220331_g1.jpg
GLOBAL PAYMENTS INC.
(Exact name of registrant as specified in charter)
Georgia58-2567903
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3550 Lenox Road, Atlanta, Georgia
30326
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (770) 829-8000
Securities registered pursuant to Section 12(b) of the Act
Title of each classTrading symbolName of exchange on which registered
Common stock, no par valueGPNNew York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YesNo
The number of shares of the issuer’s common stock, no par value, outstanding as of April 28, 2022 was 281,539,612.


GLOBAL PAYMENTS INC.
FORM 10-Q
For the quarterly period ended March 31, 2022

TABLE OF CONTENTS
  Page
PART I - FINANCIAL INFORMATION
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
PART II - OTHER INFORMATION
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 6.


2

PART I - FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS

GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)

Three Months Ended
March 31, 2022March 31, 2021
Revenues$2,156,254 $1,990,007 
Operating expenses:
Cost of service
957,158 925,246 
Selling, general and administrative
823,149 789,502 
 1,780,307 1,714,748 
Operating income375,947 275,259 
Interest and other income1,711 4,234 
Interest and other expense(93,283)(83,141)
 (91,572)(78,907)
Income before income taxes and equity in income of equity method investments284,375 196,352 
Income tax expense52,218 20,675 
Income before equity in income of equity method investments232,157 175,677 
Equity in income of equity method investments, net of tax17,479 22,733 
Net income249,636 198,410 
Net income attributable to noncontrolling interests, net of tax(4,903)(1,729)
Net income attributable to Global Payments$244,733 $196,681 
Earnings per share attributable to Global Payments:
Basic earnings per share $0.87 $0.66 
Diluted earnings per share $0.87 $0.66 

See Notes to Unaudited Consolidated Financial Statements.
3

GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

Three Months Ended
March 31, 2022March 31, 2021
Net income $249,636 $198,410 
Other comprehensive income (loss):
Foreign currency translation adjustments(32,960)(33,567)
Income tax benefit related to foreign currency translation adjustments670 750 
Net unrealized gains on hedging activities8,934 994 
Reclassification of net unrealized losses on hedging activities to interest expense9,445 10,838 
Income tax expense related to hedging activities(4,456)(2,864)
Other, net of tax 7,775 
Other comprehensive loss(18,367)(16,074)
Comprehensive income231,269 182,336 
Comprehensive loss attributable to noncontrolling interests441 4,245 
Comprehensive income attributable to Global Payments$231,710 $186,581 

See Notes to Unaudited Consolidated Financial Statements.



4

GLOBAL PAYMENTS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 31, 2022December 31, 2021
(Unaudited)
ASSETS  
Current assets:  
Cash and cash equivalents$2,045,277 $1,979,308 
Accounts receivable, net972,961 946,247 
Settlement processing assets1,450,419 1,143,539 
Prepaid expenses and other current assets683,753 641,891 
Total current assets5,152,410 4,710,985 
Goodwill24,793,799 24,813,274 
Other intangible assets, net11,292,243 11,633,709 
Property and equipment, net1,716,257 1,687,586 
Deferred income taxes22,754 12,117 
Other noncurrent assets2,457,797 2,422,042 
Total assets$45,435,260 $45,279,713 
LIABILITIES AND EQUITY
Current liabilities:
Settlement lines of credit$497,345 $484,202 
Current portion of long-term debt120,226 78,505 
Accounts payable and accrued liabilities2,550,112 2,542,256 
Settlement processing obligations1,699,491 1,358,051 
Total current liabilities4,867,174 4,463,014 
Long-term debt11,723,798 11,414,809 
Deferred income taxes2,725,980 2,793,427 
Other noncurrent liabilities723,503 739,046 
Total liabilities20,040,455 19,410,296 
Commitments and contingencies
Equity:
Preferred stock, no par value; 5,000,000 shares authorized and none issued
  
Common stock, no par value; 400,000,000 shares authorized at March 31, 2022 and December 31, 2021; 281,434,153 issued and outstanding at March 31, 2022 and 284,750,452 issued and outstanding at December 31, 2021
  
Paid-in capital22,338,086 22,880,261 
Retained earnings3,068,683 2,982,122 
Accumulated other comprehensive loss(247,205)(234,182)
Total Global Payments shareholders’ equity25,159,564 25,628,201 
Noncontrolling interests235,241 241,216 
Total equity25,394,805 25,869,417 
Total liabilities and equity$45,435,260 $45,279,713 

See Notes to Unaudited Consolidated Financial Statements.
5

GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31, 2022March 31, 2021
Cash flows from operating activities:
Net income$249,636 $198,410 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment99,665 96,372 
Amortization of acquired intangibles329,007 329,201 
Amortization of capitalized contract costs25,906 21,050 
Share-based compensation expense38,399 37,165 
Provision for operating losses and credit losses28,523 23,405 
Noncash lease expense21,555 27,066 
Deferred income taxes(80,841)(56,390)
Equity in income of equity method investments, net of tax(17,479)(22,733)
Distribution received on investments6,022 438 
Other, net6,127 (6,285)
Changes in operating assets and liabilities, net of the effects of business combinations:
Accounts receivable(34,191)(37,141)
Settlement processing assets and obligations, net48,198 21,714 
Prepaid expenses and other assets(115,904)(33,128)
Accounts payable and other liabilities25,377 262 
Net cash provided by operating activities630,000 599,406 
Cash flows from investing activities:
Business combinations and other acquisitions, net of cash acquired(4,726)(11,074)
Capital expenditures(156,102)(86,159)
Other, net5 293 
Net cash used in investing activities(160,823)(96,940)
Cash flows from financing activities:
Net borrowings from settlement lines of credit16,497 108,488 
Proceeds from long-term debt1,529,157 1,987,005 
Repayments of long-term debt(1,176,496)(1,575,435)
Payments of debt issuance costs(1,706)(6,819)
Repurchases of common stock(649,654)(802,955)
Proceeds from stock issued under share-based compensation plans7,940 17,705 
Common stock repurchased - share-based compensation plans(26,295)(39,437)
Distributions to noncontrolling interests(5,534) 
Dividends paid(70,243)(57,574)
Net cash used in financing activities(376,334)(369,022)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(36,147)(21,141)
Increase in cash, cash equivalents and restricted cash56,696 112,303 
Cash, cash equivalents and restricted cash, beginning of the period2,123,023 2,089,771 
Cash, cash equivalents and restricted cash, end of the period$2,179,719 $2,202,074 

See Notes to Unaudited Consolidated Financial Statements.
6

GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 (in thousands, except per share data)

 
Number of Shares
Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive LossTotal Global Payments Shareholders’ EquityNoncontrolling InterestsTotal Equity
Balance at December 31, 2021284,750 $22,880,261 $2,982,122 $(234,182)$25,628,201 $241,216 $25,869,417 
Net income244,733 244,733 4,903 249,636 
Other comprehensive loss(13,023)(13,023)(5,344)(18,367)
Stock issued under share-based compensation plans1,395 7,940 7,940 7,940 
Common stock repurchased - share-based compensation plans(195)(26,789)(26,789)(26,789)
Share-based compensation expense38,399 38,399 38,399 
Repurchases of common stock(4,516)(561,725)(87,929)(649,654)(649,654)
Distributions to noncontrolling interest— (5,534)(5,534)
Cash dividends declared ($0.25 per common share)
(70,243)(70,243)(70,243)
Balance at March 31, 2022281,434 $22,338,086 $3,068,683 $(247,205)$25,159,564 $235,241 $25,394,805 

 
Number of Shares
Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Total Global Payments Shareholders’ Equity
Noncontrolling InterestsTotal Equity
Balance at December 31, 2020298,332 $24,963,769 $2,570,874 $(202,273)$27,332,370 $154,674 $27,487,044 
Net income196,681 196,681 1,729 198,410 
Other comprehensive loss(10,100)(10,100)(5,974)(16,074)
Stock issued under share-based compensation plans1,003 17,705 17,705 17,705 
Common stock repurchased - share-based compensation plans(222)(41,529)(41,529)(41,529)
Share-based compensation expense37,165 37,165 37,165 
Repurchases of common stock(3,955)(573,787)(209,169)(782,956)(782,956)
Cash dividends declared ($0.195 per common share)
(57,574)(57,574)(57,574)
Balance at March 31, 2021295,158 $24,403,323 $2,500,812 $(212,373)$26,691,762 $150,429 $26,842,191 

See Notes to Unaudited Consolidated Financial Statements.



7

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Business, consolidation and presentation - We are a leading payments technology company delivering innovative software and services to our customers globally. Our technologies, services and team member expertise allow us to provide a broad range of solutions that enable our customers to operate their businesses more efficiently across a variety of channels around the world. We operate in three reportable segments: Merchant Solutions, Issuer Solutions and Business and Consumer Solutions, which are described in "Note 12—Segment Information." Global Payments Inc. and its consolidated subsidiaries are referred to herein collectively as "Global Payments," the "Company," "we," "our" or "us," unless the context requires otherwise.

These unaudited consolidated financial statements include our accounts and those of our majority-owned subsidiaries, and all intercompany balances and transactions have been eliminated in consolidation. These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The consolidated balance sheet as of December 31, 2021 was derived from the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 but does not include all disclosures required by GAAP for annual financial statements.

In the opinion of our management, all known adjustments necessary for a fair presentation of the results of the interim periods have been made. These adjustments consist of normal recurring accruals and estimates that affect the carrying amount of assets and liabilities. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Use of estimates - The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. In particular, the future magnitude, duration and effects of the COVID-19 pandemic and the invasion of Ukraine by Russia are difficult to predict at this time, and the ultimate effect could result in additional charges related to the recoverability of assets, including financial assets, long-lived assets and goodwill and other losses.

In response to the invasion of Ukraine by Russia, economic sanctions were imposed on individuals and entities in Russia, including financial institutions, by governments around the world, including the U.S. and the European Union. As of March 31, 2022, we were in compliance with all applicable restrictions and sanctions, and our operations in Russia had not been significantly affected. As a result of additional sanctions imposed in April 2022 that will affect our ability to continue normal operations in Russia, we sold our merchant business in Russia effective April 29, 2022. Based on our current estimates, we expect to recognize a charge of approximately $130 million during the second quarter of 2022 associated with the sale, including recognition of the associated accumulated foreign currency translation losses.

These unaudited consolidated financial statements reflect the financial statement effects based upon management’s estimates and assumptions utilizing the most currently available information.
8


Recently issued pronouncements not yet adopted

Accounting Standards Update ("ASU") 2021-08In October 2021, the Financial Accounting Standards Board ("FASB") issued ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("Topic 606"), at fair value on the acquisition date. ASU 2021-08 requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts, which should generally result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. This update also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption is permitted, including adoption in an interim period. Adoption during an interim period requires retrospective application to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application. We are evaluating the potential effects of ASU 2021-08 on our consolidated financial statements.

NOTE 2—ACQUISITION

On June 10, 2021, we acquired Zego, a real estate technology company that provides comprehensive resident experience management software and digital commerce solutions to property managers, primarily in the United States, for cash consideration of approximately $933 million. This acquisition aligns with our technology-enabled, software driven strategy and expands our business into a new vertical market. We accounted for this transaction as a business combination, which generally requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date. The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration were as follows:
9


Provisional Amounts at March 31, 2022
(in thousands)
Cash and cash equivalents$67,374 
Accounts receivable1,017 
Identifiable intangible assets473,000 
Property and equipment575 
Other assets9,051 
Accounts payable and accrued liabilities(71,006)
Deferred income tax liabilities(13,902)
Other liabilities(8,010)
Total identifiable net assets458,099 
Goodwill475,147 
Total purchase consideration$933,246 

As of March 31, 2022, we considered these amounts to be provisional because we were still in the process of gathering and reviewing information to support the valuation of assets acquired and liabilities assumed and to evaluate the differences in the bases of assets and liabilities for financial reporting and tax purposes. There were no measurement-period adjustments during the three months ended March 31, 2022.

Goodwill of $475.1 million arising from the acquisition, included in the Merchant Solutions segment, is attributable to expected growth opportunities, potential synergies from combining our existing businesses and an assembled workforce. We expect that substantially all of the goodwill will be deductible for income tax purposes.

The following table reflects the provisional estimated fair values of the identified intangible assets of Zego and the respective weighted-average estimated amortization periods:

Estimated Fair ValueWeighted-Average Estimated Amortization Periods
(in thousands)(years)
Customer-related intangible assets$208,000 13
Contract-based intangible assets119,000 20
Acquired technologies124,000 6
Trademarks and trade names22,000 15
Total estimated identifiable intangible assets$473,000 14

10

NOTE 3—REVENUES

The following tables present a disaggregation of our revenues from contracts with customers by geography for each of our reportable segments for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31, 2022
Merchant
Solutions
Issuer
Solutions
Business and
Consumer
Solutions
Intersegment
Eliminations
Total
(in thousands)
Americas$1,242,620 $385,243 $191,432 $(15,451)$1,803,844 
Europe174,055 117,671 4,340  296,066 
Asia Pacific56,344 8,587  (8,587)56,344 
$1,473,019 $511,501 $195,772 $(24,038)$2,156,254 

Three Months Ended March 31, 2021
Merchant
Solutions
Issuer
Solutions
Business and
Consumer
Solutions
Intersegment
Eliminations
Total
(in thousands)
Americas$1,080,470 $378,043 $240,633 $(16,905)$1,682,241 
Europe132,934 117,412 2,952  253,298 
Asia Pacific54,468 4,796  (4,796)54,468 
$1,267,872 $500,251 $243,585 $(21,701)$1,990,007 

The following table presents a disaggregation of our Merchant Solutions segment revenues by distribution channel for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31, 2022March 31, 2021
(in thousands)
Relationship-led$752,214 $668,556 
Technology-enabled720,805 599,316 
$1,473,019 $1,267,872 

ASC Topic 606, Revenues from Contracts with Customers ("ASC 606"), requires that we determine for each customer arrangement whether revenue should be recognized at a point in time or over time. For the three months ended March 31, 2022 and 2021, substantially all of our revenues were recognized over time.

11

Supplemental balance sheet information related to contracts from customers as of March 31, 2022 and December 31, 2021 was as follows:
Balance Sheet LocationMarch 31, 2022December 31, 2021
(in thousands)
Assets:
Capitalized costs to obtain customer contracts, net
Other noncurrent assets$306,319 $291,914 
Capitalized costs to fulfill customer contracts, net
Other noncurrent assets$123,852 $113,366 
Liabilities:
Contract liabilities, net (current)Accounts payable and accrued liabilities$209,869 $227,783 
Contract liabilities, net (noncurrent)Other noncurrent liabilities$45,512 $44,502 

Net contract assets were not material at March 31, 2022 or at December 31, 2021. Revenue recognized for the three months ended March 31, 2022 and 2021 from contract liability balances at the beginning of each period was $84.1 million and $85.9 million, respectively.

ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations. The purpose of this disclosure is to provide additional information about the amounts and expected timing of revenue to be recognized from the remaining performance obligations in our existing contracts. The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at March 31, 2022. However, as permitted, we have elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. Accordingly, the total amount of unsatisfied or partially unsatisfied performance obligations related to processing services is significantly higher than the amounts disclosed in the table below (in thousands):
Year Ending December 31,
2022$770,573 
2023859,699 
2024600,524 
2025478,419 
2026378,490 
2027246,544 
2028 and thereafter285,701 
Total$3,619,950 

12

NOTE 4—GOODWILL AND OTHER INTANGIBLE ASSETS

As of March 31, 2022 and December 31, 2021, goodwill and other intangible assets consisted of the following:

 March 31, 2022December 31, 2021
 (in thousands)
Goodwill$24,793,799 $24,813,274 
Other intangible assets:
Customer-related intangible assets$9,683,201 $9,694,083 
Acquired technologies2,960,242 2,962,154 
Contract-based intangible assets2,251,832 2,258,676 
Trademarks and trade names1,270,797 1,271,302 
16,166,072 16,186,215 
Less accumulated amortization:
Customer-related intangible assets2,756,357 2,587,586 
Acquired technologies1,466,246 1,367,513 
Contract-based intangible assets201,402 180,975 
Trademarks and trade names449,824 416,432 
4,873,829 4,552,506 
$11,292,243 $11,633,709 

The following table sets forth the changes by reportable segment in the carrying amount of goodwill for the three months ended March 31, 2022:
Merchant
Solutions
Issuer
Solutions
Business and
Consumer
Solutions


Total
(in thousands)
Balance at December 31, 2021$14,063,682 $7,954,453 $2,795,139 $24,813,274 
Effect of foreign currency translation(6,953)(7,541)(599)(15,093)
Reallocation of goodwill 407,713 (407,713) 
Measurement period adjustments (4,382) (4,382)
Balance at March 31, 2022$14,056,729 $8,350,243 $2,386,827 $24,793,799 

During the first quarter of 2022, the recently acquired operations of MineralTree were reassigned to the Issuer Solutions segment to reflect how the business will be managed going forward. As a result of this realignment, $407.7 million of goodwill was reallocated from the Business and Consumer Solutions segment to the Issuer Solutions segment.

There were no accumulated impairment losses for goodwill as of March 31, 2022 or December 31, 2021.

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NOTE 5—LONG-TERM DEBT AND LINES OF CREDIT

As of March 31, 2022 and December 31, 2021, long-term debt consisted of the following:
March 31, 2022December 31, 2021
(in thousands)
3.750% senior notes due June 1, 2023
$555,918 $557,186 
4.000% senior notes due June 1, 2023
557,690 559,338 
1.500% senior notes due November 15, 2024
497,430 497,185 
2.650% senior notes due February 15, 2025
995,219 994,797 
1.200% senior notes due March 1, 2026
1,092,495 1,092,016 
4.800% senior notes due April 1, 2026
795,199 798,024 
2.150% senior notes due January 15, 2027
744,008 743,695 
4.450% senior notes due June 1, 2028
477,096 478,194 
3.200% senior notes due August 15, 2029
1,238,401 1,238,006 
2.900% senior notes due May 15, 2030
990,489 990,196 
2.900% senior notes due November 15, 2031
741,926 741,716 
4.150% senior notes due August 15, 2049
740,235 740,146 
Unsecured term loan facility1,990,797 1,989,793 
Unsecured revolving credit facility370,000  
Finance lease liabilities56,895 64,421 
Other borrowings226 8,601 
Total long-term debt11,844,024 11,493,314 
Less current portion120,226 78,505 
Long-term debt, excluding current portion$11,723,798 $11,414,809 

The carrying amounts of our senior notes and term loan in the table above are presented net of unamortized discount and unamortized debt issuance costs, as applicable. At March 31, 2022, unamortized discount on senior notes was $11.4 million, and unamortized debt issuance costs on senior notes and the unsecured term loan facility were $57.6 million. At December 31, 2021, unamortized discount on senior notes was $11.7 million and unamortized debt issuance costs on our senior notes and the unsecured term loan facility were $60.7 million. The portion of unamortized debt issuance costs related to revolving credit facilities is included in other noncurrent assets. At March 31, 2022, unamortized debt issuance costs on the unsecured revolving credit facility were $9.0 million, and at December 31, 2021, unamortized debt issuance costs on the unsecured revolving credit facility were $9.9 million.

At March 31, 2022, future maturities of long-term debt (excluding finance lease liabilities) are as follows by year (in thousands):
Year Ending December 31,
2022$50,173 
20231,300,000 
20242,620,000 
20251,000,000 
20261,850,000 
2027750,000 
2028 and thereafter4,200,000 
Total$11,770,173 

14

Long-Term Debt

As of March 31, 2022, our senior notes had a total carrying amount of $9.4 billion and an estimated fair value of $9.1 billion. The estimated fair value of our senior notes was based on quoted market prices in an active market and is considered to be a Level 1 measurement of the valuation hierarchy. The fair value of other long-term debt approximated its carrying amount at March 31, 2022.

Compliance with Covenants

The unsecured term loan and revolving credit facility contain customary conditions to funding, affirmative covenants, negative covenants, financial covenants and events of default. As of March 31, 2022, financial covenants under the term loan facility required a leverage ratio of 3.50 to 1.00 and an interest coverage ratio of 3.00 to 1.00. We were in compliance with all applicable covenants as of March 31, 2022.

Derivative Agreements

We have interest rate swap agreements with financial institutions to hedge changes in cash flows attributable to interest rate risk on a portion of our variable-rate debt instruments. Net amounts to be received or paid under the swap agreements are reflected as adjustments to interest expense. Since we have designated the interest rate swap agreements as portfolio cash flow hedges, unrealized gains or losses resulting from adjusting the swaps to fair value are recorded as components of other comprehensive income (loss). The fair values of our interest rate swaps were determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date. These derivative instruments were classified within Level 2 of the valuation hierarchy.

The table below presents information about our derivative financial instruments, designated as cash flow hedges, included in the consolidated balance sheets:
Fair Values
Derivative Financial InstrumentsBalance Sheet LocationWeighted-Average Fixed Rate of Interest at March 31, 2022Range of Maturity Dates at
March 31, 2022
March 31, 2022December 31, 2021
(in thousands)
Interest rate swaps (Notional of $1,250 million at March 31, 2022 and December 31, 2021)
Accounts payable and accrued liabilities 2.73%December 31, 2022$11,765 $28,777 
15


The table below presents the effects of our interest rate swaps on the consolidated statements of income and statements of comprehensive income for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31, 2022March 31, 2021
(in thousands)
Net unrealized gains recognized in other comprehensive income (loss)$8,934 $994 
Net unrealized losses reclassified out of other comprehensive income (loss) to interest expense$9,445 $10,838 

As of March 31, 2022, the amount of net unrealized losses in accumulated other comprehensive loss related to our interest rate swaps that is expected to be reclassified into interest expense during the next 12 months was $16.9 million.

Interest Expense

Interest expense was $89.3 million and $81.2 million for the three months ended March 31, 2022 and 2021, respectively.

NOTE 6—INCOME TAX

Our effective income tax rate for the three months ended March 31, 2022 was 18.4%. Our effective income tax rate for the three months ended March 31, 2022 differed favorably from the U.S. statutory rate primarily as a result of foreign interest income not subject to tax, tax credits and the foreign-derived intangible income deduction.

Our effective income tax rate for the three months ended March 31, 2021 was 10.5%. Our effective income tax rate for the three months ended March 31, 2021 differed favorably from the U.S. statutory rate primarily as a result of a change in the assessment of the need for a valuation allowance related to foreign tax credit carryforwards, foreign interest income not subject to tax, tax credits, the foreign-derived intangible income deduction and excess tax benefits of share-based awards.

NOTE 7—SHAREHOLDERS’ EQUITY

We repurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase ("ASR") programs. During the three months ended March 31, 2022, we repurchased and retired 4,515,626 shares of our common stock at a cost, including commissions, of $649.7 million, or $143.95 per share. During the three months ended March 31, 2021, we repurchased and retired 3,955,400 shares of our common stock at a cost including commissions, of $783.0 million, or $198.00 per share. The activity for the three months ended March 31, 2021 included the repurchase of 2,491,161 shares at an average price of $200.71 per share under an ASR agreement we entered into on February 10, 2021 with a financial institution to repurchase an aggregate of $500 million of our common stock during the ASR program purchase period, which ended on March 31, 2021. As of March 31, 2022, the remaining amount available under our share repurchase program was $1,707.0 million.

On April 28, 2022, our board of directors declared a dividend of $0.25 per share payable on June 24, 2022 to common shareholders of record as of June 10, 2022.

16

NOTE 8—SHARE-BASED AWARDS AND STOCK OPTIONS

The following table summarizes share-based compensation expense and the related income tax benefit recognized for our share-based awards and stock options:
Three Months Ended
March 31, 2022March 31, 2021
(in thousands)
Share-based compensation expense$38,399 $37,165 
Income tax benefit$9,679 $8,399 
 
Share-Based Awards

The following table summarizes the changes in unvested restricted stock and performance awards for the three months ended March 31, 2022:
SharesWeighted-Average
Grant-Date
Fair Value
(in thousands)
Unvested at December 31, 20211,640 $184.90 
Granted1,428 138.21 
Vested(535)174.51 
Forfeited(22)167.59 
Unvested at March 31, 20222,511 $160.68 

The total fair value of restricted stock and performance awards vested during the three months ended March 31, 2022 and March 31, 2021 was $93.3 million and $86.1 million, respectively.

For restricted stock and performance awards, we recognized compensation expense of $35.1 million and $33.5 million during the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, there was $333.5 million of unrecognized compensation expense related to unvested restricted stock and performance awards that we expect to recognize over a weighted-average period of 2.4 years.

17

Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2022: 
OptionsWeighted-Average Exercise PriceWeighted-Average Remaining Contractual TermAggregate Intrinsic Value
(in thousands)(years)(in millions)
Outstanding at December 31, 20211,172 $107.44 5.8$47.4
Granted154 136.02 
Exercised(4)16.89 
Outstanding at March 31, 20221,322 $111.06 5.9$48.5
Options vested and exercisable at March 31, 20221,053 $97.96 5.1$48.4

We recognized compensation expense for stock options of $1.8 million and $2.4 million during the three months ended March 31, 2022 and 2021, respectively. The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2022 and 2021 was $0.6 million and $20.6 million, respectively. As of March 31, 2022, we had $14.0 million of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of 2.3 years.

The weighted-average grant-date fair value of stock options granted during the three months ended March 31, 2022 and 2021 was $48.88 and $65.99, respectively. Fair value was estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:
Three Months Ended
March 31, 2022March 31, 2021
Risk-free interest rate1.87%0.59%
Expected volatility40%40%
Dividend yield0.56%0.44%
Expected term (years)55

The risk-free interest rate was based on the yield of a zero coupon U.S. Treasury security with a maturity equal to the expected life of the option from the date of the grant. Our assumption on expected volatility was based on our historical volatility. The dividend yield assumption was determined using our average stock price over the preceding year and the annualized amount of our most current quarterly dividend per share. We based our assumptions on the expected term of the options on our analysis of the historical exercise patterns of the options and our assumption on the future exercise pattern of options.

NOTE 9—EARNINGS PER SHARE

Basic earnings per share ("EPS") was computed by dividing net income attributable to Global Payments by the weighted-average number of shares outstanding during the period. Earnings available to common shareholders was the same as reported net income attributable to Global Payments for all periods presented.

18

Diluted EPS is computed by dividing net income attributable to Global Payments by the weighted-average number of shares outstanding during the period, including the effect of share-based awards that would have a dilutive effect on EPS. All stock options with an exercise price lower than the average market share price of our common stock for the period are assumed to have a dilutive effect on EPS. The dilutive share base for the three months ended March 31, 2022 excluded approximately 388,355 shares related to stock options that would have an antidilutive effect on the computation of diluted earnings per share. There were no such shares for the three months ended March 31, 2021.

The following table sets forth the computation of diluted weighted-average number of shares outstanding for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31, 2022March 31, 2021
(in thousands)
Basic weighted-average number of shares outstanding282,100 296,425 
Plus: Dilutive effect of stock options and other share-based awards467 1,246 
Diluted weighted-average number of shares outstanding282,567 297,671 

NOTE 10 - SUPPLEMENTAL BALANCE SHEET INFORMATION

Cash, cash equivalents and restricted cash

A reconciliation of the amounts of cash and cash equivalents and restricted cash in the consolidated balance sheets to the amount in the consolidated statements of cash flows is as follows:

March 31, 2022December 31, 2021
(in thousands)
Cash and cash equivalents$2,045,277 $1,979,308 
Restricted cash included in prepaid expenses and other current assets134,442 143,715 
Cash, cash equivalents and restricted cash shown in the statement of cash flows$2,179,719 $2,123,023 

Accounts payable and accrued liabilities

At March 31, 2022 and December 31, 2021, accounts payable and accrued liabilities in the consolidated balance sheet included obligations totaling $3.6 million and $14.5 million, respectively, for employee termination benefits resulting from integration activities related to our merger with Total System Services, Inc. (the "Merger"). During the three months ended March 31, 2021, we recognized charges for employee termination benefits of $25.2 million, which included $0.5 million of share-based compensation expense. These charges are recorded within selling, general and administrative expenses in our consolidated statements of income and included within Corporate expenses for segment reporting purposes. Employee termination benefits from Merger-related integration activities were substantially complete as of December 31, 2021, and there were no significant charges recognized during the three months ended March 31, 2022. Any remaining obligations are expected to be paid within the next 12 months.

19

NOTE 11—ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in the accumulated balances for each component of other comprehensive income (loss) were as follows for the three months ended March 31, 2022 and 2021:
Foreign Currency Translation Gains (Losses)Unrealized Gains (Losses) on Hedging ActivitiesOtherAccumulated Other Comprehensive Loss
(in thousands)
Balance at December 31, 2021$(182,949)$(48,490)$(2,743)$(234,182)
Other comprehensive (loss) income(26,946)13,923  (13,023)
Balance at March 31, 2022$(209,895)$(34,567)$(2,743)$(247,205)
Balance at December 31, 2020$(114,227)$(81,543)$(6,503)$(202,273)
Other comprehensive (loss) income(26,843)8,968 7,775 (10,100)
Balance at March 31, 2021$(141,070)$(72,575)$1,272 $(212,373)

Other comprehensive loss attributable to noncontrolling interests, which relates only to foreign currency translation, was $5.3 million and $6.0 million for the three months ended March 31, 2022 and 2021, respectively.

NOTE 12—SEGMENT INFORMATION

We operate in three reportable segments: Merchant Solutions, Issuer Solutions and Business and Consumer Solutions. We evaluate performance and allocate resources based on the operating income of each operating segment. The operating income of each operating segment includes the revenues of the segment less expenses that are directly related to those revenues. Operating overhead, shared costs and share-based compensation costs are included in Corporate. Interest and other income, interest and other expense, income tax expense and equity in income of equity method investments, net of tax, are not allocated to the individual segments. We do not evaluate the performance of or allocate resources to our operating segments using asset data. The accounting policies of the reportable operating segments are the same as those described in our Annual Report on Form 10-K for the year ended December 31, 2021 and our summary of significant accounting policies in "Note 1 - Basis of Presentation and Summary of Significant Accounting Policies." During the first quarter of 2022, the recently acquired operations of MineralTree were reassigned to the Issuer Solutions segment to reflect how the business will be managed going forward.

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Information on segments and reconciliations to consolidated revenues, consolidated operating income and consolidated depreciation and amortization was as follows for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31, 2022March 31, 2021
(in thousands)
Revenues:(1)
Merchant Solutions$1,473,019 $1,267,872 
Issuer Solutions511,501 500,251 
Business and Consumer Solutions195,772 243,585 
Intersegment eliminations(24,038)(21,701)
 Consolidated revenues$2,156,254 $1,990,007 
Operating income (loss)(1)(2):
Merchant Solutions$444,530 $339,989 
Issuer Solutions58,102 68,455 
Business and Consumer Solutions33,658 61,923 
Corporate(160,343)(195,108)
Consolidated operating income$375,947 $275,259 
Depreciation and amortization:(1)
Merchant Solutions$249,961 $250,596 
Issuer Solutions152,123 144,609 
Business and Consumer Solutions20,269 21,920 
Corporate6,319 8,448 
 Consolidated depreciation and amortization$428,672 $425,573 

(1) Revenues, operating income and depreciation and amortization reflect the effects of acquired businesses from the respective acquisition dates.

(2) Operating loss for Corporate included acquisition and integration expenses of $48.2 million and $90.1 million during the three months ended March 31, 2022 and 2021, respectively.

NOTE 13—COMMITMENTS AND CONTINGENCIES

Legal Matters

We are party to a number of claims and lawsuits incidental to our business. In our opinion, the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, are not expected to have a material adverse effect on our financial position, liquidity, results of operations or cash flows.

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ITEM 2—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report and the Management’s Discussion and Analysis of Financial Condition and Results of Operations and consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2021. This discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements.

Executive Overview

We are a leading payments technology company delivering innovative software and services to our customers globally. Our technologies, services and team member expertise allow us to provide a broad range of solutions that enable our customers to operate their businesses more efficiently across a variety of channels around the world.

We have grown organically as well as through acquisitions. We continue to invest in new technology solutions and innovation, infrastructure to support our growing business and the consolidation and enhancement of our operating platforms. These investments include new product development and innovation to further enhance and differentiate our suite of technology and cloud-based solutions available to customers, along with migration of certain underlying technology platforms to cloud environments to enhance performance, improve speed to market and drive cost efficiencies. We continue to execute on merger and integration activities, such as combining business operations, streamlining technology infrastructure, eliminating duplicative corporate and operational support structures and realizing scale efficiencies. We have also recently commenced a strategic evaluation of the consumer portion of our Business and Consumer Solutions segment with the intent to focus on our growing business-to-business portfolio of assets.

Highlights related to our financial condition at March 31, 2022 and results of operations for the three months then ended include the following:

Consolidated revenues for the three months ended March 31, 2022 increased to $2,156.3 million compared to $1,990.0 million for the prior year. The increase in consolidated revenues was primarily due to an increase in transaction volumes as a result of growth in customer base, accelerat