Item 1. Financial Statements
ITEM 1—FINANCIAL STATEMENTS
GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended
March 31, 2022 March 31, 2021
Revenues $ 2,156,254 $ 1,990,007
Operating expenses:
Cost of service
957,158 925,246
Selling, general and administrative
823,149 789,502
1,780,307 1,714,748
Operating income 375,947 275,259
Interest and other income 1,711 4,234
Interest and other expense ( 93,283 ) ( 83,141 )
( 91,572 ) ( 78,907 )
Income before income taxes and equity in income of equity method investments 284,375 196,352
Income tax expense 52,218 20,675
Income before equity in income of equity method investments 232,157 175,677
Equity in income of equity method investments, net of tax 17,479 22,733
Net income 249,636 198,410
Net income attributable to noncontrolling interests, net of tax ( 4,903 ) ( 1,729 )
Net income attributable to Global Payments $ 244,733 $ 196,681
Earnings per share attributable to Global Payments:
Basic earnings per share $ 0.87 $ 0.66
Diluted earnings per share $ 0.87 $ 0.66
See Notes to Unaudited Consolidated Financial Statements.
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GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Three Months Ended
March 31, 2022 March 31, 2021
Net income $ 249,636 $ 198,410
Other comprehensive income (loss):
Foreign currency translation adjustments ( 32,960 ) ( 33,567 )
Income tax benefit related to foreign currency translation adjustments 670 750
Net unrealized gains on hedging activities 8,934 994
Reclassification of net unrealized losses on hedging activities to interest expense 9,445 10,838
Income tax expense related to hedging activities ( 4,456 ) ( 2,864 )
Other, net of tax — 7,775
Other comprehensive loss ( 18,367 ) ( 16,074 )
Comprehensive income 231,269 182,336
Comprehensive loss attributable to noncontrolling interests 441 4,245
Comprehensive income attributable to Global Payments $ 231,710 $ 186,581
See Notes to Unaudited Consolidated Financial Statements.
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GLOBAL PAYMENTS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 31, 2022 December 31, 2021
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,045,277 $ 1,979,308
Accounts receivable, net 972,961 946,247
Settlement processing assets 1,450,419 1,143,539
Prepaid expenses and other current assets 683,753 641,891
Total current assets 5,152,410 4,710,985
Goodwill 24,793,799 24,813,274
Other intangible assets, net 11,292,243 11,633,709
Property and equipment, net 1,716,257 1,687,586
Deferred income taxes 22,754 12,117
Other noncurrent assets 2,457,797 2,422,042
Total assets $ 45,435,260 $ 45,279,713
LIABILITIES AND EQUITY
Current liabilities:
Settlement lines of credit $ 497,345 $ 484,202
Current portion of long-term debt 120,226 78,505
Accounts payable and accrued liabilities 2,550,112 2,542,256
Settlement processing obligations 1,699,491 1,358,051
Total current liabilities 4,867,174 4,463,014
Long-term debt 11,723,798 11,414,809
Deferred income taxes 2,725,980 2,793,427
Other noncurrent liabilities 723,503 739,046
Total liabilities 20,040,455 19,410,296
Commitments and contingencies
Equity:
Preferred stock, no par value; 5,000,000 shares authorized and none issued
— —
Common stock, no par value; 400,000,000 shares authorized at March 31, 2022 and December 31, 2021; 281,434,153 issued and outstanding at March 31, 2022 and 284,750,452 issued and outstanding at December 31, 2021
— —
Paid-in capital 22,338,086 22,880,261
Retained earnings 3,068,683 2,982,122
Accumulated other comprehensive loss ( 247,205 ) ( 234,182 )
Total Global Payments shareholders’ equity 25,159,564 25,628,201
Noncontrolling interests 235,241 241,216
Total equity 25,394,805 25,869,417
Total liabilities and equity $ 45,435,260 $ 45,279,713
See Notes to Unaudited Consolidated Financial Statements.
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GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31, 2022 March 31, 2021
Cash flows from operating activities:
Net income $ 249,636 $ 198,410
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment 99,665 96,372
Amortization of acquired intangibles 329,007 329,201
Amortization of capitalized contract costs 25,906 21,050
Share-based compensation expense 38,399 37,165
Provision for operating losses and credit losses 28,523 23,405
Noncash lease expense 21,555 27,066
Deferred income taxes ( 80,841 ) ( 56,390 )
Equity in income of equity method investments, net of tax ( 17,479 ) ( 22,733 )
Distribution received on investments 6,022 438
Other, net 6,127 ( 6,285 )
Changes in operating assets and liabilities, net of the effects of business combinations:
Accounts receivable ( 34,191 ) ( 37,141 )
Settlement processing assets and obligations, net 48,198 21,714
Prepaid expenses and other assets ( 115,904 ) ( 33,128 )
Accounts payable and other liabilities 25,377 262
Net cash provided by operating activities 630,000 599,406
Cash flows from investing activities:
Business combinations and other acquisitions, net of cash acquired ( 4,726 ) ( 11,074 )
Capital expenditures ( 156,102 ) ( 86,159 )
Other, net 5 293
Net cash used in investing activities ( 160,823 ) ( 96,940 )
Cash flows from financing activities:
Net borrowings from settlement lines of credit 16,497 108,488
Proceeds from long-term debt 1,529,157 1,987,005
Repayments of long-term debt ( 1,176,496 ) ( 1,575,435 )
Payments of debt issuance costs ( 1,706 ) ( 6,819 )
Repurchases of common stock ( 649,654 ) ( 802,955 )
Proceeds from stock issued under share-based compensation plans 7,940 17,705
Common stock repurchased - share-based compensation plans ( 26,295 ) ( 39,437 )
Distributions to noncontrolling interests ( 5,534 ) —
Dividends paid ( 70,243 ) ( 57,574 )
Net cash used in financing activities ( 376,334 ) ( 369,022 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 36,147 ) ( 21,141 )
Increase in cash, cash equivalents and restricted cash 56,696 112,303
Cash, cash equivalents and restricted cash, beginning of the period 2,123,023 2,089,771
Cash, cash equivalents and restricted cash, end of the period $ 2,179,719 $ 2,202,074
See Notes to Unaudited Consolidated Financial Statements.
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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, 2021 284,750 $ 22,880,261 $ 2,982,122 $ ( 234,182 ) $ 25,628,201 $ 241,216 $ 25,869,417
Net income 244,733 244,733 4,903 249,636
Other comprehensive loss ( 13,023 ) ( 13,023 ) ( 5,344 ) ( 18,367 )
Stock issued under share-based compensation plans 1,395 7,940 7,940 7,940
Common stock repurchased - share-based compensation plans ( 195 ) ( 26,789 ) ( 26,789 ) ( 26,789 )
Share-based compensation expense 38,399 38,399 38,399
Repurchases of common stock ( 4,516 ) ( 561,725 ) ( 87,929 ) ( 649,654 ) ( 649,654 )
Distributions to noncontrolling interest — ( 5,534 ) ( 5,534 )
Cash dividends declared ($ 0.25 per common share)
( 70,243 ) ( 70,243 ) ( 70,243 )
Balance at March 31, 2022 281,434 $ 22,338,086 $ 3,068,683 $ ( 247,205 ) $ 25,159,564 $ 235,241 $ 25,394,805
Number of Shares
Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss Total Global Payments Shareholders’ Equity
Noncontrolling 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
See Notes to Unaudited Consolidated Financial Statements.
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1— BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business, consolidation and presentation - We are a leading payments technology company delivering innovative software and services to our customers globally. Our technologies, services and team member expertise allow us to provide a broad range of solutions that enable our customers to operate their businesses more efficiently across a variety of channels around the world. We operate in three reportable segments: Merchant Solutions, Issuer Solutions and Business and Consumer Solutions, which are described in "Note 12—Segment Information." Global Payments Inc. and its consolidated subsidiaries are referred to herein collectively as "Global Payments," the "Company," "we," "our" or "us," unless the context requires otherwise.
These unaudited consolidated financial statements include our accounts and those of our majority-owned subsidiaries, and all intercompany balances and transactions have been eliminated in consolidation. These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The consolidated balance sheet as of December 31, 2021 was derived from the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 but does not include all disclosures required by GAAP for annual financial statements.
In the opinion of our management, all known adjustments necessary for a fair presentation of the results of the interim periods have been made. These adjustments consist of normal recurring accruals and estimates that affect the carrying amount of assets and liabilities. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.
Use of estimates - The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. In particular, the future magnitude, duration and effects of the COVID-19 pandemic and the invasion of Ukraine by Russia are difficult to predict at this time, and the ultimate effect could result in additional charges related to the recoverability of assets, including financial assets, long-lived assets and goodwill and other losses.
In response to the invasion of Ukraine by Russia, economic sanctions were imposed on individuals and entities in Russia, including financial institutions, by governments around the world, including the U.S. and the European Union. As of March 31, 2022, we were in compliance with all applicable restrictions and sanctions, and our operations in Russia had not been significantly affected. As a result of additional sanctions imposed in April 2022 that will affect our ability to continue normal operations in Russia, we sold our merchant business in Russia effective April 29, 2022. Based on our current estimates, we expect to recognize a charge of approximately $ 130 million during the second quarter of 2022 associated with the sale, including recognition of the associated accumulated foreign currency translation losses.
These unaudited consolidated financial statements reflect the financial statement effects based upon management’s estimates and assumptions utilizing the most currently available information.
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Recently issued pronouncements not yet adopted
Accounting Standards Update ("ASU") 2021-08 — In October 2021, the Financial Accounting Standards Board ("FASB") issued ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ." Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("Topic 606"), at fair value on the acquisition date. ASU 2021-08 requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts, which should generally result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. This update also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption is permitted, including adoption in an interim period. Adoption during an interim period requires retrospective application to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application. We are evaluating the potential effects of ASU 2021-08 on our consolidated financial statements.
NOTE 2— ACQUISITION
On June 10, 2021, we acquired Zego, a real estate technology company that provides comprehensive resident experience management software and digital commerce solutions to property managers, primarily in the United States, for cash consideration of approximately $ 933 million. This acquisition aligns with our technology-enabled, software driven strategy and expands our business into a new vertical market. We accounted for this transaction as a business combination, which generally requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date. The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration were as follows:
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Provisional Amounts at March 31, 2022
(in thousands)
Cash and cash equivalents $ 67,374
Accounts receivable 1,017
Identifiable intangible assets 473,000
Property and equipment 575
Other assets 9,051
Accounts payable and accrued liabilities ( 71,006 )
Deferred income tax liabilities ( 13,902 )
Other liabilities ( 8,010 )
Total identifiable net assets 458,099
Goodwill 475,147
Total purchase consideration $ 933,246
As of March 31, 2022, we considered these amounts to be provisional because we were still in the process of gathering and reviewing information to support the valuation of assets acquired and liabilities assumed and to evaluate the differences in the bases of assets and liabilities for financial reporting and tax purposes. There were no measurement-period adjustments during the three months ended March 31, 2022.
Goodwill of $ 475.1 million arising from the acquisition, included in the Merchant Solutions segment, is attributable to expected growth opportunities, potential synergies from combining our existing businesses and an assembled workforce. We expect that substantially all of the goodwill will be deductible for income tax purposes.
The following table reflects the provisional estimated fair values of the identified intangible assets of Zego and the respective weighted-average estimated amortization periods:
Estimated Fair 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
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NOTE 3— REVENUES
The following tables present a disaggregation of our revenues from contracts with customers by geography for each of our reportable segments for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31, 2022
Merchant
Solutions Issuer
Solutions Business and
Consumer
Solutions Intersegment
Eliminations Total
(in thousands)
Americas $ 1,242,620 $ 385,243 $ 191,432 $ ( 15,451 ) $ 1,803,844
Europe 174,055 117,671 4,340 — 296,066
Asia Pacific 56,344 8,587 — ( 8,587 ) 56,344
$ 1,473,019 $ 511,501 $ 195,772 $ ( 24,038 ) $ 2,156,254
Three Months Ended March 31, 2021
Merchant
Solutions Issuer
Solutions Business and
Consumer
Solutions Intersegment
Eliminations Total
(in thousands)
Americas $ 1,080,470 $ 378,043 $ 240,633 $ ( 16,905 ) $ 1,682,241
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
The following table presents a disaggregation of our Merchant Solutions segment revenues by distribution channel for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31, 2022 March 31, 2021
(in thousands)
Relationship-led $ 752,214 $ 668,556
Technology-enabled 720,805 599,316
$ 1,473,019 $ 1,267,872
ASC Topic 606, Revenues from Contracts with Customers ("ASC 606"), requires that we determine for each customer arrangement whether revenue should be recognized at a point in time or over time. For the three months ended March 31, 2022 and 2021, substantially all of our revenues were recognized over time.
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Supplemental balance sheet information related to contracts from customers as of March 31, 2022 and December 31, 2021 was as follows:
Balance Sheet Location March 31, 2022 December 31, 2021
(in thousands)
Assets:
Capitalized costs to obtain customer contracts, net
Other noncurrent assets $ 306,319 $ 291,914
Capitalized costs to fulfill customer contracts, net
Other noncurrent assets $ 123,852 $ 113,366
Liabilities:
Contract liabilities, net (current) Accounts payable and accrued liabilities $ 209,869 $ 227,783
Contract liabilities, net (noncurrent) Other noncurrent liabilities $ 45,512 $ 44,502
Net contract assets were not material at March 31, 2022 or at December 31, 2021. Revenue recognized for the three months ended March 31, 2022 and 2021 from contract liability balances at the beginning of each period was $ 84.1 million and $ 85.9 million, respectively.
ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations. The purpose of this disclosure is to provide additional information about the amounts and expected timing of revenue to be recognized from the remaining performance obligations in our existing contracts. The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at March 31, 2022. However, as permitted, we have elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. Accordingly, the total amount of unsatisfied or partially unsatisfied performance obligations related to processing services is significantly higher than the amounts disclosed in the table below (in thousands):
Year Ending December 31,
2022 $ 770,573
2023 859,699
2024 600,524
2025 478,419
2026 378,490
2027 246,544
2028 and thereafter 285,701
Total $ 3,619,950
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NOTE 4— GOODWILL AND OTHER INTANGIBLE ASSETS
As of March 31, 2022 and December 31, 2021, goodwill and other intangible assets consisted of the following:
March 31, 2022 December 31, 2021
(in thousands)
Goodwill $ 24,793,799 $ 24,813,274
Other intangible assets:
Customer-related intangible assets $ 9,683,201 $ 9,694,083
Acquired technologies 2,960,242 2,962,154
Contract-based intangible assets 2,251,832 2,258,676
Trademarks and trade names 1,270,797 1,271,302
16,166,072 16,186,215
Less accumulated amortization:
Customer-related intangible assets 2,756,357 2,587,586
Acquired technologies 1,466,246 1,367,513
Contract-based intangible assets 201,402 180,975
Trademarks and trade names 449,824 416,432
4,873,829 4,552,506
$ 11,292,243 $ 11,633,709
The following table sets forth the changes by reportable segment in the carrying amount of goodwill for the three months ended March 31, 2022:
Merchant
Solutions Issuer
Solutions Business and
Consumer
Solutions
Total
(in thousands)
Balance at December 31, 2021 $ 14,063,682 $ 7,954,453 $ 2,795,139 $ 24,813,274
Effect of foreign currency translation ( 6,953 ) ( 7,541 ) ( 599 ) ( 15,093 )
Reallocation of goodwill — 407,713 ( 407,713 ) —
Measurement period adjustments — ( 4,382 ) — ( 4,382 )
Balance at March 31, 2022 $ 14,056,729 $ 8,350,243 $ 2,386,827 $ 24,793,799
During the first quarter of 2022, the recently acquired operations of MineralTree were reassigned to the Issuer Solutions segment to reflect how the business will be managed going forward. As a result of this realignment, $ 407.7 million of goodwill was reallocated from the Business and Consumer Solutions segment to the Issuer Solutions segment.
There were no accumulated impairment losses for goodwill as of March 31, 2022 or December 31, 2021.
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NOTE 5— LONG-TERM DEBT AND LINES OF CREDIT
As of March 31, 2022 and December 31, 2021, long-term debt consisted of the following:
March 31, 2022 December 31, 2021
(in thousands)
3.750 % senior notes due June 1, 2023
$ 555,918 $ 557,186
4.000 % senior notes due June 1, 2023
557,690 559,338
1.500 % senior notes due November 15, 2024
497,430 497,185
2.650 % senior notes due February 15, 2025
995,219 994,797
1.200 % senior notes due March 1, 2026
1,092,495 1,092,016
4.800 % senior notes due April 1, 2026
795,199 798,024
2.150 % senior notes due January 15, 2027
744,008 743,695
4.450 % senior notes due June 1, 2028
477,096 478,194
3.200 % senior notes due August 15, 2029
1,238,401 1,238,006
2.900 % senior notes due May 15, 2030
990,489 990,196
2.900 % senior notes due November 15, 2031
741,926 741,716
4.150 % senior notes due August 15, 2049
740,235 740,146
Unsecured term loan facility 1,990,797 1,989,793
Unsecured revolving credit facility 370,000 —
Finance lease liabilities 56,895 64,421
Other borrowings 226 8,601
Total long-term debt 11,844,024 11,493,314
Less current portion 120,226 78,505
Long-term debt, excluding current portion $ 11,723,798 $ 11,414,809
The carrying amounts of our senior notes and term loan in the table above are presented net of unamortized discount and unamortized debt issuance costs, as applicable. At March 31, 2022, unamortized discount on senior notes was $ 11.4 million, and unamortized debt issuance costs on senior notes and the unsecured term loan facility were $ 57.6 million. At December 31, 2021, unamortized discount on senior notes was $ 11.7 million and unamortized debt issuance costs on our senior notes and the unsecured term loan facility were $ 60.7 million. The portion of unamortized debt issuance costs related to revolving credit facilities is included in other noncurrent assets. At March 31, 2022, unamortized debt issuance costs on the unsecured revolving credit facility were $ 9.0 million, and at December 31, 2021, unamortized debt issuance costs on the unsecured revolving credit facility were $ 9.9 million.
At March 31, 2022, future maturities of long-term debt (excluding finance lease liabilities) are as follows by year (in thousands):
Year Ending December 31,
2022 $ 50,173
2023 1,300,000
2024 2,620,000
2025 1,000,000
2026 1,850,000
2027 750,000
2028 and thereafter 4,200,000
Total $ 11,770,173
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Long-Term Debt
As of March 31, 2022, our senior notes had a total carrying amount of $ 9.4 billion and an estimated fair value of $ 9.1 billion. The estimated fair value of our senior notes was based on quoted market prices in an active market and is considered to be a Level 1 measurement of the valuation hierarchy. The fair value of other long-term debt approximated its carrying amount at March 31, 2022.
Compliance with Covenants
The unsecured term loan and revolving credit facility contain customary conditions to funding, affirmative covenants, negative covenants, financial covenants and events of default. As of March 31, 2022, financial covenants under the term loan facility required a leverage ratio of 3.50 to 1.00 and an interest coverage ratio of 3.00 to 1.00. We were in compliance with all applicable covenants as of March 31, 2022.
Derivative Agreements
We have interest rate swap agreements with financial institutions to hedge changes in cash flows attributable to interest rate risk on a portion of our variable-rate debt instruments. Net amounts to be received or paid under the swap agreements are reflected as adjustments to interest expense. Since we have designated the interest rate swap agreements as portfolio cash flow hedges, unrealized gains or losses resulting from adjusting the swaps to fair value are recorded as components of other comprehensive income (loss). The fair values of our interest rate swaps were determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date. These derivative instruments were classified within Level 2 of the valuation hierarchy.
The table below presents information about our derivative financial instruments, designated as cash flow hedges, included in the consolidated balance sheets:
Fair Values
Derivative Financial Instruments Balance Sheet Location Weighted-Average Fixed Rate of Interest at March 31, 2022 Range of Maturity Dates at
March 31, 2022 March 31, 2022 December 31, 2021
(in thousands)
Interest rate swaps (Notional of $ 1,250 million at March 31, 2022 and December 31, 2021)
Accounts payable and accrued liabilities 2.73 % December 31, 2022 $ 11,765 $ 28,777
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The table below presents the effects of our interest rate swaps on the consolidated statements of income and statements of comprehensive income for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31, 2022 March 31, 2021
(in thousands)
Net unrealized gains recognized in other comprehensive income (loss) $ 8,934 $ 994
Net unrealized losses reclassified out of other comprehensive income (loss) to interest expense $ 9,445 $ 10,838
As of March 31, 2022, the amount of net unrealized losses in accumulated other comprehensive loss related to our interest rate swaps that is expected to be reclassified into interest expense during the next 12 months was $ 16.9 million.
Interest Expense
Interest expense was $ 89.3 million and $ 81.2 million for the three months ended March 31, 2022 and 2021, respectively.
NOTE 6— INCOME TAX
Our effective income tax rate for the three months ended March 31, 2022 was 18.4 %. Our effective income tax rate for the three months ended March 31, 2022 differed favorably from the U.S. statutory rate primarily as a result of foreign interest income not subject to tax, tax credits and the foreign-derived intangible income deduction.
Our effective income tax rate for the three months ended March 31, 2021 was 10.5 %. Our effective income tax rate for the three months ended March 31, 2021 differed favorably from the U.S. statutory rate primarily as a result of a change in the assessment of the need for a valuation allowance related to foreign tax credit carryforwards, foreign interest income not subject to tax, tax credits, the foreign-derived intangible income deduction and excess tax benefits of share-based awards.
NOTE 7— SHAREHOLDERS’ EQUITY
We repurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase ("ASR") programs. During the three months ended March 31, 2022, we repurchased and retired 4,515,626 shares of our common stock at a cost, including commissions, of $ 649.7 million, or $ 143.95 per share. During the three months ended March 31, 2021, we repurchased and retired 3,955,400 shares of our common stock at a cost including commissions, of $ 783.0 million, or $ 198.00 per share. The activity for the three months ended March 31, 2021 included the repurchase of 2,491,161 shares at an average price of $ 200.71 per share under an ASR agreement we entered into on February 10, 2021 with a financial institution to repurchase an aggregate of $ 500 million of our common stock during the A SR program purchase period, which ended on March 31, 2021. As of March 31, 2022, the remaining amount available under our share repurchase program was $ 1,707.0 million.
On April 28, 2022, our board of directors declared a dividend of $ 0.25 per share payable on June 24, 2022 to common shareholders of record as of June 10, 2022.
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NOTE 8— SHARE-BASED AWARDS AND STOCK OPTIONS
The following table summarizes share-based compensation expense and the related income tax benefit recognized for our share-based awards and stock options:
Three Months Ended
March 31, 2022 March 31, 2021
(in thousands)
Share-based compensation expense $ 38,399 $ 37,165
Income tax benefit $ 9,679 $ 8,399
Share-Based Awards
The following table summarizes the changes in unvested restricted stock and performance awards for the three months ended March 31, 2022:
Shares Weighted-Average
Grant-Date
Fair Value
(in thousands)
Unvested at December 31, 2021 1,640 $ 184.90
Granted 1,428 138.21
Vested ( 535 ) 174.51
Forfeited ( 22 ) 167.59
Unvested at March 31, 2022 2,511 $ 160.68
The total fair value of restricted stock and performance awards vested during the three months ended March 31, 2022 and March 31, 2021 was $ 93.3 million and $ 86.1 million, respectively.
For restricted stock and performance awards, we recognized compensation expense of $ 35.1 million and $ 33.5 million during the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, there was $ 333.5 million of unrecognized compensation expense related to unvested restricted stock and performance awards that we expect to recognize over a weighted-average period of 2.4 years.
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Stock Options
The following table summarizes stock option activity for the three months ended March 31, 2022:
Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value
(in thousands) (years) (in millions)
Outstanding at December 31, 2021 1,172 $ 107.44 5.8 $ 47.4
Granted 154 136.02
Exercised ( 4 ) 16.89
Outstanding at March 31, 2022 1,322 $ 111.06 5.9 $ 48.5
Options vested and exercisable at March 31, 2022 1,053 $ 97.96 5.1 $ 48.4
We recognized compensation expense for stock options of $ 1.8 million and $ 2.4 million during the three months ended March 31, 2022 and 2021, respectively. The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2022 and 2021 was $ 0.6 million and $ 20.6 million, respectively. As of March 31, 2022, we had $ 14.0 million of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of 2.3 years.
The weighted-average grant-date fair value of stock options granted during the three months ended March 31, 2022 and 2021 was $ 48.88 and $ 65.99 , respectively. Fair value was estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:
Three Months Ended
March 31, 2022 March 31, 2021
Risk-free interest rate 1.87 % 0.59 %
Expected volatility 40 % 40 %
Dividend yield 0.56 % 0.44 %
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 9— EARNINGS PER SHARE
Basic earnings per share ("EPS") was computed by dividing net income attributable to Global Payments by the weighted-average number of shares outstanding during the period. Earnings available to common shareholders was the same as reported net income attributable to Global Payments for all periods presented.
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Diluted EPS is computed by dividing net income attributable to Global Payments by the weighted-average number of shares outstanding during the period, including the effect of share-based awards that would have a dilutive effect on EPS. All stock options with an exercise price lower than the average market share price of our common stock for the period are assumed to have a dilutive effect on EPS. The dilutive share base for the three months ended March 31, 2022 excluded approximately 388,355 shares related to stock options that would have an antidilutive effect on the computation of diluted earnings per share. There were no such shares for the three months ended March 31, 2021.
The following table sets forth the computation of diluted weighted-average number of shares outstanding for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31, 2022 March 31, 2021
(in thousands)
Basic weighted-average number of shares outstanding 282,100 296,425
Plus: Dilutive effect of stock options and other share-based awards 467 1,246
Diluted weighted-average number of shares outstanding 282,567 297,671
NOTE 10 - SUPPLEMENTAL BALANCE SHEET INFORMATION
Cash, cash equivalents and restricted cash
A reconciliation of the amounts of cash and cash equivalents and restricted cash in the consolidated balance sheets to the amount in the consolidated statements of cash flows is as follows:
March 31, 2022 December 31, 2021
(in thousands)
Cash and cash equivalents $ 2,045,277 $ 1,979,308
Restricted cash included in prepaid expenses and other current assets 134,442 143,715
Cash, cash equivalents and restricted cash shown in the statement of cash flows $ 2,179,719 $ 2,123,023
Accounts payable and accrued liabilities
At March 31, 2022 and December 31, 2021, accounts payable and accrued liabilities in the consolidated balance sheet included obligations totaling $ 3.6 million and $ 14.5 million, respectively, for employee termination benefits resulting from integration activities related to our merger with Total System Services, Inc. (the "Merger"). During the three months ended March 31, 2021, we recognized charges for employee termination benefits of $ 25.2 million, which included $ 0.5 million of share-based compensation expense. These charges are recorded within selling, general and administrative expenses in our consolidated statements of income and included within Corporate expenses for segment reporting purposes. Employee termination benefits from Merger-related integration activities were substantially complete as of December 31, 2021, and there were no significant charges recognized during the three months ended March 31, 2022. Any remaining obligations are expected to be paid within the next 12 months.
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NOTE 11— ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in the accumulated balances for each component of other comprehensive income (loss) were as follows for the three months ended March 31, 2022 and 2021:
Foreign Currency Translation Gains (Losses) Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss
(in thousands)
Balance at December 31, 2021 $ ( 182,949 ) $ ( 48,490 ) $ ( 2,743 ) $ ( 234,182 )
Other comprehensive (loss) income ( 26,946 ) 13,923 — ( 13,023 )
Balance at March 31, 2022 $ ( 209,895 ) $ ( 34,567 ) $ ( 2,743 ) $ ( 247,205 )
Balance at December 31, 2020 $ ( 114,227 ) $ ( 81,543 ) $ ( 6,503 ) $ ( 202,273 )
Other comprehensive (loss) income ( 26,843 ) 8,968 7,775 ( 10,100 )
Balance at March 31, 2021 $ ( 141,070 ) $ ( 72,575 ) $ 1,272 $ ( 212,373 )
Other comprehensive loss attributable to noncontrolling interests, which relates only to foreign currency translation, was $ 5.3 million and $ 6.0 million for the three months ended March 31, 2022 and 2021, respectively.
NOTE 12— SEGMENT INFORMATION
We operate in three reportable segments: Merchant Solutions, Issuer Solutions and Business and Consumer Solutions. We evaluate performance and allocate resources based on the operating income of each operating segment. The operating income of each operating segment includes the revenues of the segment less expenses that are directly related to those revenues. Operating overhead, shared costs and share-based compensation costs are included in Corporate. Interest and other income, interest and other expense, income tax expense and equity in income of equity method investments, net of tax, are not allocated to the individual segments. We do not evaluate the performance of or allocate resources to our operating segments using asset data. The accounting policies of the reportable operating segments are the same as those described in our Annual Report on Form 10-K for the year ended December 31, 2021 and our summary of significant accounting policies in "Note 1 - Basis of Presentation and Summary of Significant Accounting Policies." During the first quarter of 2022, the recently acquired operations of MineralTree were reassigned to the Issuer Solutions segment to reflect how the business will be managed going forward.
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Information on segments and reconciliations to consolidated revenues, consolidated operating income and consolidated depreciation and amortization was as follows for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31, 2022 March 31, 2021
(in thousands)
Revenues : (1)
Merchant Solutions $ 1,473,019 $ 1,267,872
Issuer Solutions 511,501 500,251
Business and Consumer Solutions 195,772 243,585
Intersegment eliminations ( 24,038 ) ( 21,701 )
Consolidated revenues $ 2,156,254 $ 1,990,007
Operating income (loss) (1)(2) :
Merchant Solutions $ 444,530 $ 339,989
Issuer Solutions 58,102 68,455
Business and Consumer Solutions 33,658 61,923
Corporate ( 160,343 ) ( 195,108 )
Consolidated operating income $ 375,947 $ 275,259
Depreciation and amortization : (1)
Merchant Solutions $ 249,961 $ 250,596
Issuer Solutions 152,123 144,609
Business and Consumer Solutions 20,269 21,920
Corporate 6,319 8,448
Consolidated depreciation and amortization $ 428,672 $ 425,573
(1) Revenues, operating income and depreciation and amortization reflect the effects of acquired businesses from the respective acquisition dates.
(2) Operating loss for Corporate included acquisition and integration expenses of $ 48.2 million and $ 90.1 million during the three months ended March 31, 2022 and 2021, respectively.
NOTE 13— COMMITMENTS AND CONTINGENCIES
Legal Matters
We are party to a number of claims and lawsuits incidental to our business. In our opinion, the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, are not expected to have a material adverse effect on our financial position, liquidity, results of operations or cash flows.
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