GLOBAL PAYMENTS INC 10-Q

ITEM 2—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report and the Management’s Discussion and Analysis of Financial Condition and Results of Operations and consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2021. This discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements. Executive Overview We are a leading payments technology company delivering innovative software and services to our customers globally. Our technologies, services and team member expertise allow us to provide a broad range of solutions that enable our customers to operate their businesses more efficiently across a variety of channels around the world. We have grown organically as well as through acquisitions. We continue to invest in new technology solutions and innovation, infrastructure to support our growing business and the consolidation and enhancement of our operating platforms. These investments include new product development and innovation to further enhance and differentiate our suite of technology and cloud-based solutions available to customers, along with migration of certain underlying technology platforms to cloud environments to enhance performance, improve speed to market and drive cost efficiencies. We also continue to enhance our business operating model through execution of merger and integration and other activities, such as combining business operations, streamlining technology infrastructure, eliminating duplicative corporate and operational support structures and realizing scale efficiencies. We have executed on our business strategy through several recent key transactions, including the following: • 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 $675 million of seller financing and 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. • 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 approvals, regulatory approvals and other customary closing conditions. 31 Table of Contents • Our capital allocation priorities were supported by the successful issuance of new senior notes, convertible notes and an increased credit facility during the third quarter of 2022. ◦ 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 Convertible Notes are convertible at the option of the holder at any time after 18 months 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). 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. ◦ In connection with the issuance of the Convertible Notes, we entered into privately negotiated capped call transactions with certain financial institutions to hedge the potential dilutive effect upon conversion of the Convertible Notes or offset our cash obligation if the cash settlement option is elected. ◦ On August 19, 2022, we entered into a credit agreement for an unsubordinated unsecured $5.75 billion revolving credit facility (the "Revolving Credit Facility"), and all borrowings outstanding and other amounts due under our prior credit facility (the "Prior Credit Facility") were repaid and the Prior Credit Facility was terminated. ◦ 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. 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. Highlights related to our financial condition at September 30, 2022 and results of operations for the three and nine months then ended include the following: • Consolidated revenues for the three and nine months ended September 30, 2022 were $2,285.4 million and $6,722.5 million, respectively, an increase of 3.8% and 6.2%, respectively, compared to the prior year. The increase in consolidated revenues was primarily due to an increase in transaction volumes as a result of growth in customer base, acceleration in the use of digital payment solutions and continued economic recovery from the effects of the COVID-19 pandemic, partially offset by the effects of unfavorable foreign currency exchange rates and lower volumes in our Consumer Solutions segment. • Merchant Solutions segment operating income and operating margin for the three and nine months ended September 30, 2022 and Issuer Solutions operating income and operating margin for the three months ended September 30, 2022 increased compared to the prior year primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues, and continued prudent expense management, partially offset by the effects of unfavorable foreign currency exchange rates. Issuer Solutions operating income and operating margin for the nine months ended September 30, 2022 decreased compared to the prior year as favorable effects of the increase in revenues was offset by the unfavorable effects of foreign currency exchange rates. • Consolidated operating income for the nine months ended September 30, 2022 included the unfavorable effects of a $833.1 million goodwill impairment charge related to our former Business and Consumer Solutions reporting unit and a $127.2 million loss related to the sale in April 2022 of our Merchant Solutions business in Russia. 32 Table of Contents Effects of COVID-19 and Other Global Conditions COVID-19 The COVID-19 pandemic has caused and may continue to cause significant disruptions to businesses and markets worldwide through the continued spread of the virus, including through a resurgence of COVID-19 cases or emergence of new virus variants in certain jurisdictions. The pandemic and measures to prevent its spread have affected and may continue to affect our financial results in various geographic locations as a result of volatility in spending and transaction volumes as governments implement or ease restrictions in response to the virus. While we continue to see signs of economic recovery, which has positively affected our financial results, some countries have faced more challenging circumstances in trying to contain a surge of infections. We continue to closely monitor the COVID-19 pandemic; however, the implications on future global economic conditions and related effects on our business and financial condition are difficult to predict due to continuing uncertainties around the ultimate severity, scope and duration of the pandemic, vaccine administration rates and efficacy, resurgence of COVID-19 cases and emergence of new virus variants and the direction or extent of current or future restrictive actions that may be imposed by governments or public health authorities. Invasion of Ukraine by Russia We continue to evaluate the potential effects on our business from other economic conditions and global events, including the ongoing Russia invasion of Ukraine that began in February 2022. 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. Prior to sale, our business in Russia represented an immaterial portion of our operations and financial results. We have no team members or operations in Ukraine. The invasion of Ukraine by Russia and the sanctions and other measures imposed in response to this situation have increased the level of economic and political uncertainty in Russia and other areas of the world. Risks associated with heightened geopolitical and economic instability include, among others, reduction in consumer, government or corporate spending, international sanctions, embargoes, heightened inflation, volatility in global financial markets and foreign currency rates, increased cyber disruptions and higher supply chain costs. The extent to which the effects of the invasion of Ukraine by Russia will affect the global economy and our operations outside of Russia is difficult to predict at this time. However, a significant escalation, expansion of the scope or continuation of the related economic disruption could have an adverse effect on our business and financial results. Risks Related to Macroeconomic Conditions We also continue to monitor the potential effects on our financial statements from other global developments, including fluctuations in foreign currency and actions taken by central banks to counter inflation. Certain of our operations are conducted in foreign currencies. Consequently, a portion of our revenues and expenses may be affected by fluctuations in foreign currency exchange rates. Recently, the US dollar has strengthened against most foreign currencies in the markets in which we operate. For the three and nine months ended September 30, 2022, currency exchange rate fluctuations decreased our consolidated revenues by approximately $57.1 million and $114.0 million, respectively, and decreased our operating income by approximately $24.0 million and $40.4 million, respectively, calculated by converting revenues and operating income for the current year in local currencies using exchange rates for the prior year. A continued strengthening of the US dollar or other significant fluctuations in foreign currency exchange rates could result in an adverse effect on our future financial results; however, we are unable to predict the extent of the potential effect on our financial results. We also continue to closely monitor developments related to other macroeconomic conditions, including continued inflation and rising interest rates. We have reduced our interest rate risk through issuance of fixed rate debt in place of variable rate debt. However, inflationary pressure or interest rate fluctuations could adversely affect our business and financial performance as a result of higher costs and/or lower consumer spending. A continued rise in inflation or interest rates could result in an adverse effect on our future financial results and the recoverability of assets; however, as the future magnitude, duration and effects of these conditions are difficult to predict at this time, we are unable to predict the extent of the potential effect on our financial results. 33 Table of Contents For a further discussion of trends, uncertainties and other factors that could affect our future operating results, see the section entitled "Risk Factors" in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2021 and subsequent filings we make with the SEC, including this Quarterly Report on Form 10-Q. 34 Table of Contents Results of Operations During the third quarter of 2022, as a result of the pending divestiture of our consumer business and changes in how the business is 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. For further information about our reportable segments, see "Item 1. Business—Business Segments" within our Annual Report on Form 10-K for the year ended December 31, 2021, incorporated herein by reference, and "Note 14—Segment Information" in the notes to the accompanying unaudited consolidated financial statements. The following table sets forth key selected financial data for the three months ended September 30, 2022 and 2021, this data as a percentage of total revenues and the changes between the periods in dollars and as a percentage of the prior-year amount. The income statement data for the three months ended September 30, 2022 and 2021 is derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 - Financial Statements. Three Months Ended September 30, 2022 % of Revenues (1) Three Months Ended September 30, 2021 % of Revenues (1) $ Change % Change (dollar amounts in thousands) Revenues (2) : Merchant Solutions $ 1,596,326 69.8 % $ 1,495,898 67.9 % $ 100,428 6.7 % Issuer Solutions 566,039 24.8 % 545,486 24.8 % 20,553 3.8 % Consumer Solutions 147,337 6.4 % 183,591 8.3 % (36,254) (19.7) % Intersegment eliminations (24,331) (1.1) % (22,638) (1.0) % (1,693) 7.5 % Consolidated revenues $ 2,285,371 100.0 % $ 2,202,337 100.0 % $ 83,034 3.8 % Consolidated operating expenses (2) : Cost of service $ 931,249 40.7 % $ 944,172 42.9 % $ (12,923) (1.4) % Selling, general and administrative 918,757 40.2 % 858,082 39.0 % 60,675 7.1 % Loss on business dispositions (4) 48,933 2.1 % — — % 48,933 NM Operating expenses $ 1,898,939 83.1 % $ 1,802,254 81.8 % $ 96,685 5.4 % Operating income (loss) (2) : Merchant Solutions $ 550,684 24.1 % $ 488,407 22.2 % $ 62,277 12.8 % Issuer Solutions 97,548 4.3 % 85,717 3.9 % 11,831 13.8 % Consumer Solutions 23,175 1.0 % 27,208 1.2 % (4,033) (14.8) % Corporate (3) (236,042) (10.3) % (201,249) (9.1) % (34,793) 17.3 % Loss on business dispositions (4) (48,933) (2.1) % — — % (48,933) NM Operating income $ 386,432 16.9 % $ 400,083 18.2 % $ (13,651) (3.4) % Operating margin (2) : Merchant Solutions 34.5 % 32.6 % 1.9 % Issuer Solutions 17.2 % 15.7 % 1.5 % Consumer Solutions 15.7 % 14.8 % 0.9 % NM = Not meaningful 35 Table of Contents (1) Percentage amounts may not sum to the total due to rounding. (2) Revenues, consolidated operating expenses, operating income (loss) and operating margin 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—Acquisitions” and “Note 3—Business Dispositions” for further discussion. (3) 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. For the three months ended September 30, 2022, operating loss for Corporate also included $31.7 million of other charges related to facilities exit activities. (4) For the three months ended September 30, 2022, consolidated operating income included a charge of $48.9 million to reduce the carrying amount of the consumer business disposal group to estimated fair value less costs to sell. The following table sets forth key selected financial data for the nine months ended September 30, 2022 and 2021, this data as a percentage of total revenues and the changes between the periods in dollars and as a percentage of the prior-year amount. The income statement data for the nine months ended September 30, 2022 and 2021 is derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 - Financial Statements. 36 Table of Contents Nine Months Ended September 30, 2022 % of Revenues (1) Nine Months Ended September 30, 2021 % of Revenues (1) $ Change % Change (dollar amounts in thousands) Revenues (2) : Merchant Solutions $ 4,651,061 69.2 % $ 4,190,524 66.2 % $ 460,537 11.0 % Issuer Solutions 1,663,008 24.7 % 1,596,104 25.2 % 66,904 4.2 % Consumer Solutions 478,082 7.1 % 608,645 9.6 % (130,563) (21.5) % Intersegment eliminations (69,620) (1.0) % (65,492) (1.0) % (4,128) 6.3 % Consolidated revenues $ 6,722,531 100.0 % $ 6,329,781 100.0 % $ 392,750 6.2 % Consolidated operating expenses (2) : Cost of service $ 2,850,706 42.4 % $ 2,805,728 44.3 % $ 44,978 1.6 % Selling, general and administrative 2,605,085 38.8 % 2,486,153 39.3 % 118,932 4.8 % Impairment of goodwill (4) 833,075 12.4 % — — % 833,075 NM Loss on business dispositions (5) 201,144 3.0 % — — % 201,144 NM Operating expenses $ 6,490,010 96.5 % $ 5,291,881 83.6 % $ 1,198,129 22.6 % Operating income (loss) (2) : Merchant Solutions $ 1,530,573 22.8 % $ 1,265,689 20.0 % $ 264,884 20.9 % Issuer Solutions 244,190 3.6 % 245,588 3.9 % (1,398) (0.6) % Consumer Solutions 67,735 1.0 % 114,804 1.8 % (47,069) (41.0) % Corporate (3) (575,758) (8.6) % (588,181) (9.3) % 12,423 (2.1) % Impairment of goodwill (4) (833,075) (12.4) % — — % (833,075) NM Loss on business dispositions (5) (201,144) (3.0) % — — % (201,144) NM Operating income $ 232,521 3.5 % $ 1,037,900 16.4 % $ (805,379) (77.6) % Operating margin (2) : Merchant Solutions 32.9 % 30.2 % 2.7 % Issuer Solutions 14.7 % 15.4 % (0.7) % Consumer Solutions 14.2 % 18.9 % (4.7) % NM = Not meaningful (1) Percentage amounts may not sum to the total due to rounding. (2) Revenues, consolidated operating expenses, operating income (loss) and operating margin 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—Acquisitions” and “Note 3—Business Dispositions” for further discussion. (3) 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 nine months ended September 30, 2022, operating loss for Corporate also included $40.0 million of other charges related to facilities exit activities. (4) 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. 37 Table of Contents (5) For the nine months ended September 30, 2022, consolidated operating income included a $127.2 million on the sale of our Merchant Solutions business in Russia and a charge of $73.9 million to reduce the carrying amount of the consumer business disposal group to estimated fair value less costs to sell. Revenues Consolidated revenues for the three and nine months ended September 30, 2022 increased by 3.8% and 6.2%, respectively, to $2,285.4 million and $6,722.5 million, respectively, compared to $2,202.3 million and $6,329.8 million, respectively, for the prior year. The increase in revenues was primarily due to an increase in transaction volumes as a result of growth in customer base, acceleration in the use of digital payment solutions and continued economic recovery from the effects of the COVID-19 pandemic, partially offset by the effects of unfavorable foreign currency exchange rates as the U.S. dollar has continued to strengthen. While we continue to see signs of economic recovery, which has positively affected our financial results in 2022 compared to the prior year, the rate of recovery on a global basis has been and may continue to be affected by additional developments related to COVID-19 as well as other global events and economic conditions. Merchant Solutions Segment. Revenues from our Merchant Solutions segment for the three and nine months ended September 30, 2022 increased by 6.7% and 11.0%, respectively, to $1,596.3 million and $4,651.1 million, respectively, compared to $1,495.9 million and $4,190.5 million, respectively, for the prior year. The increase in revenues was primarily due to an increase in transaction volumes as a result of growth in customer base, acceleration in the use of digital payment solutions and continued economic recovery from the effects of the COVID-19 pandemic. The increase in revenues was partially offset by the effects of unfavorable foreign currency exchange rates of $37.4 million and $77.3 million for the three and nine months ended September 30, 2022, respectively. Issuer Solutions Segment. Revenues from our Issuer Solutions segment for the three and nine months ended September 30, 2022 increased by 3.8% and 4.2%, respectively, to $566.0 million and $1,663.0 million, respectively, compared to $545.5 million and $1,596.1 million, respectively, for the prior year. The increase in revenues was primarily due to an increase in transaction volumes from continued economic recovery from the effects of the COVID-19 pandemic and revenue related to the MineralTree business, which was acquired in the fourth quarter of 2021. The increase in revenues was partially offset by the effects of unfavorable foreign currency exchange rates of $19.7 million and $36.7 million for the three and nine months ended September 30, 2022, respectively. Consumer Solutions Segment. Revenues from our Consumer Solutions segment for the three and nine months ended September 30, 2022 were $147.3 million and $478.1 million, respectively, compared to $183.6 million and $608.6 million, respectively, for the prior year. Revenues for the three and nine months ended September 30, 2022 were affected by reduced consumer spending and lower spending volumes as a result of individual stimulus payments and supplementary unemployment amounts distributed to our customers by the U.S. government in the first half of 2021 that did not recur in 2022. Operating Expenses Cost of Service. Cost of service for the three and nine months ended September 30, 2022 was $931.2 million and $2,850.7 million, respectively, compared to $944.2 million and $2,805.7 million, respectively, for the prior year. Cost of service as a percentage of revenues decreased to 40.7% and 42.4%, respectively, for the three and nine months ended September 30, 2022 compared to 42.9% and 44.3%, respectively, for the prior year. Compared to the prior year, cost of service for the three and nine months ended September 30, 2022 included higher variable costs associated with the increase in revenues, offset by the favorable effects of prudent expense management and lower amortization of acquired intangibles, as the consumer business assets classified as held for sale are not subject to amortization. The decrease in cost of service as a percentage of revenues also reflects the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues. Amortization of acquired intangibles were $306.0 million and $319.9 million for the three months ended September 30, 2022 and 2021, respectively, and $962.4 million and $973.9 million for the nine months ended September 30, 2022 and 2021, respectively. Selling, General and Administrative Expenses . Selling, general and administrative expenses for the three and nine months ended September 30, 2022 increased by 7.1% and 4.8%, respectively, to $918.8 million and $2,605.1 million, respectively, compared to $858.1 million and $2,486.2 million, respectively, for the prior year. Selling, general and administrative expenses as a percentage of revenues was 40.2% and 38.8% for the three and nine months ended September 30, 2022, respectively, compared to 39.0% and 39.3%, respectively, for the prior year. The increase in selling, general and administrative expenses was 38 Table of Contents primarily due to an increase in variable selling and other costs related to the increase in revenues, charges related to facilities exit activities primarily due to actions taken in the third quarter of 2022 and higher compensation and benefits and other costs related to the pending sale of the consumer business, partially offset by lower share-based compensation expenses in the current year. Selling, general and administrative expenses for the nine months ended September 30, 2022 also included lower acquisition and integration expenses compared to the prior year. The change in selling, general and administrative expenses as a percentage of revenues also reflects the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues. Actions taken to exit certain leased facilities resulted in charges of $31.7 million and $40.0 million during the three and nine months ended September 30, 2022, respectively, primarily to reduce the carrying amount of the affected asset groups to estimated fair value. We continue to evaluate our physical footprint and additional charges may be incurred as these facilities exit activities continue in 2022. Selling, general and administrative expenses included acquisition and integration expenses of $73.3 million and $71.6 million for the three months ended September 30, 2022 and 2021, respectively, and $186.2 million and $241.6 million for the nine months ended September 30, 2022 and 2021, respectively. Selling, general and administrative expenses included share-based compensation expense of $37.1 million and $65.6 million for the three months ended September 30, 2022 and 2021, respectively, and $122.5 million and $146.1 million for the nine months ended September 30, 2022 and 2021, respectively. The higher share-based compensation expense for the three and nine months ended September 30, 2021 was primarily driven by the vesting of certain performance-based restricted stock units upon achievement of performance measures during the prior period. Corporate . Corporate expenses for the three and nine months ended September 30, 2022 were $236.0 million and $575.8 million, respectively, compared to $201.2 million and $588.2 million, respectively, for the prior year. The change in corporate expenses for the three and nine months ended September 30, 2022 compared to the prior year reflects the unfavorable effects of the charges related to facilities exit activities and higher compensation costs, partially offset by the decrease in share-based compensation expense as described above. In addition, corporate expenses included acquisition and integration expenses of $75.3 million and $184.8 million for the three and nine months ended September 30, 2022, respectively, compared to $70.7 million and $237.7 million for the three and nine months ended September 30, 2021, respectively. Operating Income and Operating Margin Consolidated operating income for the three and nine months ended September 30, 2022 was $386.4 million and $232.5 million, respectively, compared to $400.1 million and $1,037.9 million, respectively, for the prior year. Operating margin for the three months ended September 30, 2022 was 16.9% compared to 18.2% for the prior year. Consolidated operating income and operating margin for the three and nine months ended September 30, 2022 compared to the prior year included the favorable effects of the increase in revenues, since certain fixed costs do not vary with revenues, and lower amortization of acquired intangibles and share-based compensation expenses as described above. Consolidated operating income for the nine months ended September 30, 2022 also included the favorable effect of lower acquisition and integration expenses compared to the prior year. Consolidated operating income for the nine months ended September 30, 2022 included the unfavorable effects of a $833.1 million goodwill impairment charge related to our former Business and Consumer Solutions reporting unit and a $127.2 million loss related to the sale in April 2022 of our Merchant Solutions business in Russia. 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 consumer business 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. Operating income for the three and nine months ended September 30, 2022 also included the unfavorable effect of a charge in the third quarter of 2022 related to facilities exit activities as described above. 39 Table of Contents Segment Operating Income and Operating Margin In our Merchant Solutions segment, operating income and operating margin for the three and nine months ended September 30, 2022 increased compared to the prior year primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues, and continued prudent expense management, slightly offset by incremental expenses related to continued investment in new product, innovation and our technology environments and the effects of unfavorable foreign currency exchange rates. In our Issuer Solutions segment, operating income and operating margin for the three months ended September 30, 2022 increased compared to the prior year primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues, and continued prudent expense management, partially offset by the effects of unfavorable foreign currency exchange rates. In our Issuer Solutions segment, operating income and operating margin for the nine months ended September 30, 2022 decreased compared to the prior year as favorable effects of the increase in revenues was offset by the unfavorable effects of foreign currency exchange rates. In our Consumer Solutions segment, operating income and operating margin for the three and nine months ended September 30, 2022 were unfavorably affected by the decline in revenues. Other Income/Expense, Net Interest and other income for the three and nine months ended September 30, 2022 increased to $20.4 million and $25.1 million, respectively, compared to $6.3 million and $16.0 million, respectively, for the prior year, primarily due to a gain of $13.2 million recognized in connection with the release and conversion of a portion of our Visa convertible preferred shares. See "Note 6—Other Assets" in the notes to the accompanying consolidated financial statements for further discussion of this transaction. Interest and other expense for the three and nine months ended September 30, 2022 increased to $135.2 million and $327.7 million, respectively, compared to $82.2 million and $245.9 million, respectively, for the prior year, as a result of the increase in our average outstanding borrowings and higher average interest rates on outstanding borrowings. In addition, interest expense for the three and nine months ended September 30, 2022 included fees and charges incurred in connection with financing activities that occurred during the third quarter of 2022, including $17.3 million related to commitment fees associated with bridge financing. Income Tax Expense For the three months ended September 30, 2022 and 2021, our effective income tax rates were 5.2% and 15.5%, respectively. The decrease in our effective rate from the prior year was primarily due to the favorable effects of foreign interest income not subject to tax, 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 the loss on the sale of our Merchant Solutions business in Russia, for which no tax benefit was recognized. The effective tax rate for the nine months ended September 30, 2021 of 16.3% included the unfavorable effect of a change in the U.K. statutory income tax rate that took effect during the nine months ended September 30, 2021, which required a remeasurement of deferred tax balances to increase the effective rate, which was partially offset by the favorable effect of a change in the assessment of the need for a valuation allowance related to foreign tax credit carryforwards. 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. 40 Table of Contents Net Income (Loss) Attributable to Global Payments Net income (loss) attributable to Global Payments was $290.5 million and ($137.8 million), respectively, for the three and nine months ended September 30, 2022 compared to net income of $296.7 million and $757.0 million, respectively, for the prior year, reflecting the changes noted above along with changes in equity in income of equity method investments. Equity in income of equity method investments for the three and nine months ended September 30, 2022 included a $17.9 million gain on the sale of an equity method investment. In addition, equity in income of equity method investments for the nine months ended September 30, 2022 included a decrease in fair value of investments held at certain investees, compared to appreciation in fair value of investments held at certain investees in the nine months ended September 30, 2021. Diluted Earnings (Loss) per Share Diluted earnings (loss) per share was $1.05 and ($0.49), respectively, for the three and nine months ended September 30, 2022 compared to diluted earnings per share of $1.01 and $2.56, respectively, for the prior year. Diluted earnings (loss) per share for the three and nine months ended September 30, 2022 reflects the changes in net income (loss) and the decrease in the weighted-average number of shares outstanding. Liquidity and Capital Resources We have numerous sources of capital, including cash on hand and cash flows generated from operations as well as various sources of financing. In the ordinary course of our business, a significant portion of our liquidity comes from operating cash flows and borrowings, including the capacity under our Revolving Credit Facility. Our capital allocation priorities are to make planned capital investments in our business, to pursue acquisitions that meet our corporate objectives, to pay dividends, to pay principal and interest on our outstanding debt and to repurchase shares of our common stock. Our significant contractual cash requirements also include ongoing payments for lease liabilities and contractual obligations related to service arrangements with suppliers for fixed or minimum amounts, which primarily relate to software, technology infrastructure and related services. Commitments under our borrowing arrangements are further described in "Note 7—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements and below under "Long-Term Debt and Lines of Credit." For additional information regarding our other cash commitments and contractual obligations, see "Note 6—Leases" and “Note 17—Commitments and Contingencies” in our Annual Report on Form 10-K for the year ended December 31, 2021. Our capital plan objectives are to support our operational needs and strategic plan for long-term growth while optimizing our cost of capital and financial position. To supplement cash from operating activities, we use a combination of bank financing, such as borrowings under our credit facilities, and senior note issuances for general corporate purposes and to fund acquisitions. During the third quarter of 2022, we entered into an investment agreement with Silver Lake Partners in the form of privately placed Convertible Notes, which also served as a source of general funding together with our other borrowings. In addition, specialized lines of credit are also used in certain of our markets to fund merchant settlement prior to receipt of funds from the card networks. We believe that our current level of cash and borrowing capacity under our Revolving Credit Facility, together with expected future cash flows from operations, will be sufficient to meet both the near-term and long-term needs of our existing operations and planned requirements. We regularly evaluate our liquidity and capital position relative to cash requirements, and we may elect to raise additional funds in the future through the issuance of debt or equity or by other means. Accumulated cash balances are invested in high-quality, marketable short-term instruments. At September 30, 2022, we had cash and cash equivalents totaling $1,993.8 million. Of this amount, we considered $1,113.4 million to be available for general purposes, of which $29.9 million is undistributed foreign earnings considered to be indefinitely reinvested outside the United States. The available cash of $1,113.4 million does not include the following: (i) settlement-related cash balances, (ii) funds held as collateral for merchant losses ("Merchant Reserves") and (iii) funds held for customers. Settlement-related cash balances represent funds that we hold when the incoming amount from the card networks precedes the funding obligation to the merchant. Settlement-related cash balances are not restricted in their use; however, these funds are generally paid out in satisfaction of settlement processing obligations the following day. Merchant Reserves serve as 41 Table of Contents collateral to minimize contingent liabilities associated with any losses that may occur under the merchant's agreement. While this cash is not restricted in its use, we believe that designating this cash as a Merchant Reserve strengthens our fiduciary standing with our member sponsors. Funds held for customers, which are not restricted in their use, include amounts collected before the corresponding obligation is due to be settled to or at the direction of our customers. We also had restricted cash of $132.5 million as of September 30, 2022, representing amounts deposited by customers for prepaid card transactions. These balances are subject to local regulatory restrictions requiring appropriate segregation and restriction in their use. Operating activities provided net cash of $1,534.5 million and $2,027.6 million for the nine months ended September 30, 2022 and 2021, respectively, which reflect net income (loss) adjusted for noncash items, including depreciation and amortization, charges associated with the impairment of goodwill and loss on business dispositions, facility exit charges, and changes in operating assets and liabilities. The decrease in cash flows from operating activities from the prior year was due to fluctuations in operating assets and liabilities that are affected primarily by timing of month-end and transaction volume, including changes in settlement processing assets and obligations and accounts payable and other liabilities balances. We used net cash in investing activities of $486.9 million and $1,295.9 million during the nine months ended September 30, 2022 and 2021, respectively, primarily to fund acquisitions and capital expenditures. During the nine months ended September 30, 2022 and 2021, we used cash of $25.0 million and $946.4 million, respectively, for acquisitions. We made capital expenditures of $463.4 million and $350.7 million during the nine months ended September 30, 2022 and 2021, respectively. These investments include software and hardware to support the development of new technologies, infrastructure to support our growing business and the consolidation and enhancement of our operating platforms. These investments also include new product development and innovation to further enhance and differentiate our suite of technology and cloud-based solutions available to customers. We expect to continue to make significant capital investments in the business, and we anticipate capital expenditures to remain as a similar percentage of revenues for the year ending December 31, 2022 as compared to the year ended December 31, 2021. Additionally, investing cash flows for the nine months ended September 30, 2022 includes the net effect on cash from the sale of our Merchant Solutions business in Russia and cash received from the sale of investments in Visa common shares of $13.2 million and equity method investments of $17.9 million. Financing activities include borrowings and repayments under our various debt arrangements, as well as borrowings and repayments made under specialized lines of credit to fund daily settlement activities. Our borrowing arrangements are further described in "Note 7—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements and below under "Long-Term Debt and Lines of Credit." Financing activities also include cash flows associated with common stock repurchase programs and share-based compensation programs, cash distributions made to our shareholders and cash contributions from and distributions to noncontrolling interests. We used net cash in financing activities of $804.6 million and $310.2 million during the nine months ended September 30, 2022 and 2021, respectively. Proceeds from long-term de bt were $9,124.4 million and $3,910.0 million for the nine months ended September 30, 2022 and 2021, respectively. Repayments of long-term debt were $7,193.7 million and $2,434.8 million for the nine months ended September 30, 2022 and 2021, respectively. Proceeds from and repayments of long-term debt consist of borrowings and repayments that we make with available cash, from time-to-time, under our Revolving Credit Facility, as well as scheduled principal repayments we make on our term loans. 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. 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. On August 19, 2022, we entered into a credit agreement for an unsubordinated unsecured $5.75 billion Revolving Credit Facility, and all borrowings outstanding and other amounts due under our Prior Credit Facility were repaid and the Prior Credit Facility was terminated. 42 Table of Contents 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 Notes due 2029 in a private placement, and the transaction closed on August 8, 2022. In connection with the issuance of the Convertible Notes, we paid $302.4 million to purchase privately negotiated capped call transactions with certain financial institutions, to hedge the potential dilutive effect upon conversion of the Convertible Notes, or offset our cash obligation if the cash settlement option is elected. On February 26, 2021, we issued $1.1 billion aggregate principal amount of 1.200% senior unsecured notes due February 2026. We used the net proceeds from this offering to fund the redemption in full of the 3.800% senior unsecured notes due April 2021, to repay a portion of the outstanding indebtedness under our Prior Credit Facility and for general corporate purposes. Activity under our settlement lines of credit is affected primarily by timing of month-end and transaction volume. During the nine months ended September 30, 2022, we had net repayments of settlement lines of credit of $2.8 million. During the nine months ended September 30, 2021, we had net borrowings from settlement lines of credit of $244.9 million. We repurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase ("ASR") programs. During the nine months ended September 30, 2022 and 2021, we used $2,139.7 million and $1,833.7 million, respectively, to repurchase shares of our common stock. 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. We paid dividends to our common shareholders in the amounts of $208.1 million and $188.2 million during the nine months ended September 30, 2022 and 2021, respectively. Additionally, during the nine months ended September 30, 2022, we made distributions to noncontrolling interests in the amount of $17.7 million and paid contingent consideration of $15.7 million related to a 2021 acquisition. During the nine months ended September 30, 2021, Global Payments and a noncontrolling shareholder made contributions of $185.3 million and $46.3 million, respectively, to one of our majority-owned subsidiaries, Comercia Global Payments Entidad de Pago, S.L. (“Comercia”). Contributions were made to Comercia based on each shareholder's proportionate ownership to fund an acquisition by Comercia that closed in the fourth quarter of 2021. Long-Term Debt and Lines of Credit Senior Notes We have $11.9 billion in aggregate principal amount of senior unsecured notes, which mature at various dates ranging from June 2023 to August 2052. 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 43 Table of Contents 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 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 $229.26 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. 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. 44 Table of Contents 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 borrowings 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 Prior Credit Facility agreement with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents. 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 $17.3 million of commitment fees associated with the Bridge Facility in interest expense. Compliance with Covenants 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. Settlement Lines of Credit In various markets where we do business, we have specialized lines of credit that are restricted for use in funding settlement. The settlement lines of credit generally have variable interest rates, are subject to annual review and are denominated in local currency but may, in some cases, facilitate borrowings in multiple currencies. For certain of our lines of credit, the available credit is increased by the amount of cash we have on deposit in specific accounts with the lender. Accordingly, the amount of the outstanding lines of credit may exceed the stated credit limit. As of September 30, 2022, a total of $78.0 million of cash on deposit was used to determine the available credit. As of September 30, 2022, we had $440.9 million outstanding under these lines of credit with additional capacity to fund settlement of $1.8 billion. During the three months ended September 30, 2022, the maximum and average outstanding balances under these lines of credit were $958.2 million and $499.5 million, respectively. The weighted-average interest rate on these borrowings was 4.78% at September 30, 2022. 45 Table of Contents See "Note 7—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements for further information about our borrowing agreements. Update to Critical Accounting Policies Goodwill - We test goodwill for impairment at the reporting unit level annually and more often if an event occurs or circumstances change that indicate the fair value of a reporting unit may be below its carrying amount. When applying the quantitative assessment, we determine the fair value of our reporting units based on a weighted average of multiple valuation techniques, principally a combination of an income approach and a market approach. The income approach calculates a value based upon the present value of estimated future cash flows, while the market approach uses earnings multiples of similarly situated guideline public companies. 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 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 our Issuer Solutions reporting unit was still greater than its carrying amount by approximately 4% as of June 30, 2022, indicating no impairment. 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. We continue to closely monitor developments related to COVID-19 and other global events and conditions, including continued inflation and rising interest rates. 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. Intangible and Long-lived Assets - We classify an asset or business as a held for sale disposal group if we have committed to a plan to sell the asset or business within one year and are actively marketing the asset or business in its current condition for a price that is reasonable in comparison to its estimated fair value. Disposal groups held for sale are reported at the lower of carrying amount or fair value less costs to sell. Long-lived assets classified as held for sale are not subject to depreciation or amortization, and both the assets and any liabilities directly associated with the disposal group are presented within separate held for sale line items in our consolidated balance sheet. Subsequent changes to the estimated selling price of an asset or disposal group held for sale are recorded as gains or losses in our consolidated statement of income and any subsequent gains are limited to the cumulative losses previously recognized. Effect of New Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted From time-to-time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standards setting bodies that may affect our current and/or future financial statements. See "Note 1—Basis of Presentation and Summary of Significant Accounting Policies" in the notes to the accompanying unaudited consolidated financial statements for a discussion of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted. Forward-Looking Statements Some of the statements we use in this report, and in some of the documents we incorporate by reference in this report, contain forward-looking statements concerning our business operations, economic performance and financial condition, including in particular: our business strategy and means to implement the strategy; measures of future results of operations, such as revenues, expenses, operating margins, income tax rates, and earnings per share; other operating metrics such as shares outstanding and capital expenditures; the effects of the COVID-19 pandemic and other general economic conditions on our business; statements about the strategic rationale and benefits of the proposed acquisition of EVO Payments, Inc. (“EVO”), including future financial and operating results, the combined company’s plans, objectives, expectation and intentions and the completion and expected timing of completion of the proposed transaction; planned divestitures or strategic initiatives; and our 46 Table of Contents success and timing in developing and introducing new services and expanding our business. You can sometimes identify forward-looking statements by our use of the words "believes," "anticipates," "expects," "intends," "plan," "forecast," "guidance" and similar expressions. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Although we believe that the plans and expectations reflected in or suggested by our forward-looking statements are reasonable, those statements are based on a number of assumptions, estimates, projections or plans that are inherently subject to significant risks, uncertainties and contingencies, many of which are beyond our control, cannot be foreseen and reflect future business decisions that are subject to change. Accordingly, we cannot guarantee that our plans and expectations will be achieved. Our actual revenues, revenue growth rates and margins, other results of operations and shareholder values could differ materially from those anticipated in our forward-looking statements as a result of many known and unknown factors, many of which are beyond our ability to predict or control. Important factors, among others, that may otherwise cause actual events or results to differ materially from those anticipated by such forward-looking statements or historical performance include the effects of global economic, political, market, health and social events or other conditions, including the effects and duration of, and actions taken in response to, the COVID-19 pandemic and the evolving situation involving Ukraine and Russia; foreign currency exchange, inflation and rising interest rate risks; difficulties, delays and higher than anticipated costs related to integrating the businesses of acquired companies, including with respect to implementing controls to prevent a material security breach of any internal systems or to successfully manage credit and fraud risks in business units; our ability to complete the proposed transaction with EVO on the proposed terms or on the proposed timeline, or at all, including risks and uncertainties related to securing the necessary regulatory approvals and the satisfaction of other closing conditions; the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive merger agreement relating to the transaction with EVO; failure to realize the expected benefits of the proposed transaction with EVO, as applicable; significant transaction costs and/or unknown or inestimable liabilities; the risk that EVO Payments’ business will not be integrated successfully, including with respect to implementing systems to prevent a material security breach of any internal systems or to successfully manage credit and fraud risks in business units, or that such integration may be more difficult, time-consuming or costly than expected; effects relating to the announcement of the proposed transaction with EVO, including on the market price of our common stock and our relationships with customers, employees and suppliers; the risk of potential stockholder litigation associated with the proposed transaction with EVO; the effect of a security breach or operational failure on the Company's business; failing to comply with the applicable requirements of Visa, Mastercard or other payment networks or card schemes or changes in those requirements; the ability to maintain Visa and Mastercard registration and financial institution sponsorship; the ability to retain, develop and hire key personnel; the diversion of management’s attention from ongoing business operations; the continued availability of capital and financing; increased competition in the markets in which we operate and our ability to increase our market share in existing markets and expand into new markets; our ability to safeguard our data; risks associated with our indebtedness; our ability to meet environmental, social and governance targets, goals and commitments; the potential effects of climate change, including natural disasters; the effects of new or changes in current laws, regulations, credit card association rules or other industry standards on us or our partners and customers, including privacy and cybersecurity laws and regulations; and other events beyond our control, and other factors presented in "Item 1A - Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2021 and subsequent filings we make with the SEC, including this Quarterly Report on Form 10-Q, which we advise you to review. These cautionary statements qualify all of our forward-looking statements, and you are cautioned not to place undue reliance on these forward-looking statements. Our forward-looking statements speak only as of the date they are made and should not be relied upon as representing our plans and expectations as of any subsequent date. While we may elect to update or revise forward-looking statements at some time in the future, we specifically disclaim any obligation to publicly release the results of any revisions to our forward-looking statements, except as required by law. ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For a discussion of our exposure to market risk, refer to Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," contained in our Annual Report on Form 10-K for the year ended December 31, 2021. 47 Table of Contents