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 September 30, 2021 September 30, 2020 Revenues $ 2,202,337 $ 1,917,815 Operating expenses: Cost of service 944,172 900,921 Selling, general and administrative 858,082 726,475 1,802,254 1,627,396 Operating income 400,083 290,419 Interest and other income 6,320 29,983 Interest and other expense ( 82,187 ) ( 82,976 ) ( 75,867 ) ( 52,993 ) Income before income taxes and equity in income of equity method investments 324,216 237,426 Income tax expense 50,117 42,834 Income before equity in income of equity method investments 274,099 194,592 Equity in income of equity method investments, net of tax 31,364 35,638 Net income 305,463 230,230 Net income attributable to noncontrolling interests, net of tax ( 8,727 ) ( 9,259 ) Net income attributable to Global Payments $ 296,736 $ 220,971 Earnings per share attributable to Global Payments: Basic earnings per share $ 1.02 $ 0.74 Diluted earnings per share $ 1.01 $ 0.74 See Notes to Unaudited Consolidated Financial Statements. 3 Table of Contents GLOBAL PAYMENTS INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Nine Months Ended September 30, 2021 September 30, 2020 Revenues $ 6,329,781 $ 5,493,365 Operating expenses: Cost of service 2,805,728 2,728,532 Selling, general and administrative 2,486,153 2,122,862 5,291,881 4,851,394 Operating income 1,037,900 641,971 Interest and other income 16,009 35,277 Interest and other expense ( 245,884 ) ( 258,475 ) ( 229,875 ) ( 223,198 ) Income before income taxes and equity in income of equity method investments 808,025 418,773 Income tax expense 131,600 59,173 Income before equity in income of equity method investments 676,425 359,600 Equity in income of equity method investments, net of tax 94,261 60,682 Net income 770,686 420,282 Net income attributable to noncontrolling interests, net of tax ( 13,679 ) ( 18,406 ) Net income attributable to Global Payments $ 757,007 $ 401,876 Earnings per share attributable to Global Payments: Basic earnings per share $ 2.57 $ 1.34 Diluted earnings per share $ 2.56 $ 1.34 See Notes to Unaudited Consolidated Financial Statements. 4 Table of Contents GLOBAL PAYMENTS INC. UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Three Months Ended September 30, 2021 September 30, 2020 Net income $ 305,463 $ 230,230 Other comprehensive income (loss): Foreign currency translation adjustments ( 79,532 ) 110,809 Income tax benefit related to foreign currency translation adjustments 447 — Net unrealized (losses) gains on hedging activities ( 646 ) 194 Reclassification of net unrealized losses on hedging activities to interest expense 9,788 11,133 Income tax expense related to hedging activities ( 2,208 ) ( 2,612 ) Other, net of tax ( 2,209 ) ( 3,531 ) Other comprehensive (loss) income ( 74,360 ) 115,993 Comprehensive income 231,103 346,223 Comprehensive income attributable to noncontrolling interests ( 4,625 ) ( 18,010 ) Comprehensive income attributable to Global Payments $ 226,478 $ 328,213 Nine Months Ended September 30, 2021 September 30, 2020 Net income $ 770,686 $ 420,282 Other comprehensive income (loss): Foreign currency translation adjustments ( 80,427 ) ( 10,844 ) Income tax benefit related to foreign currency translation adjustments 5,438 1,160 Net unrealized losses on hedging activities ( 62 ) ( 53,332 ) Reclassification of net unrealized losses on hedging activities to interest expense 30,288 25,786 Income tax (expense) benefit related to hedging activities ( 7,297 ) 6,677 Other, net of tax 4,017 ( 3,288 ) Other comprehensive loss ( 48,043 ) ( 33,841 ) Comprehensive income 722,643 386,441 Comprehensive income attributable to noncontrolling interests ( 6,328 ) ( 25,898 ) Comprehensive income attributable to Global Payments $ 716,315 $ 360,543 See Notes to Unaudited Consolidated Financial Statements. 5 Table of Contents GLOBAL PAYMENTS INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) September 30, 2021 December 31, 2020 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 2,347,732 $ 1,945,868 Accounts receivable, net 904,142 794,172 Settlement processing assets 1,912,421 1,230,853 Prepaid expenses and other current assets 628,042 621,467 Total current assets 5,792,337 4,592,360 Goodwill 24,344,275 23,871,451 Other intangible assets, net 11,529,826 12,015,883 Property and equipment, net 1,667,287 1,578,532 Deferred income taxes 8,480 7,627 Other noncurrent assets 2,412,270 2,135,692 Total assets $ 45,754,475 $ 44,201,545 LIABILITIES AND EQUITY Current liabilities: Settlement lines of credit $ 588,347 $ 358,698 Current portion of long-term debt 39,148 827,357 Accounts payable and accrued liabilities 2,387,972 2,061,384 Settlement processing obligations 2,018,840 1,301,652 Total current liabilities 5,034,307 4,549,091 Long-term debt 10,709,791 8,466,407 Deferred income taxes 2,831,349 2,948,390 Other noncurrent liabilities 824,679 750,613 Total liabilities 19,400,126 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 September 30, 2021 and December 31, 2020; 290,086,635 issued and outstanding at September 30, 2021 and 298,332,459 issued and outstanding at December 31, 2020 — — Paid-in capital 23,544,800 24,963,769 Retained earnings 2,845,192 2,570,874 Accumulated other comprehensive loss ( 242,965 ) ( 202,273 ) Total Global Payments shareholders’ equity 26,147,027 27,332,370 Noncontrolling interests 207,322 154,674 Total equity 26,354,349 27,487,044 Total liabilities and equity $ 45,754,475 $ 44,201,545 See Notes to Unaudited Consolidated Financial Statements. 6 Table of Contents GLOBAL PAYMENTS INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Nine Months Ended September 30, 2021 September 30, 2020 Cash flows from operating activities: Net income $ 770,686 $ 420,282 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 292,230 265,738 Amortization of acquired intangibles 973,948 941,654 Amortization of capitalized contract costs 68,112 57,888 Share-based compensation expense 146,097 105,081 Provision for operating losses and credit losses 73,286 98,967 Noncash lease expense 80,371 73,493 Deferred income taxes ( 136,004 ) ( 118,466 ) Equity in income of equity investments, net of tax ( 94,261 ) ( 60,682 ) Other, net 19,967 ( 13,584 ) Changes in operating assets and liabilities, net of the effects of business combinations: Accounts receivable ( 123,370 ) 23,352 Settlement processing assets and obligations, net 28,242 155,385 Prepaid expenses and other assets ( 185,973 ) ( 240,804 ) Accounts payable and other liabilities 114,279 ( 163,544 ) Net cash provided by operating activities 2,027,610 1,544,760 Cash flows from investing activities: Business combinations and other acquisitions, net of cash acquired ( 946,377 ) ( 77,180 ) Capital expenditures ( 350,745 ) ( 329,413 ) Other, net 1,248 11,575 Net cash used in investing activities ( 1,295,874 ) ( 395,018 ) Cash flows from financing activities: Net borrowings from (repayments of) settlement lines of credit 244,858 ( 31,069 ) Proceeds from long-term debt 3,909,988 1,868,199 Repayments of long-term debt ( 2,434,805 ) ( 1,829,637 ) Payments of debt issuance costs ( 8,569 ) ( 8,075 ) Repurchases of common stock ( 1,833,689 ) ( 421,162 ) Proceeds from stock issued under share-based compensation plans 38,570 51,055 Common stock repurchased - share-based compensation plans ( 84,659 ) ( 41,966 ) Contribution from a noncontrolling interest 46,320 — Distribution to a noncontrolling interest — ( 6,955 ) Dividends paid ( 188,203 ) ( 175,025 ) Net cash used in financing activities ( 310,189 ) ( 594,635 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 42,704 ) ( 12,558 ) Increase in cash, cash equivalents and restricted cash 378,843 542,549 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 $ 2,468,614 $ 2,220,822 See Notes to Unaudited Consolidated Financial Statements. 7 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 June 30, 2021 293,703 $ 24,201,763 $ 2,664,707 $ ( 172,707 ) $ 26,693,763 $ 156,377 $ 26,850,140 Net income 296,736 296,736 8,727 305,463 Other comprehensive loss ( 70,258 ) ( 70,258 ) ( 4,102 ) ( 74,360 ) Stock issued under share-based compensation plans 819 9,262 9,262 9,262 Common stock repurchased - share-based compensation plans ( 203 ) ( 34,003 ) ( 34,003 ) ( 34,003 ) Share-based compensation expense 65,611 65,611 65,611 Repurchases of common stock ( 4,232 ) ( 697,833 ) ( 42,924 ) ( 740,757 ) ( 740,757 ) Contribution from a noncontrolling interest — 46,320 46,320 Cash dividends declared ($ 0.25 per common share) ( 73,327 ) ( 73,327 ) ( 73,327 ) Balance at September 30, 2021 290,087 $ 23,544,800 $ 2,845,192 $ ( 242,965 ) $ 26,147,027 $ 207,322 $ 26,354,349 Number of Shares Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Global Payments Shareholders’ Equity Noncontrolling Interests Total Equity Balance at June 30, 2020 299,244 $ 25,570,582 $ 2,314,423 $ ( 459,146 ) $ 27,425,859 $ 207,130 $ 27,632,989 Net income 220,971 220,971 9,259 230,230 Other comprehensive income 107,242 107,242 8,751 115,993 Stock issued under share-based compensation plans 50 8,423 8,423 8,423 Common stock repurchased - share-based compensation plans ( 7 ) ( 682 ) ( 682 ) ( 682 ) Distribution to a noncontrolling interest ( 6,955 ) ( 6,955 ) Share-based compensation expense 42,276 42,276 42,276 Cash dividends declared ($ 0.195 per common share) ( 58,432 ) ( 58,432 ) ( 58,432 ) Balance at September 30, 2020 299,287 $ 25,620,599 $ 2,476,962 $ ( 351,904 ) $ 27,745,657 $ 218,185 $ 27,963,842 See Notes to Unaudited Consolidated Financial Statements. 8 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 757,007 757,007 13,679 770,686 Other comprehensive loss ( 40,692 ) ( 40,692 ) ( 7,351 ) ( 48,043 ) Stock issued under share-based compensation plans 1,900 38,570 38,570 38,570 Common stock repurchased - share-based compensation plans ( 456 ) ( 84,432 ) ( 84,432 ) ( 84,432 ) Share-based compensation expense 146,097 146,097 146,097 Repurchases of common stock ( 9,689 ) ( 1,519,204 ) ( 294,486 ) ( 1,813,690 ) ( 1,813,690 ) Contribution from a noncontrolling interest — 46,320 46,320 Cash dividends declared ($ 0.64 per common share) ( 188,203 ) ( 188,203 ) ( 188,203 ) Balance at September 30, 2021 290,087 $ 23,544,800 $ 2,845,192 $ ( 242,965 ) $ 26,147,027 $ 207,322 $ 26,354,349 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 401,876 401,876 18,406 420,282 Other comprehensive (loss) income ( 41,333 ) ( 41,333 ) 7,492 ( 33,841 ) Stock issued under share-based compensation plans 1,495 51,055 51,055 51,055 Common stock repurchased - share-based compensation plans ( 339 ) ( 42,403 ) ( 42,403 ) ( 42,403 ) Share-based compensation expense 105,081 105,081 105,081 Distribution to a noncontrolling interest ( 6,955 ) ( 6,955 ) Repurchases of common stock ( 2,095 ) ( 326,441 ) ( 77,521 ) ( 403,962 ) ( 403,962 ) Cash dividends declared ($ 0.585 per common share) ( 175,025 ) ( 175,025 ) ( 175,025 ) Balance at September 30, 2020 299,287 $ 25,620,599 $ 2,476,962 $ ( 351,904 ) $ 27,745,657 $ 218,185 $ 27,963,842 See Notes to Unaudited Consolidated Financial Statements. 9 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 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 13—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 - Since early 2020, 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 spreads 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 continue, 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. 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. 10 Table of Contents Recently issued pronouncements not yet adopted ASU 2021-08 — In October 2021, the 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 ASC 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 ASC Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC 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 effect of ASU 2021-08 on our consolidated financial statements. 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. NOTE 2— ACQUISITION On June 10, 2021, we acquired Zego, a real estate technology company that provides a comprehensive resident experience management software and digital commerce solutions to property managers, primarily in the United States. Zego’s real estate software and payments solutions support property managers and residents throughout the real estate lifecycle. This acquisition aligns with our technology-enabled, software driven strategy and expands our business into a new vertical market. We paid cash consideration of approximately $ 933 million, which we funded with cash on hand and by drawing on our revolving credit facility. 11 Table of Contents The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration, are as follows: Provisional Amounts at Acquisition Date Measurement-Period Adjustments Provisional Amounts at September 30, 2021 (in thousands) Cash and cash equivalents $ 67,374 $ — $ 67,374 Accounts receivable 1,033 ( 16 ) 1,017 Identifiable intangible assets 410,443 62,557 473,000 Property and equipment 3,634 ( 3,059 ) 575 Other assets 9,141 — 9,141 Accounts payable and accrued liabilities ( 65,753 ) ( 496 ) ( 66,249 ) Deferred income tax liabilities ( 10,709 ) ( 1,451 ) ( 12,160 ) Other liabilities ( 8,268 ) — ( 8,268 ) Total identifiable net assets 406,895 57,535 464,430 Goodwill 525,929 ( 57,113 ) 468,816 Total purchase consideration $ 932,824 $ 422 $ 933,246 This transaction was accounted for as a business combination, which generally requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date. As of September 30, 2021, 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 basis differences for assets and liabilities for financial reporting and tax purposes. We made measurement-period adjustments, as shown in the table above, that decreased the amount of provisional goodwill by $ 57.1 million. The effects of the measurement-period adjustments on our consolidated statement of income for the third quarter of 2021 were not material. Goodwill of $ 468.8 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 a portion 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 Value Weighted-Average Estimated Amortization Periods (in thousands) (years) Customer-related intangible assets $ 208,000 13 Contract-based intangible assets 119,000 20 Acquired technologies 124,000 6 Trademarks and trade names 22,000 15 Total estimated identifiable intangible assets $ 473,000 14 12 Table of Contents 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 and nine months ended September 30, 2021 and 2020: Three Months Ended September 30, 2021 Merchant Solutions Issuer Solutions Business and Consumer Solutions Intersegment Eliminations Total (in thousands) Americas $ 1,245,805 $ 394,893 $ 204,584 $ ( 16,507 ) $ 1,828,775 Europe 189,282 120,383 3,086 — 312,751 Asia Pacific 60,811 6,890 — ( 6,890 ) 60,811 $ 1,495,898 $ 522,166 $ 207,670 $ ( 23,397 ) $ 2,202,337 Three Months Ended September 30, 2020 Merchant Solutions Issuer Solutions Business and Consumer Solutions Intersegment Eliminations Total (in thousands) Americas $ 1,039,039 $ 370,938 $ 204,106 $ ( 15,097 ) $ 1,598,986 Europe 154,262 113,907 — — 268,169 Asia Pacific 50,660 2,564 — ( 2,564 ) 50,660 $ 1,243,961 $ 487,409 $ 204,106 $ ( 17,661 ) $ 1,917,815 Nine Months Ended September 30, 2021 Merchant Solutions Issuer Solutions Business and Consumer Solutions Intersegment Eliminations Total (in thousands) Americas $ 3,529,245 $ 1,152,057 $ 669,747 $ ( 50,180 ) $ 5,300,869 Europe 488,860 358,769 8,864 — 856,493 Asia Pacific 172,419 17,523 — ( 17,523 ) 172,419 $ 4,190,524 $ 1,528,349 $ 678,611 $ ( 67,703 ) $ 6,329,781 Nine Months Ended September 30, 2020 Merchant Solutions Issuer Solutions Business and Consumer Solutions Intersegment Eliminations Total (in thousands) Americas $ 2,926,472 $ 1,127,832 $ 624,774 $ ( 47,558 ) $ 4,631,520 Europe 392,721 327,532 — — 720,253 Asia Pacific 141,592 5,832 — ( 5,832 ) 141,592 $ 3,460,785 $ 1,461,196 $ 624,774 $ ( 53,390 ) $ 5,493,365 13 Table of Contents The following table presents a disaggregation of our Merchant Solutions segment revenues by distribution channel for the three and nine months ended September 30, 2021 and 2020: Three Months Ended Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (in thousands) Relationship-led $ 799,948 $ 709,749 $ 2,245,839 $ 1,934,265 Technology-enabled 695,950 534,212 1,944,685 1,526,520 $ 1,495,898 $ 1,243,961 $ 4,190,524 $ 3,460,785 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 and nine months ended September 30, 2021 and 2020, substantially all of our revenues were recognized over time. Supplemental balance sheet information related to contracts from customers as of September 30, 2021 and December 31, 2020 was as follows: Balance Sheet Location September 30, 2021 December 31, 2020 (in thousands) Assets: Capitalized costs to obtain customer contracts, net Other noncurrent assets $ 278,565 $ 253,780 Capitalized costs to fulfill customer contracts, net Other noncurrent assets 106,236 81,371 Liabilities: Contract liabilities, net (current) Accounts payable and accrued liabilities 218,585 217,938 Contract liabilities, net (noncurrent) Other noncurrent liabilities 46,290 52,944 Net contract assets were not material at September 30, 2021 or at December 31, 2020. Revenue recognized for the three months ended September 30, 2021 and 2020 from contract liability balances at the beginning of each period was $ 75.5 million and $ 69.7 million, respectively. Revenue recognized for the nine months ended September 30, 2021 and 2020 from contract liability balances at the beginning of each period was $ 186.0 million and $ 195.3 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 September 30, 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 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): 14 Table of Contents Year Ending December 31, 2021 $ 256,447 2022 908,834 2023 694,952 2024 522,068 2025 410,883 2026 321,754 2027 and thereafter 518,598 Total $ 3,633,538 NOTE 4— GOODWILL AND OTHER INTANGIBLE ASSETS As of September 30, 2021 and December 31, 2020, goodwill and other intangible assets consisted of the following: September 30, 2021 December 31, 2020 (in thousands) Goodwill $ 24,344,275 $ 23,871,451 Other intangible assets: Customer-related intangible assets $ 9,475,914 $ 9,275,093 Acquired technologies 2,918,284 2,795,991 Contract-based intangible assets 2,108,556 1,981,260 Trademarks and trade names 1,261,241 1,239,925 15,763,995 15,292,269 Less accumulated amortization: Customer-related intangible assets 2,418,357 1,914,214 Acquired technologies 1,266,883 960,281 Contract-based intangible assets 165,837 120,631 Trademarks and trade names 383,092 281,260 4,234,169 3,276,386 $ 11,529,826 $ 12,015,883 The following table sets forth the changes by reportable segment in the carrying amount of goodwill for the nine months ended September 30, 2021: Merchant Solutions Issuer Solutions Business and Consumer Solutions Total (in thousands) Balance at December 31, 2020 $ 13,548,690 $ 7,957,616 $ 2,365,145 $ 23,871,451 Goodwill acquired 517,240 — — 517,240 Effect of foreign currency translation ( 33,565 ) ( 4,258 ) ( 1,251 ) ( 39,074 ) Measurement period adjustments ( 5,202 ) — ( 140 ) ( 5,342 ) Balance at September 30, 2021 $ 14,027,163 $ 7,953,358 $ 2,363,754 $ 24,344,275 There were no accumulated impairment losses for goodwill as of September 30, 2021 or December 31, 2020. 15 Table of Contents NOTE 5 - OTHER ASSETS Through certain of our subsidiaries in Europe, we were a member and shareholder of Visa Europe Limited ("Visa Europe"). On June 21, 2016, Visa Inc. ("Visa") acquired all of the membership interests in Visa Europe, and we received consideration in the form of cash and Series B and C convertible preferred shares of Visa. We assigned the preferred shares received a value of zero based on transfer restrictions, Visa's ability to adjust the conversion rate and the estimation uncertainty associated with those factors. Based on the outcome of any current or potential litigation involving Visa Europe in the United Kingdom and elsewhere in Europe, the conversion rate of the preferred shares could be adjusted down such that the number of Visa common shares we receive could be as low as zero . The Series B and C convertible preferred shares become convertible in stages based on developments in the litigation and become fully convertible no later than 2028 (subject to a holdback to cover any then pending claims). On September 24, 2020, in connection with the first mandatory release assessment, a portion of the Series B and C convertible preferred shares was converted by Visa representing approximately half of the original potential conversion rate. We recognized a gain of $ 27.3 million reported in interest and other income in our consolidated statement of income for the three and nine months ended September 30, 2020 based on the fair value of the shares received. NOTE 6— LONG-TERM DEBT AND LINES OF CREDIT As of September 30, 2021 and December 31, 2020, long-term debt consisted of the following: September 30, 2021 December 31, 2020 (in thousands) 3.800 % senior notes due April 1, 2021 $ — $ 752,199 3.750 % senior notes due June 1, 2023 558,454 562,258 4.000 % senior notes due June 1, 2023 560,986 565,930 2.650 % senior notes due February 15, 2025 994,375 993,110 1.200 % senior notes due March 1, 2026 1,091,536 — 4.800 % senior notes due April 1, 2026 800,849 809,324 4.450 % senior notes due June 1, 2028 479,293 482,588 3.200 % senior notes due August 15, 2029 1,237,611 1,236,424 2.900 % senior notes due May 15, 2030 989,903 989,025 4.150 % senior notes due August 15, 2049 740,056 739,789 Unsecured term loan facility 1,988,789 1,985,776 Unsecured revolving credit facility 1,222,000 36,000 Finance lease liabilities 64,081 75,989 Other borrowings 21,006 65,352 Total long-term debt 10,748,939 9,293,764 Less current portion 39,148 827,357 Long-term debt, excluding current portion $ 10,709,791 $ 8,466,407 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 September 30, 2021, unamortized discount on senior notes was $ 8.7 million, and unamortized debt issuance costs on senior notes and the unsecured term loan facility were $ 49.0 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 September 30, 2021, unamortized debt issuance costs on the unsecured revolving credit facility were $ 10.8 million, and at December 31, 2020, unamortized debt issuance costs on the unsecured revolving credit facility were $ 13.8 million. 16 Table of Contents At September 30, 2021, future maturities of long-term debt (excluding finance lease liabilities) are as follows by year (in thousands): Year Ending December 31, 2021 $ 12,602 2022 58,403 2023 1,300,000 2024 2,972,000 2025 1,000,000 2026 1,850,000 2027 and thereafter 3,450,000 Total $ 10,643,005 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 September 30, 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 September 30, 2021, our senior notes had a total carrying amount of $ 7.5 billion and an estimated fair value of $ 7.9 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 September 30, 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 September 30, 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 September 30, 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. 17 Table of Contents 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 September 30, 2021 Range of Maturity Dates at September 30, 2021 September 30, 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 September 30, 2021 and December 31, 2020) Other noncurrent liabilities 2.73 % December 31, 2022 $ 40,701 $ 65,490 NA = not applicable. 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 and nine months ended September 30, 2021 and 2020: Three Months Ended Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (in thousands) Net unrealized (losses) gains recognized in other comprehensive income (loss) $ ( 646 ) $ 194 $ ( 62 ) $ ( 53,332 ) Net unrealized losses reclassified out of other comprehensive income (loss) to interest expense $ 9,788 $ 11,133 $ 30,288 $ 25,786 As of September 30, 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 $ 38.5 million. Interest Expense Interest expense was $ 82.3 million and $ 82.1 million for the three months ended September 30, 2021 and 2020, respectively, and $ 242.9 million and $ 244.3 million for the nine months ended September 30, 2021 and 2020, respectively. NOTE 7— INCOME TAX Our effective income tax rates for the three and nine months ended September 30, 2021 were 15.5 % and 16.3 %, respectively. Our effective income tax rates for the three and nine months ended September 30, 2021 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 nine months ended September 30, 2021 also included the effect of enacted tax law changes in the U.K. which required a remeasurement of deferred tax balances raising the effective rate, and was favorably affected by a change in the assessment of the need for a valuation allowance related to foreign tax credit carryforwards. The effective rate for each period includes the effects of applicable state income taxes. 18 Table of Contents Our effective income tax rates for the three and nine months ended September 30, 2020 were 18.0 % and 14.1 %, respectively. Our effective income tax rate for the three months ended September 30, 2020 differed from the U.S. statutory rate primarily due to tax credits, foreign interest income not subject to tax, the foreign-derived intangible income deduction, changes in uncertain tax positions and the tax effect of a U.K. statutory income tax rate change that took effect during the quarter. Our effective income tax rate for the nine months ended September 30, 2020 differed from the U.S. statutory rate primarily due to tax credits, foreign interest income not subject to tax, the foreign-derived intangible income deduction and excess tax benefits of share-based awards. The effective rate for each period includes the effects of applicable state income taxes. NOTE 8— 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 September 30, 2021, we repurchased and retired 4,232,232 shares of our common stock at a cost, including commissions, of $ 740.8 million, or $ 175.03 per share. During the three months ended September 30, 2020, there were no repurchases. During the nine months ended September 30, 2021 and 2020, we repurchased and retired 9,689,181 and 2,094,731 shares of our common stock at a cost, including commissions, of $ 1,813.7 million and $ 404.0 million, or $ 187.21 per share and $ 192.85 per share, respectively. The activity for the nine months ended September 30, 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 A SR program purchase period, which ended on March 31, 2021. As of September 30, 2021, the remaining amount available under our share repurchase program was $ 949.2 million. On October 28, 2021, our board of directors declared a dividend of $ 0.25 per share payable on December 30, 2021 to common shareholders of record as of December 16, 2021. NOTE 9— 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 Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (in thousands) (in thousands) Share-based compensation expense $ 65,611 $ 42,276 $ 146,097 $ 105,081 Income tax benefit $ 16,224 $ 9,123 $ 34,595 $ 23,338 Share-Based Awards The following table summarizes the changes in unvested restricted stock and performance awards for the nine months ended September 30, 2021: Shares Weighted-Average Grant-Date Fair Value (in thousands) Unvested at December 31, 2020 1,546 $ 176.71 Granted 1,437 193.59 Vested ( 1,162 ) 153.99 Forfeited ( 90 ) 180.76 Unvested at September 30, 2021 1,731 $ 183.74 19 Table of Contents The total fair value of restricted stock and performance awards vested during the nine months ended September 30, 2021 and September 30, 2020 was $ 178.9 million and $ 77.9 million, respectively. For restricted stock and performance awards, we recognized compensation expense of $ 62.2 million and $ 38.9 million during the three months ended September 30, 2021 and 2020, respectively, and $ 135.6 million and $ 94.9 million during the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, there was $ 204.9 million of unrecognized compensation expense related to unvested restricted stock and performance awards that we expect to recognize over a weighted-average period of 2.1 years. Stock Options The following table summarizes stock option activity for the nine months ended September 30, 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 Forfeited ( 1 ) 113.48 Exercised ( 181 ) 69.08 Outstanding at September 30, 2021 1,183 $ 106.98 6.0 $ 69.4 Options vested and exercisable at September 30, 2021 908 $ 86.45 5.3 $ 66.4 We recognized compensation expense for stock options of $ 1.9 million and $ 2.4 million during the three months ended September 30, 2021 and 2020, respectively, and $ 6.0 million and $ 6.5 million for the nine months ended September 30, 2021 and 2020, respectively. The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2021 and 2020 was $ 23.4 million and $ 69.8 million, respectively. As of September 30, 2021, we had $ 10.1 million of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of 1.9 years. The weighted-average grant-date fair value of stock options granted during the nine months ended September 30, 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: Nine Months Ended September 30, 2021 September 30, 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. 20 Table of Contents NOTE 10— 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 and nine months ended September 30, 2021 excluded approximately 234,813 shares related to stock options that would have an antidilutive effect on the computation of diluted earnings per share. The dilutive share base for the three and nine months ended September 30, 2020 excluded approximately 124,888 shares related to stock options that would have an antidilutive effect on the computation of diluted earnings per share. The following table sets forth the computation of diluted weighted-average number of shares outstanding for the three and nine months ended September 30, 2021 and 2020: Three Months Ended Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (in thousands) Basic weighted-average number of shares outstanding 291,502 299,255 294,262 299,261 Plus: Dilutive effect of stock options and other share-based awards 1,005 1,236 1,159 1,264 Diluted weighted-average number of shares outstanding 292,507 300,491 295,421 300,525 NOTE 11 - 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 September 30, 2021 and December 31, 2020 to the amounts in the consolidated balance sheets is as follows: September 30, 2021 December 31, 2020 (in thousands) Cash and cash equivalents $ 2,347,732 $ 1,945,868 Restricted cash included in prepaid expenses and other current assets 120,882 143,903 Cash, cash equivalents and restricted cash shown in the statement of cash flows $ 2,468,614 $ 2,089,771 Accounts payable and accrued liabilities At September 30, 2021 and December 31, 2020, accounts payable and accrued liabilities in the consolidated balance sheet included obligations totaling $ 17.7 million and $ 48.4 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 September 30, 2021 and 2020, we recognized charges for employee termination benefits of $ 4.7 million and $ 8.1 million, which included $ 1.9 million of share-based compensation expense for the three months ended September 30, 2020. During the nine months ended September 30, 2021 and 2020, we recognized charges for employee termination benefits of $ 43.0 million 21 Table of Contents and $ 49.8 million, which included $ 1.2 million and $ 6.1 million of share-based compensation expense, respectively. As of September 30, 2021, the cumulative amount of recognized charges for employee termination benefits resulting from Merger-related integration activities was $ 183.4 million, which included $ 25.2 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. NOTE 12— ACCUMULATED OTHER COMPREHENSIVE LOSS The changes in the accumulated balances for each component of other comprehensive income (loss) were as follows for the three and nine months ended September 30, 2021 and 2020: Foreign Currency Translation Gains (Losses) Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss (in thousands) Balance at June 30, 2021 $ ( 106,882 ) $ ( 65,548 ) $ ( 277 ) $ ( 172,707 ) Other comprehensive income (loss) ( 74,983 ) 6,934 ( 2,209 ) ( 70,258 ) Balance at September 30, 2021 $ ( 181,865 ) $ ( 58,614 ) $ ( 2,486 ) $ ( 242,965 ) Balance at June 30, 2020 $ ( 361,133 ) $ ( 98,903 ) $ 890 $ ( 459,146 ) Other comprehensive income (loss) 102,058 8,715 ( 3,531 ) 107,242 Balance at September 30, 2020 $ ( 259,075 ) $ ( 90,188 ) $ ( 2,641 ) $ ( 351,904 ) Other comprehensive income (loss) attributable to noncontrolling interests, which relates only to foreign currency translation, was a loss of $( 4.1 ) million and income of $ 8.8 million for the three months ended September 30, 2021 and 2020, respectively. Foreign Currency Translation 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 income (loss) ( 67,638 ) 22,929 4,017 ( 40,692 ) Balance at September 30, 2021 $ ( 181,865 ) $ ( 58,614 ) $ ( 2,486 ) $ ( 242,965 ) Balance at December 31, 2019 $ ( 241,899 ) $ ( 69,319 ) $ 647 $ ( 310,571 ) Other comprehensive loss ( 17,176 ) ( 20,869 ) ( 3,288 ) ( 41,333 ) Balance at September 30, 2020 $ ( 259,075 ) $ ( 90,188 ) $ ( 2,641 ) $ ( 351,904 ) Other comprehensive income (loss) attributable to noncontrolling interests, which relates only to foreign currency translation, was a loss of $( 7.4 ) million and income of $ 7.5 million for the nine months ended September 30, 2021 and 2020, respectively. 22 Table of Contents NOTE 13— 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." Information on segments and reconciliations to consolidated revenues, consolidated operating income and consolidated depreciation and amortization was as follows for the three and nine months ended September 30, 2021 and 2020: Three Months Ended Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (in thousands) Revenues : (1) Merchant Solutions $ 1,495,898 $ 1,243,961 $ 4,190,524 $ 3,460,785 Issuer Solutions 522,166 487,409 1,528,349 1,461,196 Business and Consumer Solutions 207,670 204,106 678,611 624,774 Intersegment eliminations ( 23,397 ) ( 17,661 ) ( 67,703 ) ( 53,390 ) Consolidated revenues $ 2,202,337 $ 1,917,815 $ 6,329,781 $ 5,493,365 Operating income (loss) (1)(2) : Merchant Solutions $ 488,407 $ 344,981 $ 1,265,689 $ 824,212 Issuer Solutions 77,692 70,800 220,954 188,131 Business and Consumer Solutions 35,233 31,052 139,439 110,358 Corporate ( 201,249 ) ( 156,414 ) ( 588,182 ) ( 480,730 ) Consolidated operating income $ 400,083 $ 290,419 $ 1,037,900 $ 641,971 Depreciation and amortization : (1) Merchant Solutions $ 244,055 $ 238,946 $ 743,154 $ 708,808 Issuer Solutions 145,530 137,965 435,831 410,955 Business and Consumer Solutions 21,209 23,957 65,066 71,712 Corporate 7,767 6,031 22,127 15,917 Consolidated depreciation and amortization $ 418,561 $ 406,899 $ 1,266,178 $ 1,207,392 (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 $ 70.7 million and $ 57.6 million during the three months ended September 30, 2021 and 2020, respectively, and $ 237.7 million and $ 208.0 million during the nine months ended September 30, 2021 and 2020, respectively. 23 Table of Contents NOTE 14— COMMITMENTS AND CONTINGENCIES Purchase Obligations We have contractual obligations related to service arrangements with suppliers for fixed or minimum amounts. Future minimum payments at September 30, 2021 for purchase obligations were as follows (in thousands): Year Ending December 31: 2021 $ 182,374 2022 261,049 2023 199,775 2024 133,911 2025 156,296 2026 188,874 2027 and thereafter 771,046 Total future minimum payments $ 1,893,325 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 appealed the decision to the Georgia Court of Appeals. On June 30, 2021, a panel of the Georgia Court of Appeals unanimously reversed the judgment, including the entire damages award. We previously determined that it was not probable that a loss had been incurred under the applicable accounting standard (ASC Topic 450, Contingencies ); therefore, the reversal of the judgment did not affect our consolidated financial statements. 24 Table of Contents