What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-17 compared with 2022-02-18 · 270 added, 237 removed, 236 unchanged (68% of the section changed)

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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 as a result of many known and unknown factors, including but not limited to, those discussed in "Item 1A - Risk Factors." See "Cautionary Notice Regarding Forward-Looking Statements" located above in "Item 1 - Business."

During 2022, as a result of the pending divestiture of our consumer business and changes in how our business is managed, we realigned the businesses previously comprising our Business and Consumer Solutions segment to include the business-to-business ("B2B") portion within our Issuer Solutions segment and the consumer portion forming our new Consumer Solutions segment.

Our three reportable segments now are:

Merchant Solutions, Issuer Solutions and Consumer Solutions.

The presentation of segment information for the years ended December 31, 2021 and 2020 has been recast to align with the segment presentation for the year ended December 31, 2022.

See "Note 17—Segment Information" in the notes to the accompanying consolidated financial statements for additional information about our segments.

Discussions of our results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 that have been omitted under this item can be found in "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K for the year ended December 31, 2021, which was filed with the United States Securities and Exchange Commission on February 18, 2022.

On September 18, 2019, we consummated our merger with Total System Services, Inc.

("TSYS") (the "Merger") for total purchase consideration of $24.5 billion, primarily funded with shares of our common stock.

Consolidated operating results for the years ended December 31, 2020 and 2021 each reflect a full year of the acquired operations of TSYS, while consolidated operating results for the year ended December 31, 2019 include the acquired operations of TSYS only from the acquisition date through December 31, 2019.

See "Note 2—Acquisitions" in the notes to the accompanying consolidated financial statements for further discussion of the Merger.

Realignment of the B2B portion of our former Business and Consumer Solutions segment into our Issuer Solutions segment did not have a material effect on our comparison of the segment results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Executive Overview

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Our technologies, services and team member expertise allow us to provide a broad range of solutions that enable our customers to operate their businesses more efficiently across a variety of channels around the world.

We operate in three reportable segments:

Merchant Solutions, Issuer Solutions and Business and Consumer Solutions.

See "Note 16—Segment Information" in the notes to the accompanying consolidated financial statements for additional information about our segments.

We have grown organically as well as through acquisitions.

We also continue to invest in new technology solutions, infrastructure to support our growing business and the continued 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 and drive cost efficiencies.

We also continue to execute on merger and integration activities, primarily related to the Merger, such as combining business operations, streamlining technology infrastructure, eliminating duplicative corporate and operational support structures and realizing scale efficiencies.

We have grown organically as well as through acquisitions and continue to invest in new technology solutions and innovation, infrastructure to support our growing business and the continued consolidation and enhancement of our operating platforms.

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.

Highlights related to our financial condition at December 31, 2022 and results of operations for the year then ended include the following:

• Consolidated revenues for the year ended December 31, 2022 increased to $8,975.5 million, compared to $8,523.8 million for the prior year.

The increase in consolidated revenues is primarily due to an increase in transaction volumes from continued economic recovery as COVID-19 restrictions eased and acceleration in the use of digital payment solutions.

• Consolidated operating income for the year ended December 31, 2021 increased to $1,358.9 million, compared to $894.0 million for the prior year.

Operating margin for the year ended December 31, 2021 increased to 15.9% compared to 12.0% for the prior year.

The increase in consolidated operating income and operating margin for the year ended December 31, 2021 is primarily due to the increase in revenues and favorable effects of Merger-related cost synergies.

• We expanded our business through the execution of several strategic acquisitions.

◦ On June 10, 2021, we acquired Zego, a real estate technology company that provides a comprehensive resident experience management software and digital commerce solutions to property managers, primarily in the United States, for cash consideration of approximately $933 million.

This acquisition aligns with our technology-enabled, software driven strategy and expands our business into a new vertical market.

◦ During the year ended December 31, 2021, we completed other strategic business acquisitions for an aggregate purchase price of approximately $963 million.

Our acquisition of MineralTree, a leading provider of accounts payable automation and B2B payments solutions, expands our target addressable market and provides incremental avenues for growth in one of the most attractive technology markets.

Our acquisitions of the Bankia merchant services business and Worldline's PayOne Austrian acquiring business deepen our presence in Europe and expand the scale of our distribution and technologies.

• Our capital allocation priorities were supported by the successful issuance of new senior unsecured notes.

◦ On November 22, 2021, we issued $2.0 billion aggregate principal amount of senior unsecured notes consisting of the following:

(i) $500.0 million aggregate principal amount of 1.500% senior notes due November 2024;

(ii) $750.0 million aggregate principal amount of 2.150% senior notes due January 2027;

and (iii) $750.0 million aggregate principal amount of 2.900% senior notes due November 2031.

We used the net proceeds from the offering to repay the outstanding indebtedness under our revolving credit facility and for general corporate purposes.

◦ On February 26, 2021, we issued $1.1 billion aggregate principal amount of 1.200% senior unsecured notes due March 2026.

We used the net proceeds from the offering to fund the redemption in full of the 3.800% senior unsecured notes due April 2021, to repay a portion of the outstanding indebtedness under our revolving credit facility and for general corporate purposes.

The increase in consolidated revenues was primarily due to an increase in transaction volumes as a result of growth in our 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.

• Merchant Solutions segment and Issuer Solutions segment operating income and operating margin for the year ended December 31, 2022 increased compared to the prior year primarily due to the favorable effect of increases 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.

• Consolidated operating income for the year ended December 31, 2022 included the unfavorable effects of an $833.1 million goodwill impairment charge related to our former Business and Consumer Solutions reporting unit, a charge of $71.9 million to reduce the carrying amount of the consumer business disposal group to estimated fair value less costs to sell and a $127.2 million loss related to the sale of our Merchant Solutions business in Russia.

• We have executed on our business strategy through the execution of several recent strategic transactions as follows:

◦ On August 1, 2022, we entered into a merger agreement to acquire EVO Payments, Inc.

(“EVO”) for total purchase consideration 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 is expected to close in the first quarter of 2023, subject to customary closing conditions.

◦ On July 31, 2022, we entered into a definitive agreement to sell the consumer portion of our Netspend 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 in the first quarter of 2023, subject to required regulatory approvals and other customary closing conditions.

◦ On December 6, 2022, we entered into a definitive agreement to sell our gaming business for approximately $400 million, subject to certain closing adjustments.

The transaction is expected to close in the first quarter of 2023 and is subject to customary terms and conditions, including any required regulatory approvals.

• Our capital allocation priorities were supported by the successful issuance of new senior notes, convertible notes and an increased credit facility during 2022.

◦ On August 8, 2022, we issued $1.5 billion in aggregate principal amount of 1.000% convertible unsecured senior notes (the “Convertible Notes”) due 2029 in a private placement pursuant to an investment agreement with Silver Lake Partners.

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).

◦ 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 were to be 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.

Emerging Trends

The payments technology industry continues to grow worldwide and as a result, certain large payment technology companies, including us, have expanded operations globally by pursuing acquisitions and creating alliances and joint ventures.

We expect to continue to expand into new markets internationally and increase our scale and improve our competitiveness in existing markets by pursuing additional acquisitions and joint ventures.

The industry continues to grow as a result of wider merchant acceptance and increased use of credit and debit cards, advances in payment processing technology and migration to ecommerce, omnichannel and contactless payment solutions.

We expect to continue to expand into new markets and pursue additional acquisitions and joint ventures in existing markets to increase our scale and improve our competitiveness.

The industry continues to grow globally as a result of wider merchant acceptance and increased use of credit and debit cards, advances in payment processing technology and migration to ecommerce, omnichannel and contactless payment solutions.

The proliferation of credit and debit cards, as well as other digital payment solutions, has made the acceptance of digital payments a virtual necessity for many businesses, regardless of size, in order to remain competitive.

Further, the expanding digitization of the economy and availability and access to financial services increases the demand for cards and digital payment solutions, which in turn drives growth in acceptance and transaction volumes.

Furthermore, the expanding digitization of the economy and availability and access to financial services increases the demand for cards and digital payment solutions, which in turn drives growth in acceptance and transaction volumes.

The use of digital payment solutions, the need for development of technologies and digital-based solutions and expansion of ecommerce, omnichannel and contactless payment solutions has accelerated, in part as a result of the COVID-19 pandemic.

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We expect industries such as education, government and healthcare, as well as recurring payments and B2B payments, to continue to see transactions migrate to digital-based solutions.

We anticipate that the continued development of new services and technologies, the emergence of new vertical markets and continued expansion of technology-enabled ecommerce and omnichannel solutions, including expanded scale and market reach through new innovative cloud-based capabilities and strategic partnerships, will be a factor in the growth of our business and our revenue in the future.

For a further discussion of trends, uncertainties and other factors that could affect our continuing operating results, see the section entitled "Risk Factors" in Item 1A in this Annual Report on Form 10-K.

COVID-19 Update

Since early 2020, the global economy has been affected by the COVID-19 pandemic.

The 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 more contagious or vaccine-resistant virus variants in certain jurisdictions.

Beginning in mid-March 2020, our financial results were affected by decreased spending and transaction volumes, as governments implemented measures in an effort to contain the virus, including lockdowns, physical distancing, travel restrictions, limitations on public gatherings, work from home and restrictions on nonessential businesses.

We saw improvement in our financial results during the latter half of 2020 and in 2021, driven by an increase in spending and transaction volumes as a result of an ease in restrictions and distribution of economic stimulus provided by certain governments and continued vaccine distribution.

While we continue to see signs of economic recovery, which has positively affected our financial results in 2021 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.

At the onset of the pandemic, we took early actions to preserve our available capital and provide financial flexibility in response to the effects of COVID-19 on our business, including the temporary reduction of certain operating expenses, employee compensation costs, other discretionary spending and planned capital expenditures, adding to the strength of our financial profile.

Certain operating expenses, capital expenditures and other investments in the business have recently returned to more normalized levels.

We expect to continue to make significant capital investments in the business while also continuing to manage other discretionary spending.

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 more contagious or vaccine-resistant virus variants and the direction or extent of current or future restrictive actions that may be imposed by governments or public health authorities.

For a further discussion of trends, uncertainties and other factors that could affect our future operating results related to the effects of the COVID-19 pandemic, see “Item 1A – Risk Factors.”

For a further discussion of trends, uncertainties and other factors that could affect our continuing operating results, see the section entitled "Risk Factors" in Item 1A.

Macroeconomic Effects and Other Global Conditions

Risks Related to Macroeconomic Conditions

We are exposed to general economic conditions, including currency fluctuations, inflation, rising interest rates and health and social events or conditions that affect the overall level of consumer, business and government spending, which could negatively affect our financial performance.

Certain of our operations are conducted in foreign currencies.

Consequently, a portion of our revenues and expenses has been and may continue to be affected by fluctuations in foreign currency exchange rates.

During 2022, the U.S.

dollar strengthened against most foreign currencies in the markets in which we operate.

For the year ended December 31, 2022, currency exchange rate fluctuations decreased our consolidated revenues by approximately $164.4 million and decreased our operating income by approximately $60.4 million, calculated by converting revenues and operating income for the current year in local currencies using exchange rates for the prior year.

A strengthening of the U.S.

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.

In addition, continued inflation or a rise in 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.

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 saw signs of economic recovery during 2022, which positively affected our financial results, some countries have faced more challenging circumstances in trying to contain a resurgence of infections.

Although the immediate effects of the COVID-19 pandemic have been assessed, the long-term effects on future global economic conditions and related effects on our business and financial condition are difficult to predict.

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 invasion of Ukraine by Russia that began in February 2022.

Prior to its 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 related 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.

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.

For a further discussion of trends, uncertainties and other factors that could affect our continuing operating results, see the section entitled "Risk Factors" in Item 1A.

Results of Operations

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The majority of our Merchant Solutions segment revenues is generated by services priced as a percentage of transaction value or a specified fee per transaction, depending on card type or industry vertical.

We also earn software subscription and licensing fees, as well as other fees based on specific value-added services that may be unrelated to the number or value of transactions.

We also earn software subscription and licensing fees, as well as other fees for specific value-added services that may be unrelated to the number or value of transactions.

These revenues depend upon a number of factors, such as demand for and price of our services, the technological competitiveness of our offerings, our reputation for providing timely and reliable service, competition within our industry and general economic conditions.

We provide payment technology and software solutions to customers and fund settlement either directly, in markets where we have direct membership with the payment networks, or through our relationship with a member financial institution in markets where we are sponsored.

Revenues are generally recognized in the amount of customer billing, net of interchange fees and payment network fees.

Revenues are generally recognized as billed to the customer, net of interchange fees and payment network fees.

We market our services through a variety of relationship-led and technology-enabled distribution channels, including a direct sales force, trade associations, agent and enterprise software providers and referral arrangements with value-added resellers ("VARs").

We also sell services to ISOs and financial institutions.

In certain of these arrangements, the ISO receives a share of the customer profitability in the form of a monthly residual payment, which is reflected as a component of selling, general and administrative expenses in the consolidated statements of income.

In certain of these arrangements, the ISO, financial institution or other external partner receives a share of the customer profitability in the form of a monthly residual payment, which is reflected as a component of selling, general and administrative expenses in the accompanying consolidated statements of income.

Issuer Solutions.

Issuer Solutions segment revenues are derived from long-term processing contracts with financial institutions and other financial services providers.

Issuer Solutions segment revenues are primarily derived from long-term processing contracts with financial institutions and other financial services providers.

Payment processing services revenues are generated primarily from charges based on the number of accounts on file, transactions and authorizations processed, statements generated and/or mailed, managed services, cards embossed and mailed, and other processing services for cardholder accounts on file.

Most of these contracts have prescribed annual minimums, penalties for early termination, and service level agreements that may affect contractual fees if specific service levels are not achieved.

Most of these customer contracts have prescribed annual minimums, penalties for early termination, and service level agreements that may affect contractual fees if specific service levels are not achieved.

Issuer Solutions revenues also include loyalty redemption services and professional services.

Business and Consumer Solutions.

Business and Consumer Solutions segment revenues principally consist of fees collected from cardholders and fees generated by cardholder activity in connection with the programs that we manage.

Additionally, revenues include fees from B2B payments services and other financial service solutions marketed to corporations, including software-as-a-service (“SaaS”) offerings that enable accounts payables automation, integrated payments, employer disbursement solutions, and virtual card capabilities.

Consumer Solutions.

Consumer Solutions segment revenues principally consist of fees collected from cardholders and fees generated by cardholder activity in connection with the programs that we manage.

Customers are typically charged a fee for each purchase transaction made using their cards, unless the customer is on a monthly or annual service plan, in which case the customer is instead charged a monthly or annual subscription fee, as applicable.

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Revenues are recognized net of fees charged by the payment networks for services they provide in processing transactions routed through them.

Additionally, revenues include fees from B2B payment services and software-as-a-service (“SaaS”) offerings that automate key procurement processes and enable virtual cards and integrated payments options.

We have recently commenced a strategic evaluation of the consumer portion of this segment with the intent to focus on our growing B2B portfolio.

Operating Expenses

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Selling, General and Administrative Expenses.

Selling, general and administrative expenses consist primarily of salaries, wages, commissions and related expenses paid to sales personnel, customer support functions other than those supporting revenue, administrative employees and management;

share-based compensation expense;

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Overhead and shared expenses, including share-based compensation, are not allocated to segment operations;

they are reported in the caption "Corporate." Similarly, we refer to "operating margin" regarding segment operations, which is calculated by dividing segment operating income by segment revenues.

they are reported in the caption "Corporate." Impairment of goodwill and gains or losses on business dispositions are also not included in determining segment operating income.

In addition, in discussing segment operations we refer to "operating margin," which is calculated by dividing segment operating income by segment revenues.

Equity in Income of Equity Method Investments

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Issuer Solutions 2,245,623 25.0 % 2,165,747 25.4 % 79,876 3.7 %

Business and Consumer Solutions 886,443 10.4 % 829,505 11.2 % 56,938 6.9 %

Consumer Solutions 620,482 6.9 % 783,625 9.2 % (163,143) (20.8) %

Intersegment eliminations (95,507) (1.1) % (91,167) (1.1) % (4,340) 4.8 %

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Selling, general and administrative 3,524,578 39.3 % 3,391,161 39.8 % 133,417 3.9 %

Impairment of goodwill (4)

833,075 9.3 % — — % 833,075 NM

Loss on business dispositions (5)

199,094 2.2 % — — % 199,094 NM

Operating expenses $ 8,335,364 92.9 % $ 7,164,886 84.1 % $ 1,170,478 16.3 %

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Issuer Solutions 356,215 4.0 % 333,355 3.9 % 22,860 6.9 %

Business and Consumer Solutions 167,777 2.0 % 138,630 1.9 % 29,147 21.0 %

Consumer Solutions 53,594 0.6 % 135,541 1.6 % (81,947) (60.5) %

Corporate (3)

(777,744) (8.7) % (836,010) (9.8) % 58,266 (7.0) %

Impairment of goodwill (4)

(833,075) (9.3) % — — % (833,075) NM

Loss on business dispositions (5)

(199,094) (2.2) % — — % (199,094) NM

Operating income $ 640,151 7.1 % $ 1,358,876 15.9 % $ (718,725) (52.9) %

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Issuer Solutions 15.9 % 15.4 % 0.5 %

Business and Consumer Solutions 18.9 % 16.7 % 2.2 %

Consumer Solutions 8.6 % 17.3 % (8.7) %

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.

(3) Operating loss for Corporate included acquisition and integration expenses of $335.5 million and $313.0 million during the years ended December 31, 2021 and 2020, respectively.

During the year ended December 31, 2021, operating loss for Corporate also included $56.8 million of other charges related to facilities exit activities in response to the transition to remote and flexible work arrangements.

(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 $254.2 million and $335.5 million for the years ended December 31, 2022 and 2021, respectively.

For the years ended December 31, 2022 and 2021, operating loss for Corporate also included $47.1 million and $56.8 million, respectively, of other charges related to facilities exit activities.

(4) For the year ended December 31, 2022, consolidated operating income included an $833.1 million goodwill impairment charge related to our former Business and Consumer Solutions reporting unit.

See “Note 6—Goodwill and Other Intangible Assets” for further discussion.

(5) For the year ended December 31, 2022, consolidated operating income included a $127.2 million loss on the sale of our Merchant Solutions business in Russia and a charge of $71.9 million to reduce the carrying amount of the consumer business disposal group to estimated fair value less costs to sell.

Consolidated revenues for the year ended December 31, 2022 increased by 5.3% to $8,975.5 million, compared to $8,523.8 million for the prior year.

Starting in mid-March 2020, COVID-19 began to have an unfavorable effect on transaction volumes and on our revenues.

We saw improvements during the latter half of 2020 and in 2021, and revenues for the year ended December 31, 2021 increased compared to the prior year primarily due to an increase in transaction volumes from continued economic recovery as COVID-19 restrictions eased and acceleration in the use of digital payment solutions.

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 strengthened during 2022.

While we saw signs of economic recovery during 2022, which positively affected our financial results 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 other global events and economic conditions.

Merchant Solutions Segment.

Revenues from our Merchant Solutions segment for the year ended December 31, 2022 increased by 9.5% to $6,204.9 million, compared to $5,665.6 million for the prior year.

Starting in mid-March 2020, COVID-19 began to have an unfavorable effect on our revenues as a result of a reduction in transaction volumes and restrictions on certain of our customer businesses throughout North America, Europe and Asia Pacific.

We saw improvement in our financial results during the latter half of 2020 and in 2021 as certain governments eased pandemic-related restrictions and consumer and business spending increased.

Revenues for the year ended December 31, 2021 increased compared to the prior year due to an increase in transaction volumes from continued economic recovery as COVID-19 restrictions eased and acceleration in the use of digital payment solutions.

While we continue to see signs of economic recovery, which has positively affected our financial results in 2021 compared to the prior year, additional developments related to COVID-19 slowed the rate of recovery during the fourth quarter of 2021.

The increase in revenues was primarily due to an increase in transaction volumes as a result of growth in customer base and the 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 of $110.4 million for the year ended December 31, 2022.

Issuer Solutions Segment.

Revenues from our Issuer Solutions segment for the year ended December 31, 2022 increased by 3.7% to $2,245.6 million, compared to $2,165.7 million for the prior year.

Starting in mid-March 2020, COVID-19 began to have an unfavorable effect on our revenues as a result of lower transaction volumes, particularly related to the processing of commercial cards.

We saw improvement in our financial results during the latter half of 2020 and in 2021 as certain governments began to gradually ease pandemic-related restrictions.

The increase in revenues for the year ended December 31, 2021 was primarily due to an increase in transaction volumes from continued economic recovery as COVID-19 restrictions eased and growth in our output services of card and statement production.

Business and Consumer Solutions Segment.

Revenues from our Business and Consumer Solutions segment for the year ended December 31, 2021 increased by 6.9% to $886.4 million, compared to $829.5 million for the prior year.

Our Business and Consumer Solutions segment experienced an unfavorable effect on revenues starting in mid-March 2020 due to reduced consumer spending as a result of COVID-19.

We saw improvement in our financial results throughout the latter half of 2020 and in 2021 from increases in consumer spending driven by government stimulus programs and the easing of COVID-19 related restrictions.

Increases in consumer spending and additional spending volumes driven by further individual stimulus payments distributed to our customers by the United States government had a favorable effect on revenues for the year ended December 31, 2021.

Our revenues for the year ended December 31, 2020 also included the favorable effect of revenues from individual stimulus payments and supplementary unemployment insurance distributions to our customers resulting from the Coronavirus Aid, Relief and Economic Security Act.

To a lesser extent, revenues from recently acquired businesses contributed to the increase in revenues for the year ended December 31, 2021.

We do not expect any recurring effect on our revenues in 2022 related to government stimulus payment distributions.

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, partially offset by the effects of unfavorable foreign currency exchange rates of $54.0 million for the year ended December 31, 2022.

Consumer Solutions Segment.

Revenues from our Consumer Solutions segment for the year ended December 31, 2022 were $620.5 million, compared to $783.6 million for the prior year.

Revenues for the year ended December 31, 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 year ended December 31, 2021 increased by 3.4% to $3,773.7 million, compared to $3,650.7 million for the prior year.

Cost of service for the year ended December 31, 2022 was $3,778.6 million, compared to $3,773.7 million for the prior year.

Cost of service as a percentage of revenues decreased to 42.1% for the year ended December 31, 2022, compared to 44.3% for the prior year.

The increase in cost of service is primarily due to higher variable costs associated with the increase in revenues.

The increase in costs of service also reflects an increase in amortization of acquired intangibles, which were $1,295.0 million and $1,256.9 million for the years ended December 31, 2021 and 2020, respectively.

The decrease in cost of service as a percentage of revenues is primarily due to the favorable effects of the increases in revenues, since certain fixed costs do not vary with revenues, and Merger-related cost synergies.

Compared to the prior year, cost of service for the year ended December 31, 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 as of June 30, 2022 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 $1,263.0 million and $1,295.0 million for the years ended December 31, 2022 and 2021, respectively.

Selling, General and Administrative Expenses.

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Selling, general and administrative expenses as a percentage of revenues was 39.3% for the year ended December 31, 2022, compared to 39.8% for the prior year.

The increase in selling, general and administrative expenses is primarily due to an increase in variable selling and other costs related to the increase in revenues.

The increase in selling, general and administrative expenses as a percentage of revenues is primarily due to higher employee compensation expense, including an increase in share-based compensation expense of $32.0 million, and higher acquisition and integration expenses, which were $340.2 million for the year ended December 31, 2021, compared to $319.5 million for the prior year.

Employee compensation costs were lower in the prior year as a result of certain temporary cost-saving actions taken to help mitigate the financial effects of the COVID-19 pandemic.

Additionally, share-based compensation expense was higher in the current year primarily driven by the vesting of certain performance-based restricted stock units upon achievement of performance measures during the period.

In addition, opportunities were identified during the fourth quarter of 2021 to reduce our facility footprint in certain markets around the world given the success of remote work and flexible arrangements implemented during the COVID-19 pandemic.

Actions taken to exit certain leased facilities resulted in charges of $56.8 million during the year ended December 31, 2021, 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.

Corporate expenses for the year ended December 31, 2021 increased by $150.9 million to $836.0 million, compared to $685.1 million for the prior year.

The increase for the year ended December 31, 2021 is primarily due to higher employee compensation expense, including an increase in share-based compensation expense of $32.0 million as described

above, higher acquisition and integration expenses, which were $335.5 million for the year ended December 31, 2021 compared to $313.0 million for the prior year, and other charges related to facilities exit activities in the fourth quarter of 2021 as described above.

Certain of the Merger-related integration activities resulted in the recognition of employee termination benefits.

During the years ended December 31, 2021 and 2020, Corporate expenses included charges for employee termination benefits of $43.4 million and $83.3 million, respectively, which included $1.2 million and $6.7 million, respectively, of share-based compensation expense.

As of December 31, 2021, the cumulative amount of recognized charges for employee termination benefits resulting from Merger-related integration activities was $183.8 million, which included $25.2 million of share-based compensation expense.

Employee termination benefits from Merger-related integration activities are substantially complete as of December 31, 2021.

The increase in selling, general and administrative expenses was primarily due to an increase in variable selling and other costs related to the increase in revenues and higher compensation and benefits and other costs related to the pending sale of the consumer business, partially offset by lower acquisition and integration expenses, charges related to facilities exit activities and share-based compensation 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.

Selling, general and administrative expenses included acquisition and integration expenses of $258.0 million and $340.2 million for the years ended December 31, 2022 and 2021, respectively.

Actions taken to exit certain leased facilities resulted in charges of $47.1 million and $56.8 million during the years ended December 31, 2022 and 2021, respectively, primarily to reduce the carrying amount of the affected asset groups to estimated fair value.

The decrease in share-based compensation expense, which was $163.3 million and $180.8 million for the years ended December 31, 2022 and 2021, respectively, was driven by the vesting of certain performance-based restricted stock units upon achievement of performance measures during the

prior period that did not recur in 2022.

Corporate expenses for the year ended December 31, 2022 were $777.7 million, compared to $836.0 million for the prior year.

The decrease for the year ended December 31, 2022 was primarily due to the decreases in acquisition and integration expenses, charges related to facilities exit activities and share-based compensation expense as described above.

Corporate expenses included acquisition and integration expenses of $254.2 million and $335.5 million for the years ended December 31, 2022 and 2021, respectively.

Operating Income and Operating Margin

Consolidated operating income for the year ended December 31, 2021 increased to $1,358.9 million, compared to $894.0 million for the prior year.

Operating margin for the year ended December 31, 2021 increased to 15.9%, compared to 12.0% for the prior year.

The increase in consolidated operating income and operating margin for the year ended December 31, 2021 was primarily due to the increases in revenues, the operating margin effect in part being driven by the fact that certain fixed costs do not vary with revenues.

The unfavorable effects of COVID-19 on our revenues and incremental expenses directly related to COVID-19 contributed to the lower consolidated operating income and operating margin in the prior year.

We saw improvement in our financial results and positive trends during the latter half of 2020 and in 2021 as a result of the recovery seen across our markets as COVID-19 restrictions eased.

Further, Merger-related cost synergies and lower credit loss expense had a favorable effect on operating income and operating margin for the year ended December 31, 2021.

The increase in consolidated operating income and operating margin for the year ended December 31, 2021 was partially offset by an increase in acquisition and integration expenses of $20.3 million compared to the prior year, charges related to facilities exit activities in the fourth quarter of 2021 as described above and an increase in amortization of acquired intangibles of $38.1 million compared to the prior year.

Operating income and operating margin for the year ended December 31, 2021 also reflects an increase in employee compensation expense compared to the prior year as a result of certain temporary cost-saving actions taken in the prior year to help mitigate the financial effects of the COVID-19 pandemic and higher share-based compensation expense in the current year associated with performance-based awards.

Consolidated operating income for the year ended December 31, 2022 was $640.2 million, compared to $1,358.9 million for the prior year.

Consolidated operating income and operating margin for the year ended December 31, 2022 included the unfavorable effects of an $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 of our Merchant Solutions business in Russia.

We also recognized charges within loss on business dispositions in our consolidated statement of income of $71.9 million during the year ended December 31, 2022 to reduce the carrying amount of the consumer business disposal group to estimated fair value less costs to sell.

The charges relate primarily to estimated costs to sell and changes in the estimated fair value of the fixed rate seller financing through December 31, 2022.

Consolidated operating income and operating margin for the year ended December 31, 2022 compared to the prior year also included the favorable effects of the increase in revenues, since certain fixed costs do not vary with revenues, and lower amortization of acquired intangibles, acquisition and integration expenses, charges related to facilities exit activities and share-based compensation expenses as described above.

Segment Operating Income and Operating Margin

Operating income and operating margin in each of our Merchant Solutions, Issuer Solutions and Business and Consumer Solutions segments for the year ended December 31, 2021 increased compared to the prior year due to the increase in revenues.

We saw improvement in our financial results and positive trends during the latter half of 2020 and in 2021 as a result of the recovery seen across our geographic markets as COVID-19 restrictions eased and consumer and business spending increased, in part as a result of government stimulus payments.

Further, across all of our segments, Merger-related cost synergies had a favorable effect on segment operating income and operating margin for the year ended December 31, 2021.

In our Business and Consumer Solutions segment, operating income and operating margin for the year ended December 31, 2021 were favorably affected by spending volumes driven by additional stimulus payments distributed by the United States government in early 2021, and operating income and operating margin for the year ended December 31, 2020 included the favorable effect from our customers loading individual stimulus payments and supplementary unemployment insurance distributions during the second quarter of 2020.

In our Merchant Solutions segment, operating income and operating margin for the year ended December 31, 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 year ended December 31, 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 Consumer Solutions segment, operating income and operating margin for the year ended December 31, 2022 were unfavorably affected by the decline in revenues and higher costs during the second half of 2022 related to the pending sale of the consumer business.

Other Income/Expense, Net

Interest and other income for the year ended December 31, 2021 decreased by $24.2 million to $19.3 million, compared to $43.6 million for the prior year.

Interest and other income for the year ended December 31, 2020 included a gain of $27.7 million in connection with the release and conversion of a portion of our Visa convertible preferred shares.

Interest and other income for the year ended December 31, 2022 increased to $33.6 million, compared to $19.3 million 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 8—Other Assets" in the notes to the accompanying consolidated financial statements for further discussion of this transaction.

Interest and other expense for the year ended December 31, 2021 decreased by $9.9 million to $333.7 million, compared to $343.5 million for the prior year, as a result of lower average interest rates on outstanding borrowings in 2021 as we replaced higher interest rate senior notes with lower interest rates senior notes and the average LIBOR rate year over year was lower.

Interest and other expense for the year ended December 31, 2022 increased to $449.4 million, compared to $333.7 million 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 year ended December 31, 2022 included fees and charges incurred in connection with financing activities that occurred during 2022, including $17.3 million related to commitment fees associated with bridge financing.

Income Tax Expense

Our effective income tax rates for the years ended December 31, 2022 and 2021 were 74.3% and 16.2%, respectively.

The increase in our effective tax rate for the year ended December 31, 2021 from the prior year was primarily due to the geographical mix of earnings compared to the prior year and a change in the U.K.

statutory income tax rate that was enacted during the year ended December 31, 2021, which required a remeasurement of deferred tax balances to increase the effective tax rate.

The effective tax rate for the year ended December 31, 2020 also included the effect of a change in the U.K.

statutory income tax rate that took effect during the year, which required a remeasurement of deferred tax balances to increase the effective tax rate;

however, the 2021 U.K.

tax rate change had a more significant effect on our effective tax rate than the 2020 U.K.

tax rate change.

These effects were partially offset by a change in the assessment of the need for a valuation allowance related to foreign net operating losses and foreign tax credit carryforwards during the year ended December 31, 2021.

In addition, the lower effective tax rate in 2020 reflects the effect of permanent differences on lower income before income taxes, since the amounts of certain of our permanent differences do not vary with income before income taxes.

The increase in our effective rate from the prior year was 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, partially offset by the remeasurement of state deferred taxes to reflect enacted tax law changes.

The effective tax rate for the year ended December 31, 2021 included the unfavorable effect of a change in the U.K.

statutory income tax rate that was enacted during the year ended December 31, 2021, which required a remeasurement of deferred tax balances to increase the effective tax 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 net operating losses and 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 continuing to evaluate 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.

Equity in Income of Equity Method Investments

Equity in income of equity method investments increased to $112.4 million compared to $88.3 million for the prior year, primarily due to increases in transaction volumes and appreciation in fair value of investments held at certain investees.

Equity in income of equity method investments decreased to $85.7 million compared to $112.4 million for the prior year.

Equity in income of equity method investments for the year ended December 31, 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 for the year ended December 31, 2021.

In addition, equity in income of equity method investments for the year ended December 31, 2022 included $18.8 million in gains on the sale of certain equity method investments.

Net Income Attributable to Global Payments

Net income attributable to Global Payments increased to $965.5 million compared to $584.5 million for the prior year, reflecting the increase in operating income and equity in income of equity method investments.

Net income attributable to Global Payments was $111.5 million compared to $965.5 million for the prior year, reflecting the changes noted above.

Diluted Earnings per Share

Diluted earnings per share was $0.40 compared to $3.29 for the prior year.

Diluted earnings per share for the year ended December 31, 2021 reflects the increase in net income and a decrease in the weighted-average number of shares outstanding.

Diluted earnings per share for the year ended December 31, 2022 reflects the change in net income 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 credit facilities.

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.

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For additional information regarding our cash commitments and contractual obligations, see "Note 7—Leases," "Note 9—Long-Term Debt and Lines of Credit" and “Note 18—Commitments and Contingencies” in the notes to the accompanying consolidated financial statements.

Our capital plan objectives are to support our operational needs and strategic plan for long-term growth while maintaining a low cost of capital.

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.

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 senior unsecured 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.

Early actions taken to preserve our available capital and provide financial flexibility in response to the effects of COVID-19 on our business, including the temporary reduction of certain operating expenses, employee compensation costs, other discretionary spending and planned capital expenditures, added to the strength of our financial profile.

During 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.

Finally, 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 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.

We believe that our current and projected sources of liquidity will be sufficient to meet our projected liquidity requirements associated with our operations for the near and long term.

At December 31, 2022, we had cash and cash equivalents totaling $1,997.6 million.

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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.

Accumulated cash balances are invested in high-quality, marketable short-term instruments.

We also had restricted cash of $147.4 million as of December 31, 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 $2,780.8 million and $2,314.2 million for the years ended December 31, 2021 and 2020, respectively, which reflect net income adjusted for noncash items, including depreciation and amortization, facility exit charges and changes in operating assets and liabilities.

Fluctuations in operating assets and liabilities 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, and by the effects of businesses we acquire that have different working capital requirements.

The increase in cash flows from operating activities from the prior year was primarily due to an increase in earnings, an increase in accounts payable and other liabilities balances due to timing of month-end and transaction volume, partially offset by an increase in accounts receivable as a result of higher revenues in the current year.

We used net cash in investing activities of $2,293.8 million and $438.3 million during the years ended December 31, 2021 and 2020, respectively.

Cash used for investing activities primarily represents cash used to fund acquisitions, net of cash and restricted cash acquired, and capital expenditures.

During the year ended December 31, 2021, we used cash of $1,904.7 million for acquisitions.

During the year ended December 31, 2020, we used cash of $167.9 million for acquisitions and recorded a cash inflow of $119.4 million from restricted cash balances acquired during the year.

Cash from investing activities for the year ended December 31, 2020 also reflects cash received from the sale of Visa common shares of $27.7 million.

Operating activities provided net cash of $2,244.0 million and $2,780.8 million for the years ended December 31, 2022 and 2021, respectively, which reflect net income 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 $675.5 million and $2,293.8 million during the years ended December 31, 2022 and 2021, respectively, primarily to fund acquisitions and capital expenditures.

During the years ended December 31, 2022 and 2021, we used cash of $68.8 million and $1,904.7 million, respectively, for acquisitions.

We made capital expenditures of $615.7 million and $493.2 million during the years ended December 31, 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 continued 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, along with the migration of certain underlying technology platforms to cloud environments to enhance performance and drive cost efficiencies.

Capital expenditures and other investments in the business have recently returned to more normalized levels, and we expect to continue to make significant capital investments in the business.

We anticipate capital expenditures to grow at a similar rate as our revenue growth for the year ending December 31, 2022.

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 grow at a similar rate as our revenue growth for the year ending December 31, 2023.

Additionally, investing cash flows for the year ended December 31, 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 $19.9 million.

Financing activities include borrowings and repayments made under our various debt arrangements, as well as borrowings and repayments made under specialized lines of credit to fund daily settlement activities.

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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 February 26, 2021, we issued $1.1 billion aggregate principal amount of 1.200% senior unsecured notes due March 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 revolving credit facility and for general corporate purposes.

On November 22, 2021, we issued $2.0 billion aggregate principal amount of senior unsecured notes consisting of the following:

(i) $500.0 million aggregate principal amount of 1.5% senior notes due November 2024;

(ii) $750.0 million aggregate principal amount of 2.150% senior notes due January 2027;

and (iii) $750.0 million aggregate principal amount of 2.900% senior notes due November 2031.

We used the net proceeds from the offering to repay the outstanding indebtedness under our revolving credit facility and for general corporate purposes.

See section "Long-Term Debt and Lines of Credit" below for further discussion of our recent debt transactions.

Activity under our settlement lines of credit is affected primarily by timing of month-end and transaction volume.

During the year ended December 31, 2021, we had net borrowings from settlement lines of credit of $149.5 million.

During the year ended December 31, 2020, we had net repayments of settlement lines of credit of $133.3 million.

During the years ended December 31, 2022 and 2021, we had net borrowings of settlement lines of credit of $285.6 million and $149.5 million, respectively.

We repurchase our common stock, mainly through open market repurchase plans and, at times, through accelerated share repurchase ("ASR") programs.

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The share repurchase activity for the year ended December 31, 2021, included the repurchase of 2,491,161 shares at an average price of $200.71 per share under an ASR agreement we entered into on February 10, 2021 with a financial institution to repurchase an aggregate of $500.0 million of our common stock during the ASR program purchase period, which ended on March 31, 2021.

We temporarily suspended repurchases of our common stock during the second and third quarters of 2020, and reactivated our repurchase program in the fourth quarter of 2020.

As of December 31, 2021, we had $1,540.0 million of share repurchase authority remaining under a share repurchase program authorized by our board of directors.

On January 27, 2022, our board of directors approved an increase to our existing share repurchase program authorization, which raised the total available authorization to $2.0 billion.

As of December 31, 2022, the remaining amount available under our share repurchase program was $1,089.9 million.

We paid dividends to our common shareholders in the amounts of $274.0 million and $259.7 million during the years ended December 31, 2022 and 2021, respectively.

During the year ended December 31, 2021, Global Payments and noncontrolling shareholders made contributions of $209.6 million and $70.0 million, respectively, to certain of our majority-owned subsidiaries based on each shareholder's proportionate ownership, primarily to fund acquisitions that closed in the fourth quarter of 2021.

During the year ended December 31, 2020, we paid $578.2 million to noncontrolling interest holders to increase our controlling financial interest in Comercia Global Payments Entidad de Pago, S.L.

(“Comercia”) from 51% to 80%, which was funded through a combination of available cash resources and borrowings on our unsecured revolving credit facility.

Additionally, during the year ended December 31, 2020, we made distributions to noncontrolling interests in the amount of $26.2 million.

Long-Term Debt and Lines of Credit

Senior Unsecured Notes

We have $9.4 billion in aggregate principal amount of senior unsecured notes, which mature at various dates ranging from June 2023 to August 2049.

We have $11.9 billion in aggregate principal amount of senior unsecured notes outstanding, 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 December 31, 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.

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.

On November 22, 2021, we issued $2.0 billion aggregate principal amount of senior unsecured notes consisting of the following:

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

We used the net proceeds from the offering to repay the outstanding indebtedness under our revolving credit facility and for general corporate purposes.

We used the net proceeds from the offering to repay the outstanding indebtedness under our Prior Credit Facility and for general corporate purposes.

On February 26, 2021, we issued $1.1 billion aggregate principal amount of 1.200% senior unsecured notes due March 2026.

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

We used the net proceeds from this offering to fund the redemption in full of the 3.800% senior unsecured notes due April 2021, to repay a portion of the outstanding indebtedness under our Prior Credit Facility and for general corporate purposes.

On May 15, 2020, we issued $1.0 billion aggregate principal amount of 2.900% senior unsecured notes due May 2030 and received proceeds of $996.7 million.

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

We used the net proceeds from the offering to repay a portion of the outstanding indebtedness on our revolving credit facility and for general corporate purposes.

We used the net proceeds from the offering to repay a portion of the outstanding indebtedness on our Prior Credit Facility and for general corporate purposes.

On August 14, 2019, we issued $3.0 billion aggregate principal amount of senior unsecured notes consisting of the following:

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We issued the senior notes at a total discount of $6.1 million and capitalized related debt issuance costs of $29.6 million.

From August 14, 2019 until the closing of the Merger on September 18, 2019, the proceeds from the issuance of the senior notes were held in escrow.

Upon closing, the funds were released and used together with borrowings under the term loan facility and the revolving credit facility, as well as cash on hand, to repay TSYS' unsecured revolving credit facility, refinance certain of our existing indebtedness, fund cash payments made in lieu of fractional shares and pay transaction fees and costs related to the Merger.

In addition, in connection with the Merger, we assumed $3.0 billion aggregate principal amount of senior unsecured notes of TSYS, consisting of the following:

In addition, in connection with our merger with Total System Services, Inc.

("TSYS") in September 2019 (the "TSYS Merger"), we assumed $3.0 billion aggregate principal amount of senior unsecured notes of TSYS, consisting of the following:

(i) $750.0 million aggregate principal amount of 3.800% senior notes due 2021, which were redeemed in February 2021;

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For the 3.750% senior notes due 2023, the 4.000% senior notes due 2023 and the 4.450% senior notes due 2028, interest is payable semi-annually each June 1 and December 1.

The difference between the acquisition-date fair value and face value of senior notes assumed in the Merger is recognized over the terms of the respective notes as a reduction of interest expense.

The difference between the acquisition-date fair value and face value of senior notes assumed in the TSYS Merger is recognized over the terms of the respective notes as a reduction of interest expense.

The amortization of this fair value adjustment was $27.4 million and $29.6 million for the years ended December 31, 2022 and 2021, respectively.

Senior Unsecured Credit Facilities

We have a term loan credit agreement ("Term Loan Credit Agreement") and a revolving credit agreement ("Unsecured Revolving Credit Agreement") in each case with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents.

The Term Loan Credit Agreement provides for a senior unsecured $2.0 billion term loan facility, and the Unsecured Revolving Credit Agreement provides for a senior unsecured $3.0 billion revolving credit facility.

Borrowings under the term loan facility were made in U.S.

dollars and borrowings under the revolving credit facility are available to be made in U.S.

dollars, euros, sterling, Canadian dollars and, subject to certain conditions, certain other currencies at our option.

Borrowings in U.S.

dollars and certain other London Interbank Offered Rate ("LIBOR")-quoted currencies will bear interest, at our option, at a rate equal to either (1) the rate (adjusted for any statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits in the London interbank market, (2) a floating rate of interest set forth on the applicable LIBOR screen page designated by Bank of America or (3) the highest of (a) the federal funds effective rate plus 0.5%, (b) the rate of interest as publicly announced by Bank of America as its "prime rate" or (c) LIBOR plus 1.0%, in each case, plus an applicable margin.

In connection with the sunset of certain LIBOR reference rates occurring at the end of 2021, we amended the Unsecured Revolving Credit Agreement in December 2021 to replace the London Interbank Offered Rate as administered by the ICE Benchmark Administration with the Sterling Overnight Index Average Reference Rate and the Euro Interbank Offered Rate for any extension of credit denominated in sterling or euros, respectively.

As of December 31, 2021, borrowings outstanding under the term loan facility were $2.0 billion and there were no outstanding borrowings under the revolving credit facility .

As described in "Note 1 — Basis of Presentation and Summary of Significant Accounting Policies" in the notes to the accompanying consolidated financial statements, we continue to monitor developments related to the upcoming transition from USD LIBOR to an alternative benchmark reference rate after June 30, 2023.

Additionally, we maintain contact with our lenders and other stakeholders to evaluate the potential effects of these changes on any future financing activities.

As of December 31, 2021, the interest rate on the term loan facility was 1.48%.

Convertible Notes

On August 8, 2022, we issued $1.5 billion in aggregate principal amount of 1.000% Convertible Notes due August 2029 in a private placement pursuant to an investment agreement with Silver Lake Partners.

The net proceeds from this offering were approximately $1.44 billion, reflecting an issuance discount of $37.5 million and $20.4 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 December 31, 2022.

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 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 December 31, 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.

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.

Beginning on December 31, 2022, and at the end of each quarter thereafter, the term loan facility must be repaid in quarterly installments in the amount of 2.50% of original principal through the maturity date with the remaining principal balance due upon maturity in September 2024.

The revolving credit facility also matures in September 2024.

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

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

As of December 31, 2021, the total available commitments under the revolving credit facility were $1.9 billion.

As of December 31, 2022, there were no borrowing outstanding under the Revolving Credit Facility, and the total available commitments under the Revolving Credit Facility were $2.4 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 (as amended from time to time).

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 year ended December 31, 2022, we recognized expense of $17.3 million related to commitment fees associated with the Bridge Facility, which were presented within interest expense in our consolidated statement of income.

Compliance with Covenants

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

As of December 31, 2021, financial covenants under the term loan facility required a leverage ratio of 3.50 to 1.00 and an interest coverage ratio of 3.00 to 1.00.

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 December 31, 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 December 31, 2022.

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Accordingly, the amount of the outstanding lines of credit may exceed the stated credit limit.

As of December 31, 2021 and 2020, a total of $76.3 million an d $64.5 million, respectively, of cash on deposit was used to determine the available credit.

As of December 31, 2021, w e had $484.2 million outs tanding under these lines of credit with additional capacity to fund settlement of $1,693.2 million.

As of December 31, 2022 and 2021, a total of $81.9 million and $76.3 million, respectively, of cash on deposit was used to determine the available credit.

As of December 31, 2022, we had $747.1 million outstanding under these lines of credit with additional capacity to fund settlement of $1,654.5 million.

During the year ended December 31, 2022, the maximum and average outstanding balances under these lines of credit were $1,084.6 million and $477.5 million, respectively.

The weighted-average interest rate on these borrowings was 4.97% at December 31, 2022.

Commercial Paper

In January 2023, we established a $2.0 billion commercial paper program pursuant to which we may issue senior unsecured commercial paper ("Commercial Paper") with maturities of up to 397 days from the date of issue.

The program is backstopped by our Revolving Credit Agreement, in that the amount of commercial paper outstanding cannot exceed the undrawn portion on the Revolving Credit Facility.

Commercial Paper is expected to be issued at a discount from par, but may also bear interest, each at commercial paper market rates.

The proceeds from issuances of Commercial Paper are expected to be used for general corporate purposes but may also be used for acquisitions, to pay dividends or for debt refinancing or other purposes.

See "Note 9—Long-Term Debt and Lines of Credit" in the notes to the accompanying consolidated financial statements for further information about our borrowing agreements.

BIN/ICA Agreements

We have entered into sponsorship or depository and processing agreements with certain banks.

In certain markets, we enter into sponsorship or depository and processing agreements with banks.

These agreements allow us to use the banks' identification numbers, referred to as Bank Identification Number ("BIN") for Visa transactions and Interbank Card Association ("ICA") number for Mastercard transactions, to clear credit card transactions through Visa and Mastercard.

Certain of such agreements contain financial covenants, and we were in compliance with all such covenants as of December 31, 2022.

Critical Accounting Policies and Estimates

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which often require the judgment of management in the selection and application of certain accounting principles and methods.

We consider the following accounting policies to be critical to understanding our consolidated financial statements because the application of these policies requires significant judgment on the part of management, and as a result, actual future developments may be different from those expected at the time that we make these critical judgments.

We have discussed these critical accounting policies with the audit committee of the board of directors.

We consider the following accounting policies and estimates to be critical to understanding our consolidated financial statements because the application of these policies requires significant judgment on the part of management, and as a result, actual future developments may be different from those expected at the time that we make these important judgments.

We have discussed these critical accounting policies and estimates with the audit committee of the board of directors.

Accounting estimates necessarily require subjective determinations about future events and conditions.

Therefore, the following descriptions of our critical accounting policies are forward-looking statements, and actual results could differ materially from the results anticipated by these forward-looking statements.

You should read the following in conjunction with "Note 1—Basis of Presentation and Summary of Significant Accounting Policies" of the notes to the accompanying

consolidated financial statements and the risk factors contained in "Item 1A - Risk Factors" of this Annual Report on Form 10-K.

Therefore, the following descriptions of our critical accounting policies and estimates are forward-looking statements, and actual results could differ materially from the results anticipated by these forward-looking statements.

You should read the following in conjunction with "Note 1—Basis of Presentation and Summary of Significant Accounting Policies" of the notes to the accompanying consolidated financial statements and the risk factors contained in "Item 1A - Risk Factors."

Business Combinations

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The estimates we use to determine the fair value of long-lived assets, such as intangible assets, can be complex and require significant judgments.

We use information available to us to make fair value determinations and engage independent valuation specialists, when necessary, to assist in the fair value determination of significant acquired long-lived assets.

We use information available to us to make fair value determinations, and we engage independent valuation specialists, when necessary, to assist in the fair value determination of significant acquired long-lived assets.

The estimated fair values of customer-related and contract-based intangible assets are generally determined using the income approach, which is based on projected cash flows discounted to their present value using discount rates that consider the timing and risk of the forecasted cash flows.

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This method requires us to estimate the future revenues for the related brands, the appropriate royalty rate and the weighted-average cost of capital.

This measure of fair value requires considerable judgment about the value a market participant would be willing to pay in order to achieve the benefits associated with the trade name.

This measure of fair value requires considerable judgment about the value a market participant would be willing to pay in order to achieve the benefits associated with the trademark or trade name.

While we use our best estimates and assumptions to determine the fair values of the assets acquired and the liabilities assumed, our estimates are inherently uncertain and subject to refinement.

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We periodically review the estimated useful lives assigned to our intangible assets to determine whether such estimated useful lives continue to be appropriate.

Goodwill — We perform our annual goodwill impairment test as of October 1 each year.

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 is below its carrying amount.

Goodwill, intangibles and other long-lived assets are also regularly evaluated for impairment, which requires the use of significant estimates and assumptions as further described below.

A change in estimated fair value could result in an impairment charge, which could be material to our consolidated financial statements.

We test goodwill for impairment at the reporting unit level annually (in the fourth quarter) and more often if an event occurs or circumstances change that indicate the fair value of a reporting unit is below its carrying amount.

We have the option of performing a qualitative assessment of impairment to determine whether any further quantitative assessment for impairment is necessary.

The option of whether or not to perform a qualitative assessment is made annually and may vary by reporting unit.

The election of whether or not to perform a qualitative assessment is made annually and may vary by reporting unit.

Factors we consider in the qualitative assessment include general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying amount of the net assets of our reporting units, sustained decrease in our share price, and other relevant entity-specific events.

If we elect to bypass the qualitative assessment or if we determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative test would be required.

The quantitative assessment compares the estimated fair value of the reporting unit to its carrying amount, and recognizes an impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit.

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.

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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 .

Our reporting units consist of the following:

North America Payment Solutions, Integrated Solutions, Vertical Market Software Solutions, Europe Merchant Solutions, Spain Merchant Solutions, Asia-Pacific Merchant Solutions, Issuer Solutions and Business and Consumer Solutions.

As of October 1, 2021, we performed a quantitative assessment of impairment for our Vertical Market Software Solutions, Issuer Solutions and Business and Consumer Solutions reporting units and a qualitative assessment for all other reporting units.

We determined on the basis of the quantitative assessment of our Vertical Market Software Solutions, Issuer Solutions and Business and Consumer Solutions reporting units that the fair value of each reporting unit is greater than its respective carrying amount.

Additionally, we determined on the basis of the qualitative factors that the fair value of other reporting units was not more likely than not less than the respective carrying amounts.

We believe that the fair value of each of our reporting units is substantially in excess of its carrying amount, except for Issuer Solutions and Business and Consumer Solutions, which have smaller excess compared to the other reporting units since they were recently acquired in the Merger.

Our current year assessments, performed as of October 1, 2021, included consideration of the expected effects of the COVID-19 pandemic on revenues and our cost mitigation efforts, as well as longer term performance expectations.

We continue to closely monitor developments related to COVID-19.

The future magnitude, duration and effects of the pandemic 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.

There were no changes in reporting units or significant changes in the methodology used to assess goodwill impairment during the year ended December 31, 2021.

A 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 our former Business and Consumer Solutions reporting units for potential impairment as of June 30, 2022.

Furthermore, the estimated sales price for the consumer business, which is held for sale, 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 regularly monitor any changes in the business and evaluate whether such changes affect the determination of our reporting units.

Intangible and Long-lived Assets — Intangible assets are amortized over their estimated useful lives.

The useful lives for customer-related intangible assets are determined based primarily on forecasted cash flows, which include estimates for the revenues, expenses, and customer attrition associated with the assets.

The useful lives of contract-based intangible assets are equal to the terms of the agreements.

The useful lives of acquired technologies are based on an estimate of the period over which we expect to receive economic benefit.

The useful lives of amortizable trademarks and trade names are based on an estimate of the period over which we will earn revenues for the related brands, including contemplation of any future plans to phase out the trademarks and trade names in the applicable markets.

We use the straight-line method of amortization for our amortizable acquired technologies, trademarks and trade names and certain contract-based intangibles.

Amortization for most of our customer-related intangible assets and certain contract-based intangibles is determined using an accelerated method.

Under this accelerated method, the first step in determining the amortization expense for any period is that we divide the expected cash flows for that period that were used in determining the acquisition-date fair value of the asset divided by the expected total cash flows over the estimated life of the asset.

We then multiply that ratio by the initial carrying amount of the asset to arrive at the amortization expense for that period.

If the cash flow patterns that we experience differ significantly from our initial estimates, we adjust the amortization schedule prospectively.

We believe that our accelerated method reflects the expected pattern of the benefit to be derived.

We did not make any significant adjustments to the amortization schedules of our intangible assets during the year ended December 31, 2021.

During the third quarter of 2022, as a result of the pending divestiture of our consumer business and changes in how our business is managed, we realigned the businesses previously comprising our Business and Consumer Solutions segment to include the B2B portion within our Issuer Solutions segment and the consumer portion forming our new Consumer Solutions segment.

In connection with the change in presentation of segment information, the B2B portion of our former Business and Consumer Solutions reporting unit was realigned into the Issuer Solutions reporting unit, including a reallocation of goodwill.

There were no other changes in reporting units or significant changes in the methodology used to assess goodwill impairment during the year ended December 31, 2022.

As of October 1, 2022, our reporting units consisted of the following:

North America Payment Solutions, Integrated Solutions, Vertical Market Software Solutions, Europe Merchant Solutions, Spain Merchant Solutions, Asia-Pacific Merchant Solutions and Issuer Solutions.

As of October 1, 2022, we performed a quantitative assessment of impairment for our North America Payments Solutions, Integrated Solutions and Issuer Solutions reporting units and a qualitative assessment for all other reporting units.

We determined on the basis of the quantitative assessment of our North America Payments Solutions, Integrated Solutions and Issuer Solutions reporting units that the fair value of each reporting unit was greater than its respective carrying amount, indicating no impairment.

Additionally, we determined on the basis of the qualitative factors that the fair value of other reporting units was not more likely than not less than the respective carrying amounts.

We believe that the fair value of each of our reporting units is substantially in excess of its carrying amount, except for our Issuer Solutions reporting unit, which exceeded its carrying amount by approximately 4% as of October 1, 2022.

We continue to closely monitor developments related to 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.

Intangible and Long-lived Assets

We regularly evaluate whether events and circumstances have occurred that indicate the carrying amount of property and equipment, lease right-of-use assets and finite-life intangible assets may not be recoverable.

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The evaluation is performed at the asset group level, which is the lowest level of identifiable cash flows.

If the carrying amount of the asset group is determined not to be recoverable and exceeds its fair value, an impairment loss is recorded, measured as the difference between the fair value and the carrying amount.

If the carrying amount of the asset group is determined to be not recoverable and exceeds its fair value, an impairment loss is recorded, measured as the difference between the fair value and the carrying amount.

Fair values are determined based on quoted market prices or discounted cash flow analysis as applicable.

We regularly evaluate whether events and circumstances have occurred that indicate the useful lives of property and equipment and finite-life intangible assets may warrant revision.

As a result of actions taken in the fourth quarter of 2021 to reduce our facilities footprint in certain markets around the world given the success of remote work and flexible arrangements implemented during the COVID-19 pandemic, we recognized charges of $51.3 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.

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

Capitalization of Internal-Use Software

As a result of actions taken during the years ended December 31, 2022 and 2021 to reduce our facility footprint in certain markets around the world, we recognized charges of $30.4 million and $51.3 million, respectively, 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.

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.

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.

We recognized charges within loss on business dispositions in our consolidated statement of income of $71.9 million during the year ended December 31, 2022 to reduce the carrying amount of the consumer business disposal group to estimated fair value less costs to sell.

The charges relate primarily to estimated costs to sell and a decline in the estimated fair value of the fixed rate seller financing commitment, primarily as a result of the increase in market interest rates through December 31, 2022.

Capitalization of Internal-Use Software Costs

We develop software that is used in providing services to customers.

Capitalization of internal-use software, primarily associated with operating platforms, occurs when we have completed the preliminary project stage, management authorizes the project, management commits to funding the project, it is probable the project will be completed and the project will be used to perform the function intended.

The preliminary project stage consists of the conceptual formulation of alternatives, the evaluation of alternatives, the determination of existence of needed technology and the final selection of alternatives.

Capitalization of internal-use software costs, primarily associated with operating platforms, occurs when we have completed the preliminary project stage, management authorizes the project, management commits to funding the project, it is probable the project will be completed and the project will be used to perform the function intended.

The preliminary project stage consists of the conceptual formulation of alternatives, the evaluation of alternatives, the determination of existence of needed technology and the final selection of

alternatives.

Costs incurred during the preliminary project stage are recognized as expense as incurred.

Currently unforeseen circumstances in software development, such as a significant change in the manner in which the software is intended to be used, obsolescence or a significant reduction in revenues due to merchant attrition, could require us to implement alternative plans with respect to a particular effort, which could result in the impairment of previously capitalized software development costs.

Currently unforeseen circumstances in software development, such as a significant change in the manner in which the software is intended to be used, obsolescence or a significant reduction in revenues due to merchant attrition, could require us to implement alternative plans with respect to a particular effort, which could result in an impairment charge related to previously capitalized software development costs.

The carrying amount of internal-use software, including work-in-progress, at December 31, 2022 was $919.4 million.

Costs capitalized during the year ended December 31, 2022 totaled $321.6 million.

Internal-use software is amortized over its estimated useful life, which is typically 5 to 10 years, in a manner that best reflects the pattern of economic use of the assets.

In addition, we capitalize implementation costs associated with cloud computing arrangements that are service contracts following the same internal-use software capitalization criteria.

Our cloud computing arrangements involve services we use to support certain internal corporate functions as well as technology associated with revenue-generating activities.

We regularly evaluate whether events or circumstances have occurred that indicate the carrying amount of the capitalized implementation costs may not be recoverable.

As of December 31, 2022, capitalized implementation costs, net of accumulated amortization, were $142.9 million and are presented within other noncurrent assets in the consolidated balance sheets.

Costs capitalized during the year ended December 31, 2022 totaled $74.7 million.

There were no significant changes in the accounting methodology used for capitalization of internal-use software during the year ended December 31, 2022.

During the year ended December 31, 2019, we preliminarily determined our target technology architecture for the combined company.

As a result, we wrote-off capitalized software assets of $31.1 million related to legacy Global Payments technology that will no longer be utilized.

Revenue Recognition

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In addition, a single performance obligation may comprise a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.

We determine our provision for income taxes using management's judgments, estimates and the interpretation and application of complex tax laws in each of the jurisdictions in which we operate.

We determine our provision for income taxes using management's judgments, estimates and interpretation and application of complex tax laws in each of the jurisdictions in which we operate.

Judgment is also required in assessing the timing and amounts of deductible and taxable items.

These differences result in deferred tax assets and liabilities in our consolidated balance sheet.

Such differences in timing result in deferred tax assets and liabilities in our consolidated balance sheet.

We believe our tax return positions are fully supportable;

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Judgment is required to determine whether or not some portion or all of our deferred tax assets will not be realized.

To the extent we determine that we will not realize the benefit of some or all of our deferred tax assets, then these deferred tax assets are adjusted through our provision for income taxes in the period in which this determination is made.

To the extent that we determine that we will not realize the benefit of some or all of our deferred tax assets, these deferred tax assets are adjusted via a valuation allowance through our provision for income taxes in the period in which this determination is made.

See "Note 11 — Income Tax" in the notes to the accompanying consolidated financial statements for further information regarding the changes in the amount of unrecognized tax benefits and deferred tax valuation allowances during the year ended December 31, 2022.

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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-K

Item 7. Management’s Discussion and Analysis