GLOBAL PAYMENTS INC 10-Q

ITEM 1—FINANCIAL STATEMENTS GLOBAL PAYMENTS INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Three Months Ended March 31, 2021 March 31, 2020 Revenues $ 1,990,007 $ 1,903,598 Operating expenses: Cost of service 925,246 933,871 Selling, general and administrative 789,502 725,748 1,714,748 1,659,619 Operating income 275,259 243,979 Interest and other income 4,234 2,506 Interest and other expense ( 83,141 ) ( 92,644 ) ( 78,907 ) ( 90,138 ) Income before income taxes and equity in income of equity method investments 196,352 153,841 Income tax expense 20,675 15,502 Income before equity in income of equity method investments 175,677 138,339 Equity in income of equity method investments, net of tax 22,733 12,269 Net income 198,410 150,608 Net income attributable to noncontrolling interests, net of tax ( 1,729 ) ( 7,033 ) Net income attributable to Global Payments $ 196,681 $ 143,575 Earnings per share attributable to Global Payments: Basic earnings per share $ 0.66 $ 0.48 Diluted earnings per share $ 0.66 $ 0.48 See Notes to Unaudited Consolidated Financial Statements. 3 Table of Contents GLOBAL PAYMENTS INC. UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Three Months Ended March 31, 2021 March 31, 2020 Net income $ 198,410 $ 150,608 Other comprehensive income (loss): Foreign currency translation adjustments ( 33,567 ) ( 204,111 ) Income tax benefit related to foreign currency translation adjustments 750 1,007 Net unrealized gains (losses) on hedging activities 994 ( 47,896 ) Reclassification of net unrealized losses on hedging activities to interest expense 10,838 4,671 Income tax (expense) benefit related to hedging activities ( 2,864 ) 10,346 Other, net of tax 7,775 121 Other comprehensive loss ( 16,074 ) ( 235,862 ) Comprehensive income (loss) 182,336 ( 85,254 ) Comprehensive loss (income) attributable to noncontrolling interests 4,245 ( 380 ) Comprehensive income (loss) attributable to Global Payments $ 186,581 $ ( 85,634 ) See Notes to Unaudited Consolidated Financial Statements. 4 Table of Contents GLOBAL PAYMENTS INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) March 31, 2021 December 31, 2020 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 2,082,414 $ 1,945,868 Accounts receivable, net 824,822 794,172 Settlement processing assets 1,397,002 1,230,853 Prepaid expenses and other current assets 574,592 621,467 Total current assets 4,878,830 4,592,360 Goodwill 23,853,850 23,871,451 Other intangible assets, net 11,698,884 12,015,883 Property and equipment, net 1,580,743 1,578,532 Deferred income taxes 8,120 7,627 Other noncurrent assets 2,237,301 2,135,692 Total assets $ 44,257,728 $ 44,201,545 LIABILITIES AND EQUITY Current liabilities: Settlement lines of credit $ 459,360 $ 358,698 Current portion of long-term debt 64,530 827,357 Accounts payable and accrued liabilities 2,096,637 2,061,384 Settlement processing obligations 1,495,638 1,301,652 Total current liabilities 4,116,165 4,549,091 Long-term debt 9,627,052 8,466,407 Deferred income taxes 2,895,401 2,948,390 Other noncurrent liabilities 776,919 750,613 Total liabilities 17,415,537 16,714,501 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, 2021 and December 31, 2020; 295,157,603 issued and outstanding at March 31, 2021 and 298,332,459 issued and outstanding at December 31, 2020 — — Paid-in capital 24,403,323 24,963,769 Retained earnings 2,500,812 2,570,874 Accumulated other comprehensive loss ( 212,373 ) ( 202,273 ) Total Global Payments shareholders’ equity 26,691,762 27,332,370 Noncontrolling interests 150,429 154,674 Total equity 26,842,191 27,487,044 Total liabilities and equity $ 44,257,728 $ 44,201,545 See Notes to Unaudited Consolidated Financial Statements. 5 Table of Contents GLOBAL PAYMENTS INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Three Months Ended March 31, 2021 March 31, 2020 Cash flows from operating activities: Net income $ 198,410 $ 150,608 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 96,372 83,573 Amortization of acquired intangibles 329,201 314,245 Amortization of capitalized contract costs 21,050 18,738 Share-based compensation expense 37,165 27,822 Provision for operating losses and credit losses 23,405 37,629 Noncash lease expense 27,066 25,924 Deferred income taxes ( 56,390 ) ( 47,957 ) Equity in income of equity investments, net of tax ( 22,733 ) ( 12,269 ) Other, net ( 5,847 ) 512 Changes in operating assets and liabilities, net of the effects of business combinations: Accounts receivable ( 37,141 ) 47,624 Settlement processing assets and obligations, net 21,714 12,966 Prepaid expenses and other assets ( 33,128 ) ( 53,540 ) Accounts payable and other liabilities 262 ( 169,301 ) Net cash provided by operating activities 599,406 436,574 Cash flows from investing activities: Business combinations and other acquisitions, net of cash acquired ( 11,074 ) ( 67,196 ) Capital expenditures ( 86,159 ) ( 104,802 ) Other, net 293 2,348 Net cash used in investing activities ( 96,940 ) ( 169,650 ) Cash flows from financing activities: Net borrowings from (repayments of) settlement lines of credit 108,488 ( 78,092 ) Proceeds from long-term debt 1,987,005 607,000 Repayments of long-term debt ( 1,575,435 ) ( 110,978 ) Payments of debt issuance costs ( 6,819 ) — Repurchases of common stock ( 802,955 ) ( 421,162 ) Proceeds from stock issued under share-based compensation plans 17,705 28,283 Common stock repurchased - share-based compensation plans ( 39,437 ) ( 44,253 ) Dividends paid ( 57,574 ) ( 58,279 ) Net cash used in financing activities ( 369,022 ) ( 77,481 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 21,141 ) ( 67,655 ) Increase in cash, cash equivalents and restricted cash 112,303 121,788 Cash, cash equivalents and restricted cash, beginning of the period 2,089,771 1,678,273 Cash, cash equivalents and restricted cash, end of the period $ 2,202,074 $ 1,800,061 See Notes to Unaudited Consolidated Financial Statements. 6 Table of Contents 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 Loss Total Global Payments Shareholders’ Equity Noncontrolling Interests Total Equity Balance at December 31, 2020 298,332 $ 24,963,769 $ 2,570,874 $ ( 202,273 ) $ 27,332,370 $ 154,674 $ 27,487,044 Net income 196,681 196,681 1,729 198,410 Other comprehensive loss ( 10,100 ) ( 10,100 ) ( 5,974 ) ( 16,074 ) Stock issued under share-based compensation plans 1,003 17,705 17,705 17,705 Common stock repurchased - share-based compensation plans ( 222 ) ( 41,529 ) ( 41,529 ) ( 41,529 ) Share-based compensation expense 37,165 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, 2021 295,158 $ 24,403,323 $ 2,500,812 $ ( 212,373 ) $ 26,691,762 $ 150,429 $ 26,842,191 Number of Shares Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Global Payments Shareholders’ Equity Noncontrolling Interests Total Equity Balance at December 31, 2019 300,226 $ 25,833,307 $ 2,333,011 $ ( 310,571 ) $ 27,855,747 $ 199,242 $ 28,054,989 Cumulative effect of adoption of new accounting standard ( 5,379 ) ( 5,379 ) ( 5,379 ) Net income 143,575 143,575 7,033 150,608 Other comprehensive loss ( 229,209 ) ( 229,209 ) ( 6,653 ) ( 235,862 ) Stock issued under share-based compensation plans 1,082 28,283 28,283 28,283 Common stock repurchased - share-based compensation plans ( 203 ) ( 37,787 ) ( 37,787 ) ( 37,787 ) Share-based compensation expense 27,822 27,822 27,822 Repurchases of common stock ( 2,095 ) ( 326,441 ) ( 77,521 ) ( 403,962 ) ( 403,962 ) Cash dividends declared ($ 0.195 per common share) ( 58,279 ) ( 58,279 ) ( 58,279 ) Balance at March 31, 2020 299,010 $ 25,525,184 $ 2,335,407 $ ( 539,780 ) $ 27,320,811 $ 199,622 $ 27,520,433 See Notes to Unaudited Consolidated Financial Statements. 7 Table of Contents 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 pure play payments technology company delivering innovative software and services to our customers globally. Our technologies, services and employee expertise enable us to provide a broad range of solutions that allow 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 10—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, 2020 was derived from the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 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, 2020. COVID-19 Update - During 2020 and continuing into 2021, the global economy has been, and continues to be, affected by COVID-19. The pandemic has caused and may continue to cause significant disruptions to businesses and markets worldwide as the virus continues to spread or has a resurgence in certain jurisdictions. Measures have been implemented by governments worldwide in an effort to contain the virus, including lockdowns, physical distancing, travel restrictions, limitations on public gatherings, work from home and restrictions on nonessential businesses. Certain government actions to gradually ease restrictions, provide economic stimulus and distribute vaccines have resulted in signs of economic recovery. However, the effects of the pandemic are still evolving, and its ultimate severity and duration, and the implications on future global economic conditions, remain uncertain. 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 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. These unaudited consolidated financial statements reflect the financial statement effects of COVID-19 based upon management’s estimates and assumptions utilizing the most currently available information. 8 Table of Contents Recently adopted accounting pronouncements Accounting Standards Update ("ASU") 2019-12 — In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ," which is intended to enhance and simplify various aspects of the accounting for income taxes. The amendments in this update remove certain exceptions to the general principles in Accounting Standards Codification ("ASC") Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and amends existing guidance to improve consistency in application of the accounting for franchise taxes, enacted changes in tax laws or rates and transactions that result in a step-up in the tax basis of goodwill. The adoption of ASU 2019-12 on January 1, 2021 did not have a material effect on our consolidated financial statements. Recently issued pronouncements not yet adopted ASU 2020-04 — In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ," which provides optional expedients and exceptions to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference London Inter-bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 for which an entity has elected certain optional expedients and which are retained through the end of the hedging relationship. The amendments in this update also include a general principle that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. If elected, the optional expedients for contract modifications must be applied consistently for all eligible contracts or eligible transactions within the relevant ASC Topic or Industry Subtopic that contains the guidance that otherwise would be required to be applied. The amendments in this update were effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. A portion of our indebtedness bears interest at a variable rate based on LIBOR. Furthermore, we have entered into hedging instruments to manage our exposure to fluctuations in the LIBOR benchmark interest rate. We are evaluating the effect of the discontinuance of LIBOR on our outstanding debt and hedging instruments and the related effect of ASU 2020-04 on our consolidated financial statements. 9 Table of Contents NOTE 2— 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, 2021 and 2020: 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 Europe 132,934 117,412 2,952 — 253,298 Asia Pacific 54,468 4,796 — ( 4,796 ) 54,468 $ 1,267,872 $ 500,251 $ 243,585 $ ( 21,701 ) $ 1,990,007 Three months ended March 31, 2020 Merchant Solutions Issuer Solutions Business and Consumer Solutions Intersegment Eliminations Total (in thousands) Americas $ 1,024,504 $ 393,754 $ 203,946 $ ( 17,733 ) $ 1,604,471 Europe 135,999 108,362 — — 244,361 Asia Pacific 54,766 1,646 — ( 1,646 ) 54,766 $ 1,215,269 $ 503,762 $ 203,946 $ ( 19,379 ) $ 1,903,598 The following table presents a disaggregation of our Merchant Solutions segment revenues by distribution channel for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, 2021 March 31, 2020 (in thousands) Relationship-led $ 668,556 $ 676,522 Technology-enabled 599,316 538,747 $ 1,267,872 $ 1,215,269 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, 2021 and 2020, substantially all of our revenues were recognized over time. 10 Table of Contents Supplemental balance sheet information related to contracts from customers as of March 31, 2021 and December 31, 2020 was as follows: Balance Sheet Location March 31, 2021 December 31, 2020 (in thousands) Assets: Capitalized costs to obtain customer contracts, net Other noncurrent assets $ 257,546 $ 253,780 Capitalized costs to fulfill customer contracts, net Other noncurrent assets $ 91,070 $ 81,371 Liabilities: Contract liabilities, net (current) Accounts payable and accrued liabilities $ 212,520 $ 217,938 Contract liabilities, net (noncurrent) Other noncurrent liabilities $ 49,740 $ 52,944 Net contract assets were not material at March 31, 2021 or at December 31, 2020. Revenue recognized for the three months ended March 31, 2021 and 2020 from contract liability balances at the beginning of each period was $ 85.9 million and $ 90.8 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, 2021. 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 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, 2021 $ 732,761 2022 786,550 2023 582,240 2024 404,552 2025 302,335 2026 and thereafter 603,637 Total $ 3,412,075 11 Table of Contents NOTE 3— LONG-TERM DEBT AND LINES OF CREDIT As of March 31, 2021 and December 31, 2020, long-term debt consisted of the following: March 31, 2021 December 31, 2020 (in thousands) 3.800 % senior notes due April 1, 2021 $ — $ 752,199 3.750 % senior notes due June 1, 2023 564,282 562,258 4.000 % senior notes due June 1, 2023 560,990 565,930 2.650 % senior notes due February 15, 2025 993,532 993,110 1.200 % senior notes due March 1, 2026 1,090,577 — 4.800 % senior notes due April 1, 2026 806,499 809,324 4.450 % senior notes due June 1, 2028 481,490 482,588 3.200 % senior notes due August 15, 2029 1,236,820 1,236,424 2.900 % senior notes due May 15, 2030 989,318 989,025 4.150 % senior notes due August 15, 2049 739,878 739,789 Unsecured term loan facility 1,986,780 1,985,776 Unsecured revolving credit facility 124,000 36,000 Finance lease liabilities 70,962 75,989 Other borrowings 46,454 65,352 Total long-term debt 9,691,582 9,293,764 Less current portion 64,530 827,357 Long-term debt, excluding current portion $ 9,627,052 $ 8,466,407 The carrying amounts of our senior notes and term loans in the table above are presented net of unamortized discount and unamortized debt issuance costs, as applicable. At March 31, 2021, unamortized discount on senior notes was $ 9.3 million, and unamortized debt issuance costs on senior notes and the unsecured term loan facility were $ 53.8 million. At December 31, 2020, unamortized discount on senior notes was $ 8.5 million, and unamortized debt issuance costs on our senior notes and the unsecured term loan facility were $ 47.4 million. The portion of unamortized debt issuance costs related to revolving credit facilities is included in other noncurrent assets. At March 31, 2021, unamortized debt issuance costs on the unsecured revolving credit facility were $ 12.6 million, and, at December 31, 2020, unamortized debt issuance costs on the unsecured revolving credit facility were $ 13.8 million. At March 31, 2021, future maturities of long-term debt (excluding finance lease liabilities) were as follows by year (in thousands): Year ending December 31, 2021 $ 37,950 2022 58,403 2023 1,300,000 2024 1,874,000 2025 1,000,000 2026 and thereafter 5,300,000 Total $ 9,570,353 12 Table of Contents Senior Unsecured Notes On February 26, 2021, we issued $ 1.1 billion in aggregate principal amount of 1.200 % senior unsecured notes due March 2026. We incurred debt issuance costs of approximately $ 8.6 million, including underwriting fees, fees for professional services and registration fees, which were capitalized and reflected as a reduction of the related carrying amount of the notes in our consolidated balance sheet at March 31, 2021. Interest on the notes is payable semi-annually in arrears on March 1 and September 1 of each year, commencing September 1, 2021. The notes are unsecured and unsubordinated indebtedness and rank equally in right of payment with all of our other outstanding unsecured and unsubordinated indebtedness. We used the net proceeds from this offering to fund the redemption in full of the 3.800 % senior unsecured notes due April 2021, to repay a portion of the outstanding indebtedness under our revolving credit facility and for general corporate purposes. As of March 31, 2021, our senior notes had a total carrying amount of $ 7.5 billion and an estimated fair value of $ 7.8 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, 2021. Compliance with Covenants The senior 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, 2021, 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, 2021. 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 Instruments Balance Sheet Location Weighted-Average Fixed Rate of Interest at March 31, 2021 Range of Maturity Dates at March 31, 2021 March 31, 2021 December 31, 2020 (in thousands) Interest rate swaps (Notional of $ 300 million at December 31, 2020) Accounts payable and accrued liabilities NA NA $ — $ 1,330 Interest rate swaps (Notional of $ 1,250 million at March 31, 2021 and December 31, 2020) Other noncurrent liabilities 2.73 % December 31, 2022 $ 56,357 $ 65,490 NA = not applicable. 13 Table of Contents 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, 2021 and 2020: Three Months Ended March 31, 2021 March 31, 2020 (in thousands) Net unrealized gains (losses) recognized in other comprehensive income (loss) $ 994 $ ( 47,896 ) Net unrealized losses reclassified out of other comprehensive income (loss) to interest expense $ 10,838 $ 4,671 As of March 31, 2021, 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 $ 38.3 million. Interest Expense Interest expense was $ 81.2 million and $ 81.1 million for the three months ended March 31, 2021 and 2020, respectively. NOTE 4— INCOME TAX 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 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. Our effective income tax rate for the three months ended March 31, 2020 was 10.1 %. Our effective income tax rate for the three months ended March 31, 2020 differed from the U.S. statutory rate primarily as a result of tax credits, excess tax benefits of share-based awards and the foreign-derived intangible income deduction. NOTE 5— 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, 2021 and 2020, we repurchased and retired 3,955,400 and 2,094,731 shares of our common stock at a cost, including commissions, of $ 783.0 million and $ 404.0 million, or $ 198.00 per share and $ 192.85 per share, respectively. As of March 31, 2021, the remaining amount available under our share repurchase program was $ 901.0 million. On February 10, 2021, we entered into an ASR agreement with a financial institution to repurchase an aggregate of $ 500 million of our common stock. In exchange for an up-front payment of $ 500 million, the financial institution committed to deliver a number of shares during the ASR program purchase period, which ended on March 31, 2021. The total number of shares delivered under this ASR program was 2,491,161 shares at an average price of $ 200.71 per share. On April 29, 2021, our board of directors declared a dividend of $ 0.195 per share payable on June 25, 2021 to common shareholders of record as of June 11, 2021. 14 Table of Contents NOTE 6— 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, 2021 March 31, 2020 (in thousands) Share-based compensation expense $ 37,165 $ 27,822 Income tax benefit $ 8,399 $ 6,473 Share-Based Awards The following table summarizes the changes in unvested restricted stock and performance awards for the three months ended March 31, 2021: Shares Weighted-Average Grant-Date Fair Value (in thousands) Unvested at December 31, 2020 1,546 $ 176.71 Granted 836 188.52 Vested ( 578 ) 148.95 Forfeited ( 14 ) 181.58 Unvested at March 31, 2021 1,790 $ 181.40 The total fair value of restricted stock and performance awards vested during the three months ended March 31, 2021 and March 31, 2020 was $ 86.1 million and $ 64.6 million, respectively. For restricted stock and performance awards, we recognized compensation expense of $ 33.5 million and $ 25.2 million during the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, there was $ 289.4 million of unrecognized compensation expense related to unvested restricted stock and performance awards that we expect to recognize over a weighted-average period of 1.1 years. 15 Table of Contents Stock Options The following table summarizes stock option activity for the three months ended March 31, 2021: Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) (years) (in millions) Outstanding at December 31, 2020 1,253 $ 93.66 6.3 $ 152.6 Granted 112 196.06 Exercised ( 163 ) 70.51 Outstanding at March 31, 2021 1,202 $ 106.19 6.5 $ 114.7 Options vested and exercisable at March 31, 2021 925 $ 85.79 5.8 $ 107.1 We recognized compensation expense for stock options of $ 2.4 million and $ 1.9 million during the three months ended March 31, 2021 and 2020, respectively. The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2021 and 2020 was $ 20.6 million and $ 53.6 million, respectively. As of March 31, 2021, we had $ 14.1 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, 2021 and 2020 was $ 65.99 and $ 54.85 , 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, 2021 March 31, 2020 Risk-free interest rate 0.59 % 1.24 % Expected volatility 40 % 30 % Dividend yield 0.44 % 0.39 % Expected term (years) 5 5 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 7— 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. 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, 2020 excluded approximately 16 Table of Contents 124,888 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, 2021 and 2020: Three Months Ended March 31, 2021 March 31, 2020 (in thousands) Basic weighted-average number of shares outstanding 296,425 299,388 Plus: Dilutive effect of stock options and other share-based awards 1,246 1,450 Diluted weighted-average number of shares outstanding 297,671 300,838 17 Table of Contents NOTE 8 - SUPPLEMENTAL BALANCE SHEET INFORMATION Cash, cash equivalents and restricted cash A reconciliation of cash, cash equivalents and restricted cash in the consolidated statements of cash flows as of March 31, 2021 and December 31, 2020 to the amounts in the consolidated balance sheets is as follows: March 31, 2021 December 31, 2020 (in thousands) Cash and cash equivalents $ 2,082,414 $ 1,945,868 Restricted cash included in prepaid expenses and other current assets 119,660 143,903 Cash, cash equivalents and restricted cash shown in the statement of cash flows $ 2,202,074 $ 2,089,771 Accounts payable and accrued liabilities At March 31, 2021 and December 31, 2020, accounts payable and accrued liabilities in the consolidated balance sheet included obligations totaling $ 43.5 million and $ 48.4 million, respectively, for employee termination benefits resulting from merger-related integration activities. 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. During the three months ended March 31, 2020, we recognized charges for employee termination benefits of $ 17.6 million, which included $ 2.6 million of share-based compensation expense. As of March 31, 2021, the cumulative amount of recognized charges for employee termination benefits resulting from merger-related integration activities was $ 165.6 million, which included $ 24.5 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. New obligations may arise and related expenses may be incurred as merger-related integration activities continue in 2021. 18 Table of Contents NOTE 9— 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, 2021 and 2020: Foreign Currency Translation Gains (Losses) Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss (in thousands) 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 ) Balance at December 31, 2019 $ ( 241,899 ) $ ( 69,319 ) $ 647 $ ( 310,571 ) Other comprehensive (loss) income ( 196,451 ) ( 32,879 ) 121 ( 229,209 ) Balance at March 31, 2020 $ ( 438,350 ) $ ( 102,198 ) $ 768 $ ( 539,780 ) Other comprehensive loss attributable to noncontrolling interests, which relates only to foreign currency translation, was $ 6.0 million and $ 6.7 million for the three months ended March 31, 2021 and 2020, respectively. NOTE 10— 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, 2020 and our summary of significant accounting policies in "Note 1 - Basis of Presentation and Summary of Significant Accounting Policies." 19 Table of Contents 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, 2021 and 2020: Three Months Ended March 31, 2021 March 31, 2020 (in thousands) Revenues : Merchant Solutions $ 1,267,872 $ 1,215,269 Issuer Solutions 500,251 503,762 Business and Consumer Solutions 243,585 203,946 Intersegment eliminations ( 21,701 ) ( 19,379 ) Consolidated revenues $ 1,990,007 $ 1,903,598 Operating income (loss) (1) : Merchant Solutions $ 339,989 $ 304,153 Issuer Solutions 68,455 59,304 Business and Consumer Solutions 61,923 31,112 Corporate ( 195,108 ) ( 150,590 ) Consolidated operating income $ 275,259 $ 243,979 Depreciation and amortization : Merchant Solutions $ 250,596 $ 233,021 Issuer Solutions 144,609 136,737 Business and Consumer Solutions 21,920 23,641 Corporate 8,448 4,419 Consolidated depreciation and amortization $ 425,573 $ 397,818 (1) Operating loss for Corporate included acquisition and integration expenses of $ 90.1 million and $ 69.7 million during the three months ended March 31, 2021 and 2020, respectively. NOTE 11— COMMITMENTS AND CONTINGENCIES Purchase Obligations We have contractual obligations related to service arrangements with suppliers for fixed or minimum amounts. Future minimum payments at March 31, 2021 for purchase obligations were as follows (in thousands): Year ending December 31: 2021 $ 404,484 2022 232,720 2023 183,005 2024 151,030 2025 154,986 2026 184,041 2027 and thereafter 754,025 Total future minimum payments $ 2,064,291 20 Table of Contents 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. On September 23, 2019, a jury in the Superior Court of Dekalb County Georgia, awarded Frontline Processing Corp. ("Frontline") $ 135.2 million in damages, costs and attorney's fees (plus interest) following a trial of a breach of contract dispute between Frontline and Global Payments, wherein Frontline alleged that Global Payments violated provisions of the parties' Referral Agreement and Master Services Agreement. The Superior Court entered a final judgment on the verdict in favor of Frontline on September 30, 2019. We believe the jury verdict is in error and Frontline’s case is completely without merit, and we have appealed the decision to the Georgia Court of Appeals. Our appeal is pending. While it is reasonably possible that we will incur some loss between zero and the judgment amount plus interest, we have determined that it is not probable that Global Payments has incurred a loss under the applicable accounting standard (ASC Topic 450, Contingencies) as of March 31, 2021. As a result, we have not recorded a liability on the consolidated balance sheet with respect to this litigation. NOTE 12— SUBSEQUENT EVENT On May 4, 2021, we announced our plan to acquire Zego (Powered by PayLease), a leading property technology company that modernizes the resident experience with a comprehensive management software platform. Pursuant to the terms and subject to the conditions set forth in the purchase agreement, we will pay the seller cash consideration of approximately $ 925 million, which we plan to fund with cash on hand and our revolving credit facility. We expect the acquisition to close by the end of the second quarter of 2021, subject to regulatory approval and customary closing conditions. 21 Table of Contents