What changed in this filing

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Item 1. Financial Statements

2022-10-31 compared with 2022-08-01 · 307 added, 228 removed, 494 unchanged (52% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, 2022 June 30, 2021

September 30, 2022 September 30, 2021

Revenues $ 2,285,371 $ 2,202,337

4 unchanged sentences

918,757 858,082

Impairment of goodwill 833,075 —

Loss on business dispositions 48,933 —

1,898,939 1,802,254

Operating (loss) income ( 529,858 ) 362,558

Operating income 386,432 400,083

Interest and other income 20,393 6,320

1 unchanged sentence

( 114,791 ) ( 75,867 )

(Loss) income before income taxes and equity in income of equity method investments ( 626,090 ) 287,457

Income before income taxes and equity in income of equity method investments 271,641 324,216

Income tax expense 14,255 50,117

(Loss) income before equity in income of equity method investments ( 678,866 ) 226,649

Income before equity in income of equity method investments 257,386 274,099

Equity in income of equity method investments, net of tax 42,780 31,364

Net (loss) income ( 665,051 ) 266,813

Net income 300,166 305,463

Net income attributable to noncontrolling interests, net of tax ( 9,712 ) ( 8,727 )

Net (loss) income attributable to Global Payments $ ( 672,999 ) $ 263,590

(Loss) earnings per share attributable to Global Payments:

Basic (loss) earnings per share $ ( 2.42 ) $ 0.89

Diluted (loss) earnings per share $ ( 2.42 ) $ 0.89

Net income attributable to Global Payments $ 290,454 $ 296,736

Earnings per share attributable to Global Payments:

Basic earnings per share $ 1.06 $ 1.02

Diluted earnings per share $ 1.05 $ 1.01

See Notes to Unaudited Consolidated Financial Statements.

2 unchanged sentences

(in thousands, except per share data)

Six Months Ended

June 30, 2022 June 30, 2021

Nine Months Ended

September 30, 2022 September 30, 2021

Revenues $ 6,722,531 $ 6,329,781

7 unchanged sentences

6,490,010 5,291,881

Operating (loss) income ( 153,911 ) 637,817

Operating income 232,521 1,037,900

Interest and other income 25,060 16,009

16 unchanged sentences

Three Months Ended

June 30, 2022 June 30, 2021

Net (loss) income $ ( 665,051 ) $ 266,813

September 30, 2022 September 30, 2021

Net income $ 300,166 $ 305,463

Other comprehensive income (loss):

Foreign currency translation adjustments ( 249,562 ) ( 79,532 )

Reclassification of accumulated foreign currency translation losses to net loss as a result of the sale of a foreign entity

Income tax benefit related to foreign currency translation adjustments 963 4,242

Net unrealized gains (losses) on hedging activities 5,051 ( 410 )

Income tax (expense) benefit related to foreign currency translation adjustments ( 183 ) 447

Net unrealized losses on hedging activities ( 1,070 ) ( 646 )

Reclassification of net unrealized losses on hedging activities to interest expense 2,980 9,788

1 unchanged sentence

Other, net of tax — ( 2,209 )

Other comprehensive (loss) income ( 137,461 ) 42,391

Comprehensive (loss) income ( 802,512 ) 309,204

Other comprehensive loss ( 248,165 ) ( 74,360 )

Comprehensive income 52,001 231,103

Comprehensive loss (income) attributable to noncontrolling interests 5,130 ( 4,625 )

Comprehensive (loss) income attributable to Global Payments $ ( 796,972 ) $ 303,256

Six Months Ended

June 30, 2022 June 30, 2021

Comprehensive income attributable to Global Payments $ 57,131 $ 226,478

Nine Months Ended

September 30, 2022 September 30, 2021

Net (loss) income $ ( 115,250 ) $ 770,686

3 unchanged sentences

Income tax benefit related to foreign currency translation adjustments 1,451 5,438

Net unrealized gains on hedging activities 13,985 584

Net unrealized gains (losses) on hedging activities 12,915 ( 62 )

Reclassification of net unrealized losses on hedging activities to interest expense 19,959 30,288

1 unchanged sentence

Other, net of tax — 4,017

Other comprehensive (loss) income ( 155,828 ) 26,317

Other comprehensive loss ( 403,993 ) ( 48,043 )

Comprehensive (loss) income ( 519,243 ) 722,643

5 unchanged sentences

(in thousands, except share data)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Current assets:

29 unchanged sentences

Common stock, no par value;

400,000,000 shares authorized at June 30, 2022 and December 31, 2021;

277,032,813 issued and outstanding at June 30, 2022 and 284,750,452 issued and outstanding at December 31, 2021

400,000,000 shares authorized at September 30, 2022 and December 31, 2021;

270,307,707 issued and outstanding at September 30, 2022 and 284,750,452 issued and outstanding at December 31, 2021

Paid-in capital 20,717,133 22,880,261

9 unchanged sentences

(in thousands)

Six Months Ended

June 30, 2022 June 30, 2021

Nine Months Ended

September 30, 2022 September 30, 2021

Cash flows from operating activities:

Net (loss) income $ ( 115,250 ) $ 770,686

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization of property and equipment 299,348 292,230

6 unchanged sentences

Equity in income of equity method investments, net of tax ( 74,074 ) ( 94,261 )

Facilities exit charges 27,662 —

Distribution received on investments 8,212 26,757

12 unchanged sentences

Effect on cash from sale of business ( 29,755 ) —

Proceeds from sale of investments 31,046 —

Other, net 101 1,248

1 unchanged sentence

Cash flows from financing activities:

Net borrowings from settlement lines of credit 4,139 134,245

Net (repayments of) borrowings from settlement lines of credit ( 2,770 ) 244,858

Proceeds from long-term debt 9,124,449 3,909,988

5 unchanged sentences

Distributions to noncontrolling interests ( 17,729 ) —

Contribution from a noncontrolling interest — 46,320

Payment of contingent consideration in business combination ( 15,726 ) —

Purchase of capped calls related to issuance of convertible notes ( 302,375 ) —

Dividends paid ( 208,082 ) ( 188,203 )

1 unchanged sentence

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 208,529 ) ( 42,704 )

Decrease in cash, cash equivalents and restricted cash ( 23,182 ) ( 150,047 )

Increase in cash, cash equivalents and restricted cash 34,470 378,843

Cash, cash equivalents and restricted cash, beginning of the period 2,123,023 2,089,771

8 unchanged sentences

Accumulated Other Comprehensive Loss Total Global Payments Shareholders’ Equity Noncontrolling Interests Total Equity

Balance at March 31, 2022 281,434 $ 22,338,086 $ 3,068,683 $ ( 247,205 ) $ 25,159,564 $ 235,241 $ 25,394,805

Net (loss) income ( 672,999 ) ( 672,999 ) 7,948 ( 665,051 )

Balance at June 30, 2022 277,033 $ 21,800,574 $ 2,326,259 $ ( 371,178 ) $ 23,755,655 $ 220,872 $ 23,976,527

Net income 290,454 290,454 9,712 300,166

Other comprehensive loss ( 233,323 ) ( 233,323 ) ( 14,842 ) ( 248,165 )

4 unchanged sentences

Distributions to noncontrolling interest — ( 3,366 ) ( 3,366 )

Purchase of capped calls related to issuance of convertible notes, net of taxes of $ 72,778

( 229,597 ) ( 229,597 ) ( 229,597 )

Cash dividends declared ($ 0.25 per common share)

( 68,766 ) ( 68,766 ) ( 68,766 )

Balance at June 30, 2022 277,033 $ 21,800,574 $ 2,326,259 $ ( 371,178 ) $ 23,755,655 $ 220,872 $ 23,976,527

Balance at September 30, 2022 270,308 $ 20,717,133 $ 2,547,947 $ ( 604,501 ) $ 22,660,579 $ 212,376 $ 22,872,955

Number of Shares

3 unchanged sentences

Noncontrolling Interests Total Equity

Balance at March 31, 2021 295,158 $ 24,403,323 $ 2,500,812 $ ( 212,373 ) $ 26,691,762 $ 150,429 $ 26,842,191

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 income 39,666 39,666 2,725 42,391

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

2 unchanged sentences

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 June 30, 2021 293,703 $ 24,201,763 $ 2,664,707 $ ( 172,707 ) $ 26,693,763 $ 156,377 $ 26,850,140

Balance at September 30, 2021 290,087 $ 23,544,800 $ 2,845,192 $ ( 242,965 ) $ 26,147,027 $ 207,322 $ 26,354,349

See Notes to Unaudited Consolidated Financial Statements.

14 unchanged sentences

Distributions to noncontrolling interest — ( 17,729 ) ( 17,729 )

Purchase of capped calls related to issuance of convertible notes, net of taxes of $ 72,778

( 229,597 ) ( 229,597 ) ( 229,597 )

Cash dividends declared ($ 0.75 per common share)

( 208,082 ) ( 208,082 ) ( 208,082 )

Balance at June 30, 2022 277,033 $ 21,800,574 $ 2,326,259 $ ( 371,178 ) $ 23,755,655 $ 220,872 $ 23,976,527

Balance at September 30, 2022 270,308 $ 20,717,133 $ 2,547,947 $ ( 604,501 ) $ 22,660,579 $ 212,376 $ 22,872,955

Number of Shares

5 unchanged sentences

Net income 757,007 757,007 13,679 770,686

Other comprehensive income (loss) 29,566 29,566 ( 3,249 ) 26,317

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

2 unchanged sentences

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 June 30, 2021 293,703 $ 24,201,763 $ 2,664,707 $ ( 172,707 ) $ 26,693,763 $ 156,377 $ 26,850,140

Balance at September 30, 2021 290,087 $ 23,544,800 $ 2,845,192 $ ( 242,965 ) $ 26,147,027 $ 207,322 $ 26,354,349

See Notes to Unaudited Consolidated Financial Statements.

4 unchanged sentences

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.

Merchant Solutions, Issuer Solutions and Consumer Solutions, which are described in "Note 14—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.

7 unchanged sentences

Actual results could differ materially from those estimates.

In particular, the future magnitude, duration and effects of the COVID-19 pandemic and the ongoing 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 particular, uncertainty resulting from COVID-19, global events and other macroeconomic conditions 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 based upon management’s estimates and assumptions utilizing the most currently available information.

Recently issued pronouncements not yet adopted

Recently adopted accounting pronouncements

Accounting Standards Update ("ASU") 2021-08 — In October 2021, the Financial Accounting Standards Board ("FASB") issued ASU 2021-08, "Business Combinations (Topic 805):

3 unchanged sentences

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

We elected to early adopt ASU 2021-08 in the third quarter of 2022, with application to any business combinations for which the acquisition date occurs after January 1, 2022.

NOTE 2— ACQUISITIONS

Pending Acquisition of EVO Payments, Inc.

On August 1, 2022, we entered into a merger agreement to acquire all outstanding equity of EVO Payments, Inc.

(“EVO”) for $ 34 per share, or approximately $ 3.4 billion in preliminary estimated cash consideration to be paid to EVO shareholders, which equates to an enterprise value of approximately $ 4 billion.

EVO is a leading payment technology and services provider, offering an array of payment solutions to merchants ranging from small and middle market enterprises to multinational companies and organizations across the Americas and Europe.

The acquisition aligns with our technology-enabled payments strategy, expands our geographic presence and augments our business-to-business software and payment solutions business.

The acquisition is expected to close prior to the end of first quarter of 2023, subject to EVO's shareholder approval, regulatory approvals and other customary closing conditions.

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.

1 unchanged sentence

The final 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:

Final Amounts at June 30, 2022

Final Amounts

(in thousands)

10 unchanged sentences

Total purchase consideration $ 933,246

During the six months ended June 30, 2022, we made measurement-period adjustments that decreased the amount of deferred income tax liabilities and provisional goodwill by $ 3.2 million.

The decrease in deferred income tax liabilities for the six months ended June 30, 2022 primarily related to finalizing the evaluation of the differences in the bases of assets and liabilities for financial reporting and tax purposes.

The effects of the measurement-period adjustments on our consolidated statements of income for the three and six months ended June 30, 2022 were not material.

During the nine months ended September 30, 2022, we made measurement-period adjustments that decreased the amount of deferred income tax liabilities and provisional goodwill by $ 3.2 million.

The decrease in deferred income tax liabilities for the nine months ended September 30, 2022 primarily related to finalizing the evaluation of the differences in the bases of assets and liabilities for financial reporting and tax purposes.

The effects of the measurement-period adjustments on our consolidated statements of income for the three and nine months ended September 30, 2022 were not material.

Goodwill of $ 472.0 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.

11 unchanged sentences

We sold our Merchant Solutions business in Russia effective April 29, 2022 for cash proceeds of $ 9 million.

During the three months ended June 30, 2022, we recognized a loss of $ 127.2 million associated with the sale, comprised of the difference between the consideration received and the net carrying amount of the business and the reclassification of $ 62.9 million of associated accumulated foreign currency translation losses from the separate component of equity.

During the nine months ended September 30, 2022, we recognized a loss of $ 127.2 million associated with the sale, comprised of the difference between the consideration received and the net carrying amount of the business and the reclassification of $ 62.9 million of associated accumulated foreign currency translation losses from the separate component of equity.

The loss was presented within loss on business dispositions in our consolidated statement of income.

Consumer Business Disposition

During the first quarter of 2022, we commenced a strategic evaluation of the consumer portion of our Business and Consumer Solutions segment.

As of June 30, 2022, we committed to a plan to sell the business within one year and were actively marketing the business in its current condition for a price that was reasonable in comparison to its estimated fair value.

The assets and liabilities of the consumer business met the criteria for classification as held for sale and are reported at fair value less costs to sell in our consolidated balance sheet as of June 30, 2022.

As further discussed in "Note 5— Goodwill and Other Intangible Assets," we recognized a goodwill impairment charge of $ 833.1 million during the three months ended June 30, 2022 related to the Business and Consumer Solutions reporting unit.

We also recognized a charge of $ 25 million during the three months ended June 30, 2022 to reduce the disposal group to estimated fair value less costs to sell, which is presented within loss on business dispositions in our consolidated statement of income.

On July 31, 2022, we entered into a definitive agreement to sell the consumer business for $ 1 billion.

We will provide up to $ 675 million of seller financing and $ 80 million of future services in connection with the sale.

The transaction is expected to close prior to the end of the first quarter of 2023 and is subject to customary terms and conditions.

For the three and six months ended June 30, 2022, the consumer business contributed $ 21.9 million and $ 44.6 million to the Business and Consumer Solutions segment operating income.

For the three and six months ended June 30, 2021, the consumer business contributed $ 33.9 million and $ 87.6 million to the Business and Consumer Solutions segment operating income.

The major classes of assets presented as held for sale in the consolidated balance sheet as of June 30, 2022, primarily related to the consumer business, include cash of $ 0.7 million, accounts receivable of $ 11.6 million, other current assets of $ 53.6 million, goodwill of $ 366.4 million, other intangible assets of $ 651.2 million, property and equipment of $ 48.9 million, and other noncurrent assets of $ 20.9 million.

The major classes of liabilities presented as held for sale in the consolidated balance sheet as of June 30, 2022 include accounts payable and accrued liabilities of $ 94.0 million, and other noncurrent liabilities of $ 4.7 million.

On July 31, 2022, we entered into a definitive agreement to sell our consumer business for $ 1 billion, subject to certain closing adjustments.

In connection with the sale, we will provide seller financing, consisting of a first lien seven-year secured term loan facility in an aggregate principal amount of $ 350 million bearing interest at a fixed annual rate of 9 % and a second lien twenty-five year secured term loan facility in an aggregate principal amount of $ 325 million bearing interest at a fixed annual rate of 13 %.

In addition, we will provide the purchasers a first lien five-year $ 50 million secured revolving facility that will be available from the date of closing of the sale.

The transaction is expected to close prior to the end of the first quarter of 2023 subject to required regulatory approvals and other customary closing conditions.

The assets and liabilities of our consumer business are classified as held for sale and the disposal group is reported at fair value less costs to sell in our consolidated balance sheet as of September 30, 2022.

As further discussed in "Note 5— Goodwill and Other Intangible Assets," we recognized a goodwill impairment charge of $ 833.1 million during the nine months ended September 30, 2022 related to our former Business and Consumer Solutions reporting unit, which included the consumer business.

We also recognized charges within loss on business dispositions in our consolidated statement of income of $ 48.9 million and $ 73.9 million during the three and nine months ended September 30, 2022, respectively, to reduce the carrying amount of the disposal group to estimated fair value less costs to sell.

The charge during the three months ended September 30, 2022 relates primarily to a change in the estimated fair value of the fixed rate seller financing.

For the three and nine months ended September 30, 2022, the consumer business contributed $ 23.2 million and $ 67.7 million to the Consumer Solutions segment operating income.

For the three and nine months ended September 30, 2021, the consumer business contributed $ 27.2 million and $ 114.8 million to the Consumer Solutions segment operating income.

The major classes of assets presented as held for sale in the consolidated balance sheet as of September 30, 2022, primarily related to the consumer business, include cash of $ 31.2 million, accounts receivable of $ 10.9 million, other current assets of $ 51.7 million, goodwill of $ 366.4 million, other intangible assets of $ 651.2 million, property and equipment of $ 51.2 million, other noncurrent assets of $ 43.9 million and an asset group valuation allowance of $ 73.9 million.

The major classes of liabilities presented as held for sale in the consolidated balance sheet as of September 30, 2022 include accounts payable and accrued liabilities of $ 75.2 million and other noncurrent liabilities of $ 4.5 million.

NOTE 4— 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 six months ended June 30, 2022 and 2021:

Three Months Ended June 30, 2022

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, 2022 and 2021 and has been recast to align with the change in the presentation of segment information as further described in “Note 14-Segment Information:”

Three Months Ended September 30, 2022

Solutions Issuer

Solutions Business and

Solutions Consumer

Solutions Intersegment

5 unchanged sentences

$ 1,596,326 $ 566,039 $ 147,337 $ ( 24,331 ) $ 2,285,371

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Solutions Issuer

Solutions Business and

Solutions Consumer

Solutions Intersegment

5 unchanged sentences

$ 1,495,898 $ 545,486 $ 183,591 $ ( 22,638 ) $ 2,202,337

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Solutions Issuer

Solutions Business and

Solutions Consumer

Solutions Intersegment

5 unchanged sentences

$ 4,651,061 $ 1,663,008 $ 478,082 $ ( 69,620 ) $ 6,722,531

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Solutions Issuer

Solutions Business and

Solutions Consumer

Solutions Intersegment

5 unchanged sentences

$ 4,190,524 $ 1,596,104 $ 608,645 $ ( 65,492 ) $ 6,329,781

The following table presents a disaggregation of our Merchant Solutions segment revenues by distribution channel for the three and six months ended June 30, 2022 and 2021:

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

The following table presents a disaggregation of our Merchant Solutions segment revenues by distribution channel for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

(in thousands)

3 unchanged sentences

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 six months ended June 30, 2022 and 2021, substantially all of our revenues were recognized over time.

Supplemental balance sheet information related to contracts from customers as of June 30, 2022 and December 31, 2021 was as follows:

Balance Sheet Location June 30, 2022 December 31, 2021

For the three and nine months ended September 30, 2022 and 2021, substantially all of our revenues were recognized over time.

Supplemental balance sheet information related to contracts from customers as of September 30, 2022 and December 31, 2021 was as follows:

Balance Sheet Location September 30, 2022 December 31, 2021

(in thousands)

5 unchanged sentences

Contract liabilities, net (noncurrent) Other noncurrent liabilities $ 45,033 $ 44,502

Net contract assets were not material at June 30, 2022 or at December 31, 2021.

Revenue recognized for the three months ended June 30, 2022 and 2021 from contract liability balances at the beginning of each period was $ 83.2 million and $ 85.0 million, respectively.

Revenue recognized for the six months ended June 30, 2022 and 2021 from contract liability balances at the beginning of each period was $ 149.8 million and $ 146.6 million, respectively.

Net contract assets were not material at September 30, 2022 or at December 31, 2021.

Revenue recognized for the three months ended September 30, 2022 and 2021 from contract liability balances at the beginning of each period was $ 74.2 million and $ 75.5 million, respectively.

Revenue recognized for the nine months ended September 30, 2022 and 2021 from contract liability balances at the beginning of each period was $ 189.3 million and $ 186.0 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 June 30, 2022.

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, 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.

5 unchanged sentences

NOTE 5— GOODWILL AND OTHER INTANGIBLE ASSETS

As of June 30, 2022 and December 31, 2021, goodwill and other intangible assets consisted of the following:

June 30, 2022 December 31, 2021

As of September 30, 2022 and December 31, 2021, goodwill and other intangible assets consisted of the following:

September 30, 2022 December 31, 2021

(in thousands)

13 unchanged sentences

$ 9,907,884 $ 11,633,709

Approximately $ 651.2 million of intangible assets have been reclassified to assets held for sale in connection with the presentation of the consumer business as held for sale as of June 30, 2022.

As of September 30, 2022, approximately $ 651.2 million of intangible assets have been reclassified to assets held for sale in connection with the presentation of the consumer business as held for sale.

See “Note 3—Business Dispositions” for further discussion.

The following table sets forth the changes by reportable segment in the carrying amount of goodwill for the six months ended June 30, 2022:

The following table sets forth the changes by reportable segment in the carrying amount of goodwill for the nine months ended September 30, 2022 and has been recast to align with the change in the presentation of segment information as further described in “Note 14-Segment Information:”

Solutions Issuer

Solutions Business and

Solutions Consumer

Solutions Total

(in thousands)

1 unchanged sentence

Effect of foreign currency translation ( 124,632 ) ( 50,761 ) — ( 175,393 )

Reallocation of goodwill among segments (1)

— 407,713 ( 407,713 ) —

Goodwill acquired 7,918 — — 7,918

Goodwill derecognized in connection with the sale of a business (1)

1 unchanged sentence

Impairment of goodwill — — ( 833,075 ) ( 833,075 )

Reallocation of accumulated impairment losses due to change in reporting units — ( 357,933 ) 357,933 —

Reclassification of goodwill to assets held for sale (2)

1 unchanged sentence

Measurement period adjustments ( 2,957 ) ( 4,581 ) — ( 7,538 )

Balance at June 30, 2022 $ 13,980,073 $ 8,330,244 $ 1,186,178 $ 23,496,495

(1) 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.

Balance at September 30, 2022 $ 13,926,292 $ 9,494,739 $ — $ 23,421,031

(1) Reflects goodwill derecognized in connection with the sale of our Merchant Solutions business in Russia.

See “Note 3—Business Dispositions” for further discussion.

(3) Reflects the reclassification of goodwill in connection with the presentation of the consumer business as held for sale as of June 30, 2022.

(2) Reflects the reclassification of goodwill in connection with the presentation of the consumer business as held for sale.

See “Note 3—Business Dispositions” for further discussion.

3 unchanged sentences

Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions, which include assumptions regarding the revenue growth rates and operating margins used to calculate estimated future cash flows, risk-adjusted discount rates and future economic and market conditions.

The sustained decline in our share price and recent increases in discount rates, primarily resulting from increased economic uncertainty, indicated a potential decline in fair value and triggered a requirement to evaluate our Issuer Solutions and Business and Consumer Solutions reporting units for potential impairment as of June 30, 2022.

Further, the estimated sales price for the consumer business portion of our Business and Consumer Solutions reporting unit also indicated a potential decline in fair value as of June 30, 2022.

The sustained decline in our share price and increases in discount rates, primarily resulting from increased economic uncertainty, indicated a potential decline in fair value and triggered a requirement to evaluate our Issuer Solutions and former Business and Consumer Solutions reporting units for potential impairment as of June 30, 2022.

Further, the estimated sales price for the consumer business also indicated a potential decline in fair value of our former Business and Consumer Solutions reporting unit as of June 30, 2022.

We determined on the basis of the quantitative assessment that the fair value of the Issuer Solutions reporting unit was still greater than its carrying amount as of June 30, 2022, indicating no impairment.

Based on the quantitative assessment of the Business and Consumer Solutions reporting unit, including consideration of the consumer business disposal group and the remaining assets of the reporting unit, we recognized a goodwill impairment charge of $ 833.1 million in our consolidated statement of income for the three and six months ended June 30, 2022.

We continue to closely monitor developments related to COVID-19 and other global events.

The future magnitude, duration and effects of these events are difficult to predict at this time, and it is reasonably possible that future developments could have a negative effect on the estimates and assumptions utilized in our goodwill impairment assessments and could result in material impairment charges in future periods.

Accumulated impairment losses for goodwill as of June 30, 2022 were $ 833.1 million.

Based on the quantitative assessment of our former Business and Consumer Solutions reporting unit, including consideration of the consumer business disposal group and the remaining assets of the reporting unit, we recognized a goodwill impairment charge of $ 833.1 million in our consolidated statement of income during the three months ended June 30, 2022.

In connection with the change in presentation of segment information during the third quarter of 2022 as further described in “Note 14-Segment Information,” accumulated impairment losses associated with our former Business and Consumer Solutions reporting unit were reallocated to our new reporting units based on relative fair value.

We continue to closely monitor developments related to COVID-19 and other global events and macroeconomic conditions.

The future magnitude, duration and effects of these events and conditions are difficult to predict at this time, and it is reasonably possible that future developments could have a negative effect on the estimates and assumptions utilized in our goodwill impairment assessments and could result in material impairment charges in future periods.

Accumulated impairment losses for goodwill as of September 30, 2022 were $ 833.1 million.

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

NOTE 6— OTHER ASSETS

Visa Preferred Shares

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).

In July 2022, in connection with the second mandatory release assessment, a portion of the Series B and C convertible preferred shares was converted by Visa representing approximately one quarter of the original potential conversion rate.

We recognized a gain of $ 13.2 million reported in interest and other income in our consolidated statement of income for the three and nine months ended September 30, 2022 based on the fair value of the shares received.

The shares were subsequently sold in September 2022.

The remaining Series B and C convertible preferred shares continue to be carried at an assigned value of zero based on the aforementioned factors.

NOTE 7— LONG-TERM DEBT AND LINES OF CREDIT

As of June 30, 2022 and December 31, 2021, long-term debt consisted of the following:

June 30, 2022 December 31, 2021

As of September 30, 2022 and December 31, 2021, long-term debt consisted of the following:

September 30, 2022 December 31, 2021

(in thousands)

13 unchanged sentences

744,633 743,695

4.950 % senior notes due August 15, 2027

4.450 % senior notes due June 1, 2028

2 unchanged sentences

1,239,192 1,238,006

5.300 % senior notes due August 15, 2029

2.900 % senior notes due May 15, 2030

3 unchanged sentences

5.400 % senior notes due August 15, 2032

4.150 % senior notes due August 15, 2049

740,414 740,146

Unsecured term loan facility 1,991,802 1,989,793

Unsecured revolving credit facility 700,000 —

5.950 % senior notes due August 15, 2052

1.000 % convertible notes due August 15, 2029

Unsecured term loan facility (outstanding under our Prior Credit Facility) — 1,989,793

Finance lease liabilities 26,749 64,421

3 unchanged sentences

Long-term debt, excluding current portion $ 12,289,826 $ 11,414,809

The carrying amounts of our senior notes and unsecured term loan facility in the table above are presented net of unamortized discount and unamortized debt issuance costs, as applicable.

At June 30, 2022, unamortized discount on senior notes was $ 11.0 million, and unamortized debt issuance costs on senior notes and the unsecured term loan facility were $ 54.6 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 carrying amounts of our senior notes, convertible notes and unsecured term loan facility in the table above are presented net of unamortized discount and unamortized debt issuance costs, as applicable.

At September 30, 2022, the unamortized discount on senior notes and convertible notes was $ 78.9 million, and unamortized debt issuance costs on senior notes and convertible notes were $ 52.5 million.

At December 31, 2021, the 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 June 30, 2022, unamortized debt issuance costs on the unsecured revolving credit facility were $ 8.1 million, and at December 31, 2021, unamortized debt issuance costs on the unsecured revolving credit facility were $ 9.9 million.

At June 30, 2022, future maturities of long-term debt (excluding finance lease liabilities) are as follows by year (in thousands):

At September 30, 2022, unamortized debt issuance costs on the unsecured revolving credit facility were $ 24.8 million, and at December 31, 2021, unamortized debt issuance costs on the unsecured revolving credit facility were $ 9.9 million.

At September 30, 2022, future maturities of long-term debt (excluding finance lease liabilities) are as follows by year (in thousands):

Year Ending December 31,

3 unchanged sentences

2027 1,250,000

2026 1,850,000

2028 and thereafter 7,700,000

Total $ 13,479,955

Long-Term Debt

As of June 30, 2022, our senior notes had a total carrying amount of $ 9.4 billion and an estimated fair value of $ 8.5 billion.

We have $ 11.9 billion in aggregate principal amount of senior unsecured notes, as presented in the table above.

Interest on the senior notes is payable semi-annually at various dates.

Each series of the senior notes is redeemable, at our option, in whole or in part, at any time and from time-to-time at the redemption prices set forth in the related indenture.

On August 22, 2022, we issued $ 2.5 billion aggregate principal amount of senior unsecured notes consisting of the following:

(i) $ 500.0 million aggregate principal amount of 4.950 % senior notes due August 2027;

(ii) $ 500.0 million aggregate principal amount of 5.300 % senior notes due August 2029;

(iii) $ 750.0 million aggregate principal amount of 5.400 % senior notes due August 2032;

and (iv) $ 750.0 million aggregate principal amount of 5.950 % senior notes due August 2052.

We issued the senior notes at a total discount of $ 5.2 million, and we incurred debt issuance costs of $ 24.8 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, 2022.

Interest on the senior unsecured notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing February 15, 2023.

The notes are unsecured and unsubordinated indebtedness and rank equally in right of payment with all of our other outstanding unsecured and unsubordinated indebtedness.

The net proceeds from the offering have been or will be used to refinance the outstanding indebtedness under our credit facility, to make cash payments and pay transaction fees and expenses in connection with the pending acquisition of EVO, to refinance certain outstanding indebtedness of EVO in connection with the acquisition and for general corporate purposes.

In the event that the EVO acquisition is not consummated, we will be required to redeem the notes due 2027 and 2029 at a redemption price equal to 101 % of the principal amount of the notes due 2027 and 2029 then outstanding plus accrued and unpaid interest, if any.

Convertible Notes

On August 1, 2022, we entered into an investment agreement with Silver Lake Partners relating to the issuance of $ 1.5 billion in aggregate principal amount of 1.000 % convertible unsecured senior notes (the "Convertible Notes”) due 2029 in a private placement, and the transaction closed on August 8, 2022.

The net proceeds from this offering were approximately $ 1.45 billion, reflecting an issuance discount of $ 37.5 million and $ 10.4 million of debt issuance costs, which were capitalized and reflected as a reduction of the related carrying amount of the Convertible Notes in our consolidated balance sheet at September 30, 2022.

The Convertible Notes bear interest at a rate of 1.000 % per annum.

Interest on the Convertible Notes is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2023, to the holders of record on the preceding February 1 and August 1, respectively.

The Convertible Notes mature on August 15, 2029, subject to earlier conversion or repurchase.

The Convertible Notes are convertible at the option of the holder at any time after the date that is 18 months after issuance (or earlier, upon the occurrence of certain corporate events) until the scheduled trading day prior to the maturity date.

The Convertible Notes are convertible into cash and shares of our common stock based on an initial conversion rate of 7.1089 shares of common stock per $1,000 principal amount of the Convertible Notes (which is equal to an initial conversion price of approximately $ 140.67 per share), subject to customary anti-dilution and other adjustments upon the occurrence of certain events.

Upon conversion, the principal amount of, and interest due on, the Convertible Notes are required to be settled in cash and any other amounts may be settled in shares, cash or a combination of shares and cash at our election.

The Convertible Notes are not redeemable by us.

If certain corporate events that constitute a fundamental change (as defined in the indenture governing the Convertible Notes) occur, any holder of the Convertible Notes may require that we repurchase all or any portion of their notes for cash at a purchase price of par plus accrued and unpaid interest to, but excluding, the repurchase date.

In addition, if certain corporate events that constitute a make-whole fundamental change (as defined in the indenture governing the Convertible Notes) occur, then the conversion rate will in certain circumstances be increased for a specified period of time.

The Convertible Notes include customary covenants for convertible notes of this type, as well as customary events of default, which may result in the acceleration of the maturity of the Convertible Notes.

On August 8, 2022, in connection with the issuance of the Convertible Notes, we entered into privately negotiated capped call transactions with certain financial institutions to cover, subject to customary adjustments, the number of shares of common stock initially underlying the Convertible Notes.

The economic effect of the capped call transactions is to hedge the potential dilutive effect upon conversion of the Convertible Notes, or offset our cash obligation if the cash settlement option is elected, up to a cap price determined based on a hedging period that commenced on August 9, 2022 and concluded on August 25, 2022.

The capped call has an initial strike price of $ 140.67 per share and a cap price of $ 229.2605 per share.

The capped call transactions meet the accounting criteria to be reflected in stockholders’ equity and not accounted for as derivatives.

The cost of $ 302.4 million incurred in connection with the capped call transactions was recorded as a reduction to paid-in-capital in our consolidated balance sheet at September 30, 2022, net of applicable income taxes.

New Credit Facility

On August 19, 2022, we entered into a credit agreement (the “Revolving Credit Agreement”) with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents.

The Revolving Credit Agreement provides for an unsubordinated unsecured $ 5.75 billion revolving credit facility (the “Revolving Credit Facility”).

We capitalized debt issuance costs of $ 12.3 million in connection with the issuances under the Revolving Credit Facility.

The Revolving Credit Facility matures in August 2027.

Borrowings under the Revolving Credit Facility may be repaid prior to maturity without premium or penalty, subject to payment of certain customary expenses of lenders and customary notice provisions.

Borrowings under the Revolving Credit Facility will be available to be made in US dollars, euros, sterling, Canadian dollars and, subject to certain conditions, certain other currencies at our option.

Borrowings under the Revolving Credit Facility will bear interest, at our option, at a rate equal to (i) for Secured Overnight Financing Rate ("SOFR") based currencies or certain alternative currencies, a secured overnight financing rate (subject to a 0.00 % floor) plus a 0.10 % credit spread adjustment or an alternative currency term rate (subject to a 0.00 % floor), as applicable, (ii) for US dollar borrowings, a base rate, (iii) for US dollar borrowings, a daily floating secured overnight financing rate (subject to a 0.00 % floor on or after January 1, 2023) plus a 0.10 % credit spread adjustment or (iv) for certain alternative currencies, a daily alternative currency rate (subject to a 0.00 % floor), in each case, plus an applicable margin.

The applicable margin for borrowings under the Revolving Credit Facility will range from 1.125 % to 1.875 % depending on our credit rating and is initially 1.375 %.

In addition, we are required to pay a quarterly commitment fee with respect to the unused portion of the Revolving Credit Facility at an applicable rate per annum ranging from 0.125 % to 0.300 % depending on our credit rating.

We may issue standby letters of credit of up to $ 250.0 million in the aggregate under the Revolving Credit Facility.

Outstanding letters of credit under the Revolving Credit Facility reduce the amount of borrowings available to us.

The amounts available to borrow under the Revolving Credit Facility are also determined by a financial leverage covenant.

As of September 30, 2022, there were no borrowing outstanding under the Revolving Credit Facility, and the total available commitments under the Revolving Credit Facility were $ 2.5 billion.

Prior Credit Facility

Prior to the Revolving Credit Facility, we were party to a credit facility agreement with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents (as amended from time to time, the “Prior Credit Facility”).

The Prior Credit Facility provided for a senior unsecured $ 2.0 billion term loan facility and a senior unsecured $ 3.0 billion revolving credit facility.

In August 2022, all borrowings outstanding and other amounts due under the Prior Credit Facility were repaid and the Prior Credit Facility was terminated.

Bridge Facility

On August 1, 2022, in connection with our entry into the EVO merger agreement, we obtained commitments for a $ 4.3 billion, 364-day senior unsecured bridge facility (the "Bridge Facility").

Upon the execution of permanent financing, including the issuance of our senior unsecured notes and entry into the Revolving Credit Facility described above, the aggregate commitments under the Bridge Facility were reduced to zero and terminated.

For the three and nine months ended September 30, 2022, we recognized expense of $ 17.3 million related to commitment fees associated with the Bridge Facility, which was presented within interest expense in our consolidated statement of income.

Fair Value of Long-Term Debt

As of September 30, 2022, our senior notes had a total carrying amount of $ 11.9 billion and an estimated fair value of $ 10.4 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 June 30, 2022.

As of September 30, 2022, our Convertible Notes had a total carrying amount of $ 1.5 billion and an estimated fair value of $ 1.4 billion.

The estimated fair value of our Convertible Notes was based on a lattice pricing model and is considered to be a Level 3 measurement of the valuation hierarchy.

The fair value of other long-term debt approximated its carrying amount at September 30, 2022.

Compliance with Covenants

The unsecured term loan and revolving credit facilities contain customary conditions to funding, affirmative covenants, negative covenants, financial covenants and events of default.

As of June 30, 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 June 30, 2022.

The Convertible Notes include customary covenants and events of default for convertible notes of this type.

The Revolving Credit Agreement contains customary affirmative covenants and restrictive covenants, including, among others, financial covenants based on net leverage and interest coverage ratios, and customary events of default.

As of September 30, 2022, financial covenants under the Revolving Credit Agreement required a leverage ratio of 3.75 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, 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).

We had previously entered into 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 were reflected as adjustments to interest expense.

Since we had designated the interest rate swap agreements as portfolio cash flow hedges, unrealized gains or losses resulting from adjusting the swaps to fair value were 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:

Derivative Financial Instruments Balance Sheet Location Weighted-Average Fixed Rate of Interest at June 30, 2022 Range of Maturity Dates at

June 30, 2022 June 30, 2022 December 31, 2021

(in thousands)

Interest rate swaps (Notional of $ 500 million at June 30, 2022 and $ 0 at December 31, 2021

Prepaid expenses and other current assets 2.51 % December 31, 2022 $ 329 $ —

Interest rate swaps (Notional of $ 750 million at June 30, 2022 and $ 1,250 million at December 31, 2021)

Accounts payable and accrued liabilities 2.88 % December 31, 2022 $ 874 $ 28,777

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 six months ended June 30, 2022 and 2021:

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

In August 2022, in connection with entry into the Revolving Credit Agreement and repayment of amounts outstanding under the Prior Credit Facility, we terminated and settled our existing interest rate swap agreements.

The termination resulted in the recognition of a net gain of $ 1.2 million, including the reclassification of $ 0.5 million of accumulated losses from the separate component of equity.

The net gain was presented in interest expense in our consolidated statement of income for the three and nine months ended September 30, 2022.

As of December 30, 2021, accounts payable and accrued liabilities included $ 28.8 million related to the interest rate swaps.

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, 2022 and 2021:

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

(in thousands)

Net unrealized gains (losses) recognized in other comprehensive income (loss) $ 5,051 $ ( 410 ) $ 13,985 $ 584

Net unrealized (losses) gains recognized in other comprehensive income (loss) $ ( 1,070 ) $ ( 646 ) $ 12,915 $ ( 62 )

Net unrealized losses reclassified out of other comprehensive income (loss) to interest expense $ 2,980 $ 9,788 $ 19,959 $ 30,288

As of June 30, 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 $ 5.7 million.

As of September 30, 2022, the amount of net unrealized losses in accumulated other comprehensive loss related to our forward-starting interest rate swaps that is expected to be reclassified into interest expense during the next 12 months was $ 5.5 million.

Interest Expense

Interest expense was $ 97.1 million and $ 79.0 million for the three months ended June 30, 2022 and 2021, respectively, and $ 186.4 million and $ 160.5 million for the six months ended June 30, 2022 and 2021, respectively.

Interest expense was $ 132.4 million and $ 82.3 million for the three months ended September 30, 2022 and 2021, respectively, and $ 318.8 million and $ 242.9 million for the nine months ended September 30, 2022 and 2021, respectively.

NOTE 8— INCOME TAX

For the three and six months ended June 30, 2022, we incurred income tax expense in spite of reporting a loss before income taxes, primarily due to the unfavorable effects of the goodwill impairment charge and loss on the sale of our Merchant Solutions business in Russia for which no tax benefit was recognized.

These unfavorable effects were partially offset by the favorable effects of foreign interest income not subject to tax, tax credits and the foreign-derived intangible income deduction.

Our effective income tax rates for the three and six months ended June 30, 2021 were 21.2 % and 16.8 %, respectively.

Our effective income tax rates for the three and six months ended June 30, 2021 differed 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, each favorably affecting the effective rate, and the effect of enacted tax law changes in the U.K.

which required a remeasurement of deferred tax balances raising the effective rate.

A change in the assessment of the need for a valuation allowance related to foreign tax credit carryforwards also had a favorable effect on the effective income tax rate for the six months ended June 30, 2021.

For the three months ended September 30, 2022, our effective income tax rate was 5.2 %, and it differed from the U.S.

statutory rate primarily due to the favorable effects of foreign interest income not subject to tax, tax credits, and the foreign-derived intangible income deduction.

The effective rate also included the favorable effects of adjustments to unrecognized income tax benefits related to certain U.S.

federal income tax positions and remeasurement of state deferred taxes to reflect enacted tax law changes.

For the nine months ended September 30, 2022, we incurred income tax expense in spite of reporting a loss before income taxes primarily due to the unfavorable effects of the goodwill impairment charge and loss on the sale of our Merchant Solutions business in Russia for which no tax benefit was recognized.

These effects were partially offset by the same items that favorably affected the rate for the three months ended September 30, 2022.

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 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.

On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act (the "IRA") into law.

The IRA, among other things, implements a 15% corporate alternative minimum tax based on global adjusted financial statement income and a 1% excise tax on share repurchases, which shall take effect in tax years beginning after December 31, 2022.

We are in the process of evaluating the provisions of the IRA, but we do not currently believe the IRA will have a material effect on our reported results, cash flows or financial position when it becomes effective.

We expect to reflect the excise tax within equity as part of the repurchase price of common stock.

NOTE 9— 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 June 30, 2022 and 2021, we repurchased and retired 4,523,563 and 1,501,549 shares of our common stock at a cost, including commissions, of $ 600.3 million and $ 290.0 million, or $ 132.64 and $ 193.12 per share, respectively.

During the six months ended June 30, 2022 and 2021, we repurchased and retired 9,039,189 and 5,456,949 shares of our common stock at a cost, including commissions, of $ 1,250.0 million and $ 1,072.9 million, or $ 138.29 and $ 196.65 per share, respectively.

The activity for the six months ended June 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 June 30, 2022, the remaining amount available under our share repurchase program was $ 1,107.0 million.

On July 28, 2022, our board of directors approved an increase to our existing share repurchase program authorization, which raised the total available authorization to $ 1.5 billion.

On July 28, 2022, our board of directors declared a dividend of $ 0.25 per share payable on September 30, 2022 to common shareholders of record as of September 16, 2022.

During the three months ended September 30, 2022 and 2021, we repurchased and retired 6,907,090 and 4,232,232 shares of our common stock, respectively, at a cost, including commissions, of $ 889.7 million and $ 740.8 million, or $ 128.82 and $ 175.03 per share, respectively.

During the nine months ended September 30, 2022 and 2021, we repurchased and retired 15,946,279 and 9,689,181 shares of our common stock, respectively, at a cost, including

commissions, of $ 2,139.7 million and $ 1,813.7 million, or $ 134.18 and $ 187.21 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 ASR program purchase period, which ended on March 31, 2021.

As of September 30, 2022, the remaining amount available under our share repurchase program was $ 610.3 million.

On October 27, 2022, our board of directors approved an increase to our existing share repurchase program authorization, which raised the total available authorization to $ 1.5 billion.

On October 27, 2022, our board of directors declared a dividend of $ 0.25 per share payable on December 30, 2022 to common shareholders of record as of December 16, 2022.

NOTE 10— 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 Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

(in thousands)

2 unchanged sentences

Share-Based Awards

The following table summarizes the changes in unvested restricted stock and performance awards for the six months ended June 30, 2022:

The following table summarizes the changes in unvested restricted stock and performance awards for the nine months ended September 30, 2022:

Shares Weighted-Average

4 unchanged sentences

Forfeited ( 201 ) 165.70

Unvested at June 30, 2022 2,455 $ 160.65

The total fair value of restricted stock and performance awards vested during the six months ended June 30, 2022 and June 30, 2021 was $ 96.4 million and $ 97.2 million, respectively.

For restricted stock and performance awards, we recognized compensation expense of $ 43.6 million and $ 39.9 million during the three months ended June 30, 2022 and 2021, respectively, and $ 78.7 million and $ 73.3 million during the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, there was $ 284.8 million of unrecognized compensation expense related to unvested restricted stock and performance awards that we expect to recognize over a weighted-average period of 2.2 years.

Unvested at September 30, 2022 2,177 $ 159.09

The total fair value of restricted stock and performance awards vested during the nine months ended September 30, 2022 and September 30, 2021 was $ 128.8 million and $ 178.9 million, respectively.

For restricted stock and performance awards, we recognized compensation expens e of $ 34.5 million and $ 62.2 million during the three months ended September 30, 2022 and 2021, respectively, and $ 113.2 million and $ 135.6 million during the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, there was $ 234.0 million of unrecognized compensation expense related to unvested restricted stock and performance awards that we expect to recognize over a weighted-average period of 2.0 years.

Stock Options

The following table summarizes stock option activity for the six months ended June 30, 2022:

The following table summarizes stock option activity for the nine months ended September 30, 2022:

Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value

2 unchanged sentences

Granted 154 136.02

Forfeited ( 36 ) 162.48

Exercised ( 66 ) 66.87

Outstanding at June 30, 2022 1,265 $ 112.76 5.9 $ 24.5

Options vested and exercisable at June 30, 2022 996 $ 99.38 5.1 $ 24.5

We recognized compensation expense for stock options of $ 1.8 million and $ 1.8 million during the three months ended June 30, 2022 and 2021, respectively, and $ 3.6 million and $ 4.2 million during the six months ended June 30, 2022 and 2021, respectively.

The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2022 and 2021 was $ 3.8 million and $ 23.1 million, respectively.

As of June 30, 2022, we had $ 12.1 million of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of 2.1 years.

The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2022 and 2021 was $ 48.88 and $ 65.99 , respectively.

Outstanding at September 30, 2022 1,224 $ 111.60 5.2 $ 22.6

Options vested and exercisable at September 30, 2022 991 $ 99.67 4.4 $ 22.6

We recognized compensation expense for stock options of $ 1.2 million and $ 1.9 million during the three months ended September 30, 2022 and 2021, respectively, and $ 4.8 million and $ 6.0 million during the nine months ended September 30, 2022 and 2021, respectively.

The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2022 and 2021 was $ 4.2 million and $ 23.4 million, respectively.

As of September 30, 2022, we had $ 8.9 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, 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:

Six Months Ended

June 30, 2022 June 30, 2021

Nine Months Ended

September 30, 2022 September 30, 2021

Risk-free interest rate 1.87 % 0.59 %

10 unchanged sentences

Earnings available to common shareholders was the same as reported net income (loss) attributable to Global Payments for all periods presented.

Diluted EPS is computed by dividing net income (loss) 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.

securities 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.

Due to a net loss for the three and six months ended June 30, 2022, no incremental shares are included in the computation of diluted earnings per share because the effect would be antidilutive.

Approximately 2.0 million shares related to stock options and share-based awards were therefore excluded from the dilutive share base for the three and six months ended June 30, 2022.

The dilutive share base for the three and six months ended June 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 following table sets forth the computation of diluted weighted-average number of shares outstanding for the three and six months ended June 30, 2022 and 2021:

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

The dilutive share base for the three months ended September 30, 2022 excluded approximately 467,770 shares related to stock options that would have an antidilutive effect on the computation of diluted earnings per share.

Due to a net loss for the nine months ended September 30, 2022, no incremental shares are included in the computation of diluted earnings per share because the effect would be antidilutive.

Approximately 1.9 million shares related to stock options and share-based awards were therefore excluded from the dilutive share base for the nine months ended September 30, 2022.

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 effect of the potential shares needed to settle the conversion spread on the Convertible Notes is included in diluted EPS if the effect is dilutive.

The effect depends on the market share price of our common stock at the time of conversion and would be dilutive if the average market share price of our common stock for the period exceeds the conversion price.

For the three and nine months ended September 30, 2022, the Convertible Notes were not included in the computation of diluted EPS as the effect would have been anti-dilutive.

Further, the effect of the related capped call transactions is not included in the computation of diluted EPS as it is always anti-dilutive.

The following table sets forth the computation of diluted weighted-average number of shares outstanding for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

(in thousands)

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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:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in thousands)

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Cash, cash equivalents and restricted cash shown in the statement of cash flows $ 2,157,493 $ 2,123,023

Long-lived assets

As a result of actions taken in the third quarter of 2022 to further reduce our facility footprint in certain markets around the world, we recognized charges of $ 27.7 million, primarily related to certain lease right-of-use assets, leasehold improvements, furniture and fixtures and equipment, to reduce the carrying amount of each asset group to estimated fair value.

The charges were presented within selling, general and administrative expenses in our consolidated statement of income for the

three and nine months ended September 30, 2022.

We continue to evaluate our physical footprint and additional charges may be incurred as these facilities exit activities continue in 2022.

During the three months ended September 30, 2022, we entered into a new agreement to acquire hardware, software and related services, of which $ 83.5 million was financed utilizing a two-year vendor financing arrangement.

The agreement included the purchase of certain assets previously leased.

The reduction in operating and finance lease liabilities arising from the termination of the related right-of-use assets was $ 44.2 million and $ 9.7 million, respectively.

Accounts payable and accrued liabilities

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(the "Merger").

During the three and six months ended June 30, 2021, we recognized charges for employee termination benefits of $ 13.1 million and $ 38.3 million, respectively, which included $ 0.7 million and $ 1.2 million of share-based compensation expense, respectively.

During the three and nine months ended September 30, 2021, we recognized charges for employee termination benefits of $ 4.7 million and $ 43.0 million, respectively, which included $ 1.2 million of share-based compensation expense for the nine months ended September 30, 2021.

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.

There were no significant charges recognized during the three and six months ended June 30, 2022 and no significant remaining obligations to be paid as of June 30, 2022.

There were no significant charges recognized during the three and nine months ended September 30, 2022 and no significant remaining obligations to be paid as of September 30, 2022.

NOTE 13— 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 six months ended June 30, 2022 and 2021:

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, 2022 and 2021:

Foreign Currency Translation Gains (Losses) Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss

(in thousands)

Balance at March 31, 2022 $ ( 209,895 ) $ ( 34,567 ) $ ( 2,743 ) $ ( 247,205 )

Other comprehensive (loss) income ( 133,506 ) 9,533 — ( 123,973 )

Balance at June 30, 2022 $ ( 343,401 ) $ ( 25,034 ) $ ( 2,743 ) $ ( 371,178 )

Balance at March 31, 2021 $ ( 141,070 ) $ ( 72,575 ) $ 1,272 $ ( 212,373 )

Other comprehensive income (loss) 34,188 7,027 ( 1,549 ) 39,666

Other comprehensive (loss) income ( 234,903 ) 1,580 — ( 233,323 )

Balance at September 30, 2022 $ ( 578,304 ) $ ( 23,454 ) $ ( 2,743 ) $ ( 604,501 )

Balance at June 30, 2021 $ ( 106,882 ) $ ( 65,548 ) $ ( 277 ) $ ( 172,707 )

Other comprehensive income (loss) attributable to noncontrolling interests, which relates only to foreign currency translation, was $( 13.5 ) million and $ 2.7 million for the three months ended June 30, 2022 and 2021, respectively.

Other comprehensive (loss) income ( 74,983 ) 6,934 ( 2,209 ) ( 70,258 )

Balance at September 30, 2021 $ ( 181,865 ) $ ( 58,614 ) $ ( 2,486 ) $ ( 242,965 )

Other comprehensive loss attributable to noncontrolling interests, which relates only to foreign currency translation, was $ 14.8 million and $ 4.1 million for the three months ended September 30, 2022 and 2021, respectively.

Foreign Currency Translation Gains (Losses) Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss

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Other comprehensive (loss) income ( 395,355 ) 25,036 — ( 370,319 )

Balance at June 30, 2022 $ ( 343,401 ) $ ( 25,034 ) $ ( 2,743 ) $ ( 371,178 )

Balance at September 30, 2022 $ ( 578,304 ) $ ( 23,454 ) $ ( 2,743 ) $ ( 604,501 )

Balance at December 31, 2020 $ ( 114,227 ) $ ( 81,543 ) $ ( 6,503 ) $ ( 202,273 )

Other comprehensive income 7,345 15,995 6,226 29,566

Balance at June 30, 2021 $ ( 106,882 ) $ ( 65,548 ) $ ( 277 ) $ ( 172,707 )

Other comprehensive loss attributable to noncontrolling interests, which relates only to foreign currency translation, was $ 18.8 million and $ 3.2 million for the six months ended June 30, 2022 and 2021, respectively.

Other comprehensive (loss) income ( 67,638 ) 22,929 4,017 ( 40,692 )

Balance at September 30, 2021 $ ( 181,865 ) $ ( 58,614 ) $ ( 2,486 ) $ ( 242,965 )

Other comprehensive loss attributable to noncontrolling interests, which relates only to foreign currency translation, was $ 33.7 million and $ 7.4 million for the nine months ended September 30, 2022 and 2021, respectively.

NOTE 14— SEGMENT INFORMATION

We operate in three reportable segments:

Merchant Solutions, Issuer Solutions and Business and Consumer Solutions.

During the third quarter of 2022, as a result of the pending divestiture of our consumer business and changes in how the business is now managed, we have realigned the businesses previously comprising our Business and Consumer Solutions segment to include the business-to-business portion within our Issuer Solutions segment and the consumer portion within our Consumer Solutions segment.

Our three reportable segments now are:

Merchant Solutions, Issuer Solutions and Consumer Solutions.

The presentation of segment information for the three and nine months ended September 30, 2021 has been recast to align with the segment presentation for the three and nine months ended September 30, 2022.

We evaluate performance and allocate resources based on the operating income of each operating segment.

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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.

As a result of the planned divestiture of the consumer portion of our Business and Consumer Solutions segment, we anticipate that we will realign the retained business-to-business portion of the Business and Consumer Solutions segment to the Issuer Solutions segment during the third quarter of 2022 to reflect how the business will be managed going forward.

We would begin reporting on the revised basis during the third quarter of 2022 and recast prior periods to reflect the change in segment reporting.

Information on segments and reconciliations to consolidated revenues, consolidated operating income and consolidated depreciation and amortization were as follows for the three and six months ended June 30, 2022 and 2021:

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

(in thousands)

1 unchanged sentence

Issuer Solutions 566,039 545,486 1,663,008 1,596,104

Business and Consumer Solutions 187,632 227,355 383,404 470,941

Consumer Solutions 147,337 183,591 478,082 608,645

Intersegment eliminations ( 24,331 ) ( 22,638 ) ( 69,620 ) ( 65,492 )

3 unchanged sentences

Issuer Solutions 97,548 85,717 244,190 245,588

Business and Consumer Solutions 31,726 42,283 65,385 104,205

Consumer Solutions 23,175 27,208 67,735 114,804

Corporate (2)

4 unchanged sentences

( 48,933 ) — ( 201,144 ) —

Consolidated operating income (loss) $ ( 529,858 ) $ 362,558 $ ( 153,911 ) $ 637,817

Consolidated operating income $ 386,432 $ 400,083 $ 232,521 $ 1,037,900

Depreciation and amortization :

1 unchanged sentence

Issuer Solutions 156,936 148,066 467,287 443,176

Business and Consumer Solutions 20,268 21,938 40,536 43,858

Consumer Solutions — 18,673 35,776 57,721

Corporate 5,266 7,767 16,545 22,127

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

See “Note 2—Acquisition” and “Note 3—Business Dispositions” for further discussion.

(2) Operating loss for Corporate included acquisition and integration expenses of $ 61.4 million and $ 76.8 million during the three months ended June 30, 2022 and 2021, respectively.

Operating loss for Corporate included acquisition and integration expenses of $ 109.5 million and $ 167.0 million during the six months ended June 30, 2022 and 2021, respectively.

(3) During the three and six months ended June 30, 2022, consolidated operating loss included a $ 833.1 million goodwill impairment charge related to the Business and Consumer Solutions reporting unit.

See “Note 2—Acquisitions” and “Note 3—Business Dispositions” for further discussion.

(2) Operating loss for Corporate included acquisition and integration expenses of $ 75.3 million and $ 70.7 million for the three months ended September 30, 2022 and 2021, respectively.

Operating loss for Corporate included acquisition and integration expenses of $ 184.8 million and $ 237.7 million for the nine months ended September 30, 2022 and 2021, respectively.

For the three and nine months ended September 30, 2022, operating loss for Corporate also included $ 31.7 million and $ 40.0 million, respectively, of other charges related to facilities exit activities.

(3) For the nine months ended September 30, 2022, consolidated operating income included a $ 833.1 million goodwill impairment charge related to our former Business and Consumer Solutions reporting unit.

See “Note 5—Goodwill and Other Intangible Assets” for further discussion.

(4) During the three and six months ended June 30, 2022, consolidated operating loss included a $ 127.2 million loss on the sale of our Merchant Solutions business in Russia and a charge for the estimated costs to sell our consumer business.

(4) For the three and nine months ended September 30, 2022, consolidated operating income included charges of $ 48.9 million and $ 73.9 million, respectively, to reduce the carrying amount of the consumer business disposal group to estimated fair value less costs to sell.

During the nine months ended September 30, 2022, consolidated operating income included a $ 127.2 million loss on the sale of our Merchant Solutions business in Russia.

NOTE 15— COMMITMENTS AND CONTINGENCIES

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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.

NOTE 15— SUBSEQUENT EVENTS

Visa Preferred Shares

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.

On July 1, 2022, in connection with the second mandatory release assessment, we received notice that a portion of the Series B and C convertible preferred shares will be converted by Visa subject to a review period as required by the terms of the original transaction.

We expect the review period will be completed during the third quarter of 2022, at which time we expect to recognize a gain of $ 13.6 million.

Pending Business Acquisition and Related Bridge Facility

On August 1, 2022, we entered into a merger agreement to acquire all outstanding equity of EVO Payments, Inc.

(“EVO”) for $ 34 per share, or approximately $ 3.4 billion in preliminary estimated cash consideration to be transferred to EVO shareholders, which equates to an enterprise value of approximately $ 4 billion.

EVO is a leading payment technology and services provider, offering an array of innovative, reliable, and secure payment solutions to merchants ranging from small and middle market merchant enterprises to multinational companies and organizations across the Americas and Europe.

The acquisition aligns with our technology-enabled payments strategy, expands our geographic presence and augments our business-to-business software and payment solutions business.

The acquisition is expected to close prior to the end of first quarter of 2023, subject to regulatory and shareholder approvals.

In connection with our entry into the merger agreement, on August 1, 2022, we obtained commitments for a $ 4.3 billion, 364-day senior unsecured bridge facility (the "Bridge Facility").

The Bridge Facility establishes an unsecured capital structure under which we can refinance our Senior Unsecured Credit Facilities in order to pay the cash consideration to acquire all outstanding equity of EVO in accordance with the terms of the merger agreement, refinance certain outstanding indebtedness of EVO in connection with the acquisition and pay related transaction fees and expenses.

We expect to execute permanent financing prior to the closing of the acquisition that will eliminate the need for the Bridge Facility commitments.

Estimated fees associated with the Bridge Facility of $ 17.3 million will be amortized to interest expense through the expected date of termination of the Bridge Facility commitment.

Convertible Senior Notes

On August 1, 2022, we entered into an investment agreement with Silver Lake Partners relating to the issuance of $ 1.5 billion in aggregate principal amount of 1.0 % convertible unsecured senior notes (‘Convertible Notes”) due 2029 in a private placement.

The interest rate of the Convertible Notes is fixed at 1.0 % per annum and is payable semi-annually.

The Convertible Notes are convertible at the option of the holder after 18 months at a 15 % conversion premium.

Upon conversion of the Convertible Notes, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

In connection with the offering of the Convertible Notes, we expect to enter into a convertible note hedge transaction with certain bank counterparties whereby we have the option to purchase shares of our common stock.

In addition, we expect to sell warrants to certain bank counterparties whereby the holders of the warrants have the option to purchase shares of our common stock.

Taken together, the purchase of the convertible note hedges and the sale of warrants are intended to offset the dilutive effect from the conversion of the Convertible Notes.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements