GLOBAL PAYMENTS INC 10-Q

ITEM 1—FINANCIAL STATEMENTS GLOBAL PAYMENTS INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Three Months Ended June 30, 2023 June 30, 2022 Revenues $ 2,452,469 $ 2,280,906 Operating expenses: Cost of service 941,952 962,299 Selling, general and administrative 1,013,514 863,179 Impairment of goodwill — 833,075 (Gain) loss on business dispositions ( 105,738 ) 152,211 1,849,728 2,810,764 Operating income (loss) 602,741 ( 529,858 ) Interest and other income 27,944 2,956 Interest and other expense ( 191,423 ) ( 99,188 ) ( 163,479 ) ( 96,232 ) Income (loss) before income taxes and equity in income of equity method investments 439,262 ( 626,090 ) Income tax expense 172,211 52,776 Income (loss) before equity in income of equity method investments 267,051 ( 678,866 ) Equity in income of equity method investments, net of tax 17,155 13,815 Net income (loss) 284,206 ( 665,051 ) Net income attributable to noncontrolling interests, net of tax ( 10,058 ) ( 7,948 ) Net income (loss) attributable to Global Payments $ 274,148 $ ( 672,999 ) Earnings (loss) per share attributable to Global Payments: Basic earnings (loss) per share $ 1.05 $ ( 2.42 ) Diluted earnings (loss) per share $ 1.05 $ ( 2.42 ) See Notes to Unaudited Consolidated Financial Statements. 4 Table of Contents GLOBAL PAYMENTS INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Six Months Ended June 30, 2023 June 30, 2022 Revenues $ 4,744,916 $ 4,437,160 Operating expenses: Cost of service 1,889,705 1,919,457 Selling, general and administrative 2,056,641 1,686,328 Impairment of goodwill — 833,075 Net loss on business dispositions 139,095 152,211 4,085,441 4,591,071 Operating income (loss) 659,475 ( 153,911 ) Interest and other income 39,097 4,667 Interest and other expense ( 314,368 ) ( 192,471 ) ( 275,271 ) ( 187,804 ) Income (loss) before income taxes and equity in income of equity method investments 384,204 ( 341,715 ) Income tax expense 140,812 104,994 Income (loss) before equity in income of equity method investments 243,392 ( 446,709 ) Equity in income of equity method investments, net of tax 36,394 31,294 Net income (loss) 279,786 ( 415,415 ) Net income attributable to noncontrolling interests, net of tax ( 16,679 ) ( 12,851 ) Net income (loss) attributable to Global Payments $ 263,107 $ ( 428,266 ) Earnings (loss) per share attributable to Global Payments: Basic earnings (loss) per share $ 1.00 $ ( 1.53 ) Diluted earnings (loss) per share $ 1.00 $ ( 1.53 ) See Notes to Unaudited Consolidated Financial Statements. 5 Table of Contents GLOBAL PAYMENTS INC. UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Three Months Ended June 30, 2023 June 30, 2022 Net income (loss) $ 284,206 $ ( 665,051 ) Other comprehensive income (loss): Foreign currency translation adjustments 4,596 ( 210,882 ) Reclassification of accumulated foreign currency translation losses to net loss as a result of the sale of a foreign entity — 62,925 Income tax (expense) benefit related to foreign currency translation adjustments ( 343 ) 963 Net unrealized gains on hedging activities 40,078 5,051 Reclassification of net unrealized (gains) losses on hedging activities to interest expense ( 901 ) 7,534 Income tax expense related to hedging activities ( 9,144 ) ( 3,052 ) Other, net of tax ( 22 ) — Other comprehensive income (loss) 34,264 ( 137,461 ) Comprehensive income (loss) 318,470 ( 802,512 ) Comprehensive income (loss) attributable to noncontrolling interests 11,906 ( 5,540 ) Comprehensive income (loss) attributable to Global Payments $ 306,564 $ ( 796,972 ) Six Months Ended June 30, 2023 June 30, 2022 Net income (loss) $ 279,786 $ ( 415,415 ) Other comprehensive income (loss): Foreign currency translation adjustments 42,046 ( 243,843 ) Reclassification of accumulated foreign currency translation losses to net loss as a result of the sale of a foreign entity — 62,925 Income tax (expense) benefit related to foreign currency translation adjustments ( 530 ) 1,634 Net unrealized gains (losses) on hedging activities ( 7,973 ) 13,985 Reclassification of net unrealized losses on hedging activities to interest expense 485 16,979 Income tax (expense) benefit related to hedging activities 1,806 ( 7,508 ) Other, net of tax ( 44 ) — Other comprehensive income (loss) 35,790 ( 155,828 ) Comprehensive income (loss) 315,576 ( 571,243 ) Comprehensive income (loss) attributable to noncontrolling interests 24,901 ( 5,981 ) Comprehensive income (loss) attributable to Global Payments $ 290,675 $ ( 565,262 ) See Notes to Unaudited Consolidated Financial Statements. 6 Table of Contents GLOBAL PAYMENTS INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) June 30, 2023 December 31, 2022 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,919,591 $ 1,997,566 Accounts receivable, net 1,159,266 998,332 Settlement processing assets 1,600,809 2,519,114 Current assets held for sale 7,224 138,815 Prepaid expenses and other current assets 832,254 660,321 Total current assets 5,519,144 6,314,148 Goodwill 26,491,160 23,320,736 Other intangible assets, net 10,741,990 9,658,374 Property and equipment, net 2,084,209 1,838,809 Deferred income taxes 112,087 37,907 Noncurrent assets held for sale 29 1,295,799 Notes receivable 724,644 — Other noncurrent assets 2,477,617 2,343,241 Total assets $ 48,150,880 $ 44,809,014 LIABILITIES AND EQUITY Current liabilities: Settlement lines of credit $ 528,990 $ 747,111 Current portion of long-term debt 75,681 1,169,330 Accounts payable and accrued liabilities 2,710,458 2,442,560 Settlement processing obligations 1,802,361 2,413,799 Current liabilities held for sale 942 125,891 Total current liabilities 5,118,432 6,898,691 Long-term debt 16,975,360 12,289,248 Deferred income taxes 2,447,947 2,428,412 Noncurrent liabilities held for sale 164 4,478 Other noncurrent liabilities 693,518 647,975 Total liabilities 25,235,421 22,268,804 Commitments and contingencies Redeemable noncontrolling interests 499,479 — Equity: Preferred stock, no par value; 5,000,000 shares authorized and none issued — — Common stock, no par value; 400,000,000 shares authorized at June 30, 2023 and December 31, 2022; 259,962,485 issued and outstanding at June 30, 2023 and 263,081,872 issued and outstanding at December 31, 2022 — — Paid-in capital 19,686,035 19,978,095 Retained earnings 2,863,852 2,731,380 Accumulated other comprehensive loss ( 378,401 ) ( 405,969 ) Total Global Payments shareholders’ equity 22,171,486 22,303,506 Nonredeemable noncontrolling interests 244,494 236,704 Total equity 22,415,980 22,540,210 Total liabilities, redeemable noncontrolling interests and equity $ 48,150,880 $ 44,809,014 See Notes to Unaudited Consolidated Financial Statements. 7 Table of Contents GLOBAL PAYMENTS INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Six Months Ended June 30, 2023 June 30, 2022 Cash flows from operating activities: Net income (loss) $ 279,786 $ ( 415,415 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization of property and equipment 223,753 199,875 Amortization of acquired intangibles 645,675 656,373 Amortization of capitalized contract costs 59,065 53,113 Share-based compensation expense 136,701 85,414 Provision for operating losses and credit losses 61,313 57,929 Noncash lease expense 32,362 43,036 Deferred income taxes ( 317,660 ) ( 180,001 ) Equity in income of equity method investments, net of tax ( 36,394 ) ( 31,294 ) Impairment of goodwill — 833,075 Net loss on business dispositions 139,095 152,211 Other, net 1,409 17,573 Changes in operating assets and liabilities, net of the effects of business combinations: Accounts receivable ( 58,981 ) ( 80,580 ) Settlement processing assets and obligations, net 213,936 69,595 Prepaid expenses and other assets ( 191,478 ) ( 191,652 ) Accounts payable and other liabilities ( 24,099 ) ( 71,119 ) Net cash provided by operating activities 1,164,483 1,198,133 Cash flows from investing activities: Business combinations and other acquisitions, net of cash and restricted cash acquired ( 4,101,415 ) ( 9,931 ) Capital expenditures ( 331,002 ) ( 324,027 ) Issuance of notes receivable ( 50,000 ) — Net cash from sales of businesses 478,695 ( 29,755 ) Other, net 2,186 16 Net cash used in investing activities ( 4,001,536 ) ( 363,697 ) Cash flows from financing activities: Net borrowings from (repayments of) settlement lines of credit ( 233,075 ) 4,139 Net borrowings from commercial paper notes 1,841,675 — Proceeds from long-term debt 7,359,193 2,954,156 Repayments of long-term debt ( 5,673,724 ) ( 2,276,488 ) Payments of debt issuance costs ( 12,255 ) ( 1,706 ) Repurchases of common stock ( 418,271 ) ( 1,249,994 ) Proceeds from stock issued under share-based compensation plans 19,282 23,619 Common stock repurchased - share-based compensation plans ( 33,680 ) ( 26,972 ) Distributions to noncontrolling interests ( 17,255 ) ( 14,363 ) Payment of contingent consideration in business combination — ( 15,726 ) Dividends paid ( 130,635 ) ( 139,315 ) Net cash provided by (used in) financing activities 2,701,255 ( 742,650 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 34,543 ( 114,968 ) Decrease in cash, cash equivalents and restricted cash ( 101,255 ) ( 23,182 ) Cash, cash equivalents and restricted cash, beginning of the period 2,215,606 2,123,023 Cash, cash equivalents and restricted cash, end of the period $ 2,114,351 $ 2,099,841 See Notes to Unaudited Consolidated Financial Statements. 8 Table of Contents GLOBAL PAYMENTS INC. UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands, except per share data) Shareholders' Equity Number of Shares Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Global Payments Shareholders’ Equity Nonredeemable Noncontrolling Interests Total Equity Redeemable Noncontrolling Interests Balance at March 31, 2023 261,771 $ 19,839,506 $ 2,654,589 $ ( 410,817 ) $ 22,083,278 $ 243,481 $ 22,326,759 $ 556,070 Net income (loss) 274,148 274,148 10,062 284,210 ( 4 ) Other comprehensive income 32,416 32,416 717 33,133 1,131 Stock issued under share-based compensation plans 259 13,179 13,179 13,179 Common stock repurchased - share-based compensation plans ( 62 ) ( 6,290 ) ( 6,290 ) ( 6,290 ) Share-based compensation expense 47,135 47,135 47,135 Repurchases of common stock ( 2,006 ) ( 207,495 ) ( 207,495 ) ( 207,495 ) Distributions to noncontrolling interests — ( 9,766 ) ( 9,766 ) ( 1,271 ) Redeemable noncontrolling interests measurement period adjustment — — ( 56,447 ) Cash dividends declared ($ 0.25 per common share) ( 64,885 ) ( 64,885 ) ( 64,885 ) Balance at June 30, 2023 259,962 $ 19,686,035 $ 2,863,852 $ ( 378,401 ) $ 22,171,486 $ 244,494 $ 22,415,980 $ 499,479 Shareholders' Equity Number of Shares Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Global Payments Shareholders’ Equity Nonredeemable Noncontrolling Interests Total Equity Balance at March 31, 2022 281,434 $ 22,338,086 $ 3,068,683 $ ( 247,205 ) $ 25,159,564 $ 235,241 $ 25,394,805 Net income (loss) ( 672,999 ) ( 672,999 ) 7,948 ( 665,051 ) Other comprehensive loss ( 123,973 ) ( 123,973 ) ( 13,488 ) ( 137,461 ) Stock issued under share-based compensation plans 125 15,680 15,680 15,680 Common stock repurchased - share-based compensation plans ( 2 ) ( 220 ) ( 220 ) ( 220 ) Share-based compensation expense 47,014 47,014 47,014 Repurchases of common stock ( 4,524 ) ( 599,986 ) ( 352 ) ( 600,338 ) ( 600,338 ) Distributions to noncontrolling interest — ( 8,829 ) ( 8,829 ) Cash dividends declared ($ 0.25 per common share) ( 69,073 ) ( 69,073 ) ( 69,073 ) Balance at June 30, 2022 277,033 $ 21,800,574 $ 2,326,259 $ ( 371,178 ) $ 23,755,655 $ 220,872 $ 23,976,527 See Notes to Unaudited Consolidated Financial Statements. 9 Table of Contents GLOBAL PAYMENTS INC. UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands, except per share data) Shareholders' Equity Number of Shares Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Global Payments Shareholders’ Equity Nonredeemable Noncontrolling Interests Total Equity Redeemable Noncontrolling Interests Balance at December 31, 2022 263,082 $ 19,978,095 $ 2,731,380 $ ( 405,969 ) $ 22,303,506 $ 236,704 $ 22,540,210 $ — Net income (loss) 263,107 263,107 16,683 279,790 ( 4 ) Other comprehensive income 27,568 27,568 7,091 34,659 1,131 Stock issued under share-based compensation plans 1,273 19,282 19,282 19,282 Common stock repurchased - share-based compensation plans ( 328 ) ( 36,479 ) ( 36,479 ) ( 36,479 ) Share-based compensation expense 136,701 136,701 136,701 Redeemable noncontrolling interests acquired in a business combination — — 556,070 Issuance of share-based awards in connection with a business combination 2,484 2,484 2,484 Repurchases of common stock ( 4,065 ) ( 414,048 ) ( 414,048 ) ( 414,048 ) Distributions to noncontrolling interests — ( 15,984 ) ( 15,984 ) ( 1,271 ) Redeemable noncontrolling interests measurement period adjustment — — ( 56,447 ) Cash dividends declared ($ 0.50 per share) ( 130,635 ) ( 130,635 ) ( 130,635 ) Balance at June 30, 2023 259,962 $ 19,686,035 $ 2,863,852 $ ( 378,401 ) $ 22,171,486 $ 244,494 $ 22,415,980 $ 499,479 Shareholders' Equity Number of Shares Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Global Payments Shareholders’ Equity Nonredeemable Noncontrolling Interests Total Equity Balance at December 31, 2021 284,750 $ 22,880,261 $ 2,982,122 $ ( 234,182 ) $ 25,628,201 $ 241,216 $ 25,869,417 Net income (loss) ( 428,266 ) ( 428,266 ) 12,851 ( 415,415 ) Other comprehensive loss ( 136,996 ) ( 136,996 ) ( 18,832 ) ( 155,828 ) Stock issued under share-based compensation plans 1,518 23,619 23,619 23,619 Common stock repurchased - share-based compensation plans ( 196 ) ( 27,008 ) ( 27,008 ) ( 27,008 ) Share-based compensation expense 85,414 85,414 85,414 Repurchases of common stock ( 9,039 ) ( 1,161,712 ) ( 88,282 ) ( 1,249,994 ) ( 1,249,994 ) Distributions to noncontrolling interest — ( 14,363 ) ( 14,363 ) Cash dividends declared ($ 0.50 per common share) ( 139,315 ) ( 139,315 ) ( 139,315 ) Balance at June 30, 2022 277,033 $ 21,800,574 $ 2,326,259 $ ( 371,178 ) $ 23,755,655 $ 220,872 $ 23,976,527 See Notes to Unaudited Consolidated Financial Statements. 10 Table of Contents NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1— BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business, consolidation and presentation - We are a leading payments technology company delivering innovative software and services to our customers globally. Our technologies, services and team member expertise allow us to provide a broad range of solutions that enable our customers to operate their businesses more efficiently across a variety of channels around the world. We operate in two reportable segments: Merchant Solutions and Issuer Solutions. As described in "Note 3—Business Dispositions," during the second quarter of 2023, we completed the sale of the consumer portion of our Netspend business, which comprised our former Consumer Solutions segment. Our consolidated financial statements include the results of our former Consumer Solutions segment for periods prior to disposition. See "Note 15—Segment Information" for further information. Global Payments Inc. and its consolidated subsidiaries are referred to herein collectively as "Global Payments," the "Company," "we," "our" or "us," unless the context requires otherwise. These unaudited consolidated financial statements include our accounts and those of our majority-owned subsidiaries, and all intercompany balances and transactions have been eliminated in consolidation. These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The consolidated balance sheet as of December 31, 2022 was derived from the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 but does not include all disclosures required by GAAP for annual financial statements. In the opinion of our management, all known adjustments necessary for a fair presentation of the results of the interim periods have been made. These adjustments consist of normal recurring accruals and estimates that affect the carrying amount of assets and liabilities. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022. Use of estimates - The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. In particular, uncertainty resulting from global events and other macroeconomic conditions are difficult to predict at this time, and the ultimate effect could result in additional charges related to the recoverability of assets, including financial assets, long-lived assets and goodwill and other losses. These unaudited consolidated financial statements reflect the financial statement effects based upon management’s estimates and assumptions utilizing the most currently available information. NOTE 2— ACQUISITION EVO Payments, Inc. On March 24, 2023, we acquired all of the outstanding common stock of EVO Payments, Inc. (“EVO”). EVO is a leading payment technology and services provider, offering an array of payment solutions to merchants ranging from small and middle market enterprises to multinational companies and organizations across the Americas and Europe. The acquisition aligns with our technology-enabled payments strategy, expands our geographic presence in attractive markets and augments our business-to-business software and payment solutions business. 11 Table of Contents Total purchase consideration was $ 4.3 billion, which consisted of the following (in thousands): Cash paid to EVO shareholders (1) $ 3,273,951 Cash paid for equity awards attributable to purchase consideration (2) 58,510 Value of replacement awards attributable to purchase consideration (3) 2,484 Total purchase consideration transferred to EVO shareholders 3,334,945 Repayment of EVO's unsecured revolving credit facility (including accrued interest and fees) 665,557 Payment of certain acquiree transaction costs and other liabilities on behalf of EVO (4) 269,118 Total purchase consideration $ 4,269,620 (1) Holders of EVO common stock, convertible preferred stock and common units received $ 34 for each share of EVO common stock held at the effective time of the transaction. (2) Pursuant to the merger agreement, we cash settled vested options and certain unvested equity awards of EVO equity award holders. (3) Pursuant to the merger agreement, we granted equity awards for approximately 0.3 million shares of Global Payments common stock to certain EVO equity awards holders. Each such replacement award is subject to the same terms and conditions (including vesting and exercisability) that applied to the corresponding EVO equity award. We apportioned the fair value of the replacement awards between purchase consideration (the portion attributable to pre-acquisition services in relation to the total vesting term of the award) and amounts to be recognized in periods following the acquisition as share-based compensation expense over the requisite service period of the replacement awards. (4) Certain acquiree transaction costs and liabilities, including amounts outstanding under EVO’s tax receivable agreement, were required to be repaid by us upon consummation of the acquisition. 12 Table of Contents The cash portion of the purchase consideration was funded through cash on hand and borrowings under our revolving credit facility. The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed as of June 30, 2023, including a reconciliation to the total purchase consideration, were as follows: Provisional Amounts at Acquisition Date Measurement-period Adjustments Provisional Amounts at June 30, 2023 (in thousands) Cash and cash equivalents $ 324,859 $ — $ 324,859 Accounts receivable 105,680 ( 399 ) 105,281 Settlement processing assets 125,061 ( 77 ) 124,984 Deferred income tax assets 15,464 — 15,464 Property and equipment 83,540 ( 4,261 ) 79,279 Identifiable intangible assets 1,208,400 360,600 1,569,000 Other assets 157,166 ( 4,080 ) 153,086 Accounts payable and accrued liabilities ( 277,800 ) ( 4,488 ) ( 282,288 ) Settlement lines of credit ( 11,371 ) — ( 11,371 ) Settlement processing obligations ( 199,161 ) — ( 199,161 ) Deferred income tax liabilities ( 168,098 ) ( 80,486 ) ( 248,584 ) Other liabilities ( 58,089 ) ( 722 ) ( 58,811 ) Total identifiable net assets 1,305,651 266,087 1,571,738 Redeemable noncontrolling interests ( 556,070 ) 56,447 ( 499,623 ) Goodwill 3,520,039 ( 322,534 ) 3,197,505 Total purchase consideration $ 4,269,620 $ — $ 4,269,620 As of June 30, 2023, we considered these amounts to be provisional because we were still in the process of gathering and reviewing information to support the valuations of the assets acquired, liabilities assumed and related tax positions. We made measurement-period adjustments as shown in the table above, and the effects of the measurement-period adjustments on our consolidated statement of income for the second quarter of 2023 were not material. Goodwill arising from the acquisition was included in the Merchant Solutions segment as of June 30, 2023 and was attributable to expected growth opportunities, potential synergies from combining the acquired business into our existing business and an assembled workforce. We expect that a portion of the goodwill from this acquisition will be deductible for income tax purposes. As the amounts are still provisional, we are still in the process of assigning goodwill to our reporting units. 13 Table of Contents The following table reflects the provisional estimated acquisition-date fair values of the identified intangible assets of EVO and their respective weighted-average estimated amortization periods: Estimated Fair Value Weighted-Average Estimated Amortization Periods (in thousands) (years) Customer-related intangible assets $ 946,000 10 Contract-based intangible assets 529,000 12 Acquired technologies 88,000 7 Trademarks and trade names 6,000 2 Total estimated identifiable intangible assets $ 1,569,000 11 From the acquisition date through June 30, 2023, the acquired operations of EVO contributed less than 10 % to our consolidated revenues and operating income. The historical revenue and earnings of EVO were not material for the purpose of presenting pro forma information. In addition, transaction costs associated with this business combination were not material. 14 Table of Contents NOTE 3— BUSINESS DISPOSITIONS Gaming Business. On April 1, 2023, we completed the sale of our gaming business for approximately $ 400 million, subject to certain closing adjustments. The gaming business was included in our Merchant Solutions segment prior to disposition, and had been presented as held for sale in our consolidated balance sheet since December 31, 2022. In connection with the sale, we provided $ 32 million of seller financing as described below. We recognized a gain on the sale of $ 104.1 million during the three and six months ended June 30, 2023, and the sale is subject to certain additional final closing adjustments. The gain was presented within gain on business dispositions in the consolidated statement of income. Consumer Business. On April 26, 2023, we completed the sale of the consumer portion of our Netspend business for approximately $ 1 billion, subject to certain closing adjustments. The consumer business comprised our former Consumer Solutions segment prior to disposition, and had been presented as held for sale with certain adjustments to report the disposal group at fair value less costs to sell in our consolidated balance sheet since June 30, 2022. In connection with the sale, we provided $ 675 million of seller financing as described below. We recognized a gain (loss) on business dispositions in our consolidated statement of income of $ 1.6 million and $( 243.2 ) million during the three and six months ended June 30, 2023, respectively. The gain (loss) during the three and six months ended June 30, 2023 included the effects of incremental negotiated closing adjustments, changes in the estimated fair value of the seller financing and the effects of the final tax structure of the transaction. As further discussed in "Note 5— Goodwill and Other Intangible Assets," we recognized a goodwill impairment charge of $ 833.1 million during the three and six months ended June 30, 2022 related to our former Business and Consumer Solutions reporting unit. We also recognized a charge of $ 25.0 million during the three and six months ended June 30, 2022 to reduce the disposal group to estimated fair value less costs to sell, which was presented within net loss on business dispositions in our consolidated statement of income. Notes Receivable and Allowance for Credit Losses In connection with the sale of our consumer business, we provided seller financing consisting of the following: (1) a first lien seven-year secured term loan facility with an aggregate principal amount of $ 350 million bearing interest at a fixed annual rate of 9.0 %, including 3.5 % payable quarterly in cash and 5.5 % settled quarterly via the issuance of additional paid-in-kind ("PIK") notes with the same terms as the original notes until December 2024, after which interest will be payable quarterly in cash along with quarterly principal payments of $ 4.375 million with the remaining balance due at maturity; and (2) a second lien twenty-five year secured term loan facility with an aggregate principal amount of $ 325 million bearing interest at a fixed annual rate of 13.0 % PIK due at maturity. The aggregate fair value of the first and second lien term loans upon the closing of the transaction was $ 653.9 million, calculated using a discounted cash flow approach. In addition, we provided the purchasers a five-year $ 50 million secured revolving facility available from the date of closing of the sale, bearing interest at a fixed annual rate of 9.0 % payable quarterly in cash. In connection with the sale of our gaming business, we also provided seller financing consisting of an unsecured promissory note due April 1, 2030 with an aggregate principal amount of $ 32 million bearing interest at a fixed annual rate of 11.0 %. We classify the notes as held for investment based on the intent and ability to hold for foreseeable future or until maturity or payoff, and the notes are presented at amortized cost within notes receivable in our consolidated balance sheet. Interest income is recognized using the effective interest method, which includes the accretion of the difference between the fair value at inception and the face value of the notes. We recognized interest income of $ 14.9 million during the three and six months ended June 30, 2023 as a component of interest and other income in the consolidated statements of income. The issuance of the notes in connection with the sale transactions was a noncash investing activity in our consolidated statement of cash flows for the six months ended June 30, 2023. 15 Table of Contents We are exposed to credit losses on the notes. We utilize a probability-of-default and loss given default method to develop an estimate of current expected credit losses applied at the loan level. A variety of factors are considered to estimate the expected credit loss, including the probability of default (representing the probability the asset will default within a given time frame), the loss given default (representing the percentage of the asset that is not expected to be collected due to default), leverage ratios, interest rates, market and industry data, and forecasts that affect the collectibility of the reported amount. The estimation process also includes consideration of qualitative and quantitative risk factors associated with expected timing of payment, industry trends and current and anticipated future economic conditions. Expected credit losses are estimated over the life of the loans, adjusted for expected prepayments when appropriate. Upon issuance of the notes in connection with the sales of the two businesses, we recognized an allowance for credit losses and a noncash charge of $ 18.2 million, which is included as a component of interest and other expenses in our consolidated statements of income for the three and six months ended June 30, 2023. As of June 30, 2023, there was an aggregate principal amount of $ 769.2 million outstanding on the notes, including PIK, and the notes are presented net of the allowance for credit losses of $ 18.2 million within notes receivable in our consolidated balance sheet. The estimated fair value of the notes receivable was $ 714.4 million as of June 30, 2023. The estimated fair value of notes receivable was based on a discounted cash flow approach and is considered to be a Level 3 measurement of the valuation hierarchy. Assets and Liabilities Held for Sale. The assets and liabilities of our consumer and gaming businesses were classified as held for sale in our consolidated balance sheets as of December 31, 2022. The major classes of assets presented as held for sale in the consolidated balance sheet as of December 31, 2022 included cash of $ 70.6 million, accounts receivable of $ 18.4 million, other current assets of $ 42.3 million, goodwill of $ 529.5 million, other intangible assets of $ 717.9 million, property and equipment of $ 82.9 million, other noncurrent assets of $ 44.9 million and an asset group valuation allowance of $ 71.9 million. The major classes of liabilities presented as held for sale in the consolidated balance sheet as of December 31, 2022 included accounts payable and accrued liabilities of $ 125.9 million and other noncurrent liabilities of $ 4.5 million. Sale of Merchant Solutions Business in Russia. We sold our Merchant Solutions business in Russia effective April 29, 2022 for cash proceeds of $ 9 million. During the three months ended June 30, 2022, we recognized a loss of $ 127.2 million associated with the sale, comprised of the difference between the consideration received and the net carrying amount of the business and the reclassification of $ 63 million of associated accumulated foreign currency translation losses from the separate component of equity. The loss was presented within net loss on business dispositions in our consolidated statement of income. 16 Table of Contents NOTE 4— REVENUES The following tables present a disaggregation of our revenues from contracts with customers by geography for each of our reportable segments for the three and six months ended June 30, 2023 and 2022 and have been recast to align with the change in the presentation of segment information during 2022 as further described in “Note 15 — Segment Information:” Three Months Ended June 30, 2023 Merchant Solutions Issuer Solutions Consumer Solutions Intersegment Eliminations Total (in thousands) Americas $ 1,499,130 $ 455,019 $ 39,031 $ ( 9,155 ) $ 1,984,025 Europe 278,925 125,281 — — 404,206 Asia Pacific 64,238 10,141 — ( 10,141 ) 64,238 $ 1,842,293 $ 590,441 $ 39,031 $ ( 19,296 ) $ 2,452,469 Three Months Ended June 30, 2022 Merchant Solutions Issuer Solutions Consumer Solutions Intersegment Eliminations Total (in thousands) Americas $ 1,334,231 $ 432,963 $ 161,629 $ ( 13,641 ) $ 1,915,182 Europe 187,450 118,239 — — 305,689 Asia Pacific 60,035 8,437 — ( 8,437 ) 60,035 $ 1,581,716 $ 559,639 $ 161,629 $ ( 22,078 ) $ 2,280,906 Six Months Ended June 30, 2023 Merchant Solutions Issuer Solutions Consumer Solutions Intersegment Eliminations Total (in thousands) Americas $ 2,865,024 $ 898,364 $ 182,740 $ ( 26,477 ) $ 3,919,651 Europe 455,023 242,386 — — 697,409 Asia Pacific 127,856 20,599 — ( 20,599 ) 127,856 $ 3,447,903 $ 1,161,349 $ 182,740 $ ( 47,076 ) $ 4,744,916 Six Months Ended June 30, 2022 Merchant Solutions Issuer Solutions Consumer Solutions Intersegment Eliminations Total (in thousands) Americas $ 2,576,851 $ 839,691 $ 330,744 $ ( 28,260 ) $ 3,719,026 Europe 361,505 240,250 — — 601,755 Asia Pacific 116,379 17,024 — ( 17,024 ) 116,379 $ 3,054,735 $ 1,096,965 $ 330,744 $ ( 45,284 ) $ 4,437,160 17 Table of Contents The following table presents a disaggregation of our Merchant Solutions segment revenues by distribution channel for the three and six months ended June 30, 2023 and 2022: Three Months Ended Six Months Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 (in thousands) Relationship-led $ 979,574 $ 827,577 $ 1,760,446 $ 1,564,982 Technology-enabled 862,719 754,139 1,687,457 1,489,753 $ 1,842,293 $ 1,581,716 $ 3,447,903 $ 3,054,735 ASC Topic 606, Revenues from Contracts with Customers ("ASC 606") requires that we determine for each customer arrangement whether revenue should be recognized at a point in time or over time. For the three and six months ended June 30, 2023 and 2022, substantially all of our revenues were recognized over time. Supplemental balance sheet information related to contracts from customers as of June 30, 2023 and December 31, 2022 was as follows: Balance Sheet Location June 30, 2023 December 31, 2022 (in thousands) Assets: Capitalized costs to obtain customer contracts, net Other noncurrent assets $ 337,535 $ 329,785 Capitalized costs to fulfill customer contracts, net Other noncurrent assets $ 178,403 $ 152,520 Liabilities: Contract liabilities, net (current) Accounts payable and accrued liabilities $ 229,402 $ 226,254 Contract liabilities, net (noncurrent) Other noncurrent liabilities $ 54,295 $ 45,613 Net contract assets were not material at June 30, 2023 or at December 31, 2022. Revenue recognized for the three months ended June 30, 2023 and 2022 from contract liability balances at the beginning of each period was $ 85.2 million and $ 83.2 million, respectively. Revenue recognized for the six months ended June 30, 2023 and 2022 from contract liability balances at the beginning of each period was $ 142.9 million and $ 149.8 million, respectively. ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations. The purpose of this disclosure is to provide additional information about the amounts and expected timing of revenue to be recognized from the remaining performance obligations in our existing contracts. The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at June 30, 2023. However, as permitted, we have elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. Accordingly, the total amount 18 Table of Contents of unsatisfied or partially unsatisfied performance obligations related to processing services is significantly higher than the amounts disclosed in the table below (in thousands): Year Ending December 31, 2023 $ 549,127 2024 933,570 2025 754,656 2026 617,850 2027 476,385 2028 221,338 2029 and thereafter 324,302 Total $ 3,877,228 19 Table of Contents NOTE 5— GOODWILL AND OTHER INTANGIBLE ASSETS As of June 30, 2023 and December 31, 2022, goodwill and other intangible assets consisted of the following: June 30, 2023 December 31, 2022 (in thousands) Goodwill $ 26,491,160 $ 23,320,736 Other intangible assets: Customer-related intangible assets $ 10,477,777 $ 9,524,922 Acquired technologies 3,029,770 2,863,731 Contract-based intangible assets 2,299,501 1,741,321 Trademarks and trade names 1,074,496 1,067,745 16,881,544 15,197,719 Less accumulated amortization: Customer-related intangible assets 3,472,869 3,155,838 Acquired technologies 1,870,202 1,692,762 Contract-based intangible assets 248,503 197,478 Trademarks and trade names 547,980 493,267 6,139,554 5,539,345 $ 10,741,990 $ 9,658,374 The following table sets forth the changes by reportable segment in the carrying amount of goodwill for the six months ended June 30, 2023: Merchant Solutions Issuer Solutions Total (in thousands) Balance at December 31, 2022 $ 13,816,945 $ 9,503,791 $ 23,320,736 Goodwill acquired 3,197,505 — 3,197,505 Effect of foreign currency translation ( 39,822 ) 12,977 ( 26,845 ) Measurement period adjustments ( 236 ) — ( 236 ) Balance at June 30, 2023 $ 16,974,392 $ 9,516,768 $ 26,491,160 We test goodwill for impairment at the reporting unit level annually and more often if an event occurs or circumstances change that indicate the fair value of a reporting unit may be below its carrying amount. When applying the quantitative assessment, we determine the fair value of our reporting units based on a weighted average of multiple valuation techniques, principally a combination of an income approach and a market approach. The income approach calculates a value based upon the present value of estimated future cash flows, while the market approach uses earnings multiples of similarly situated guideline public companies. Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions, which include assumptions regarding the revenue growth rates and operating margins used to calculate estimated future cash flows, risk-adjusted discount rates and future economic and market conditions. During the second quarter of 2022, the sustained decline in our share price and recent increases in discount rates, primarily resulting from increased economic uncertainty, indicated a potential decline in fair value and triggered a requirement to evaluate our Issuer Solutions and former Business and Consumer Solutions reporting units for potential impairment as of June 30, 2022. Further, the estimated sales price for the consumer business portion of our former Business and Consumer Solutions reporting unit also indicated a potential decline in fair value as of June 30, 2022. We determined on the basis of the quantitative assessment that the fair value of the Issuer Solutions reporting unit was still greater than its carrying amount as of June 30, 2022, indicating no impairment. Based on the quantitative assessment of the former Business and Consumer Solutions reporting unit, including consideration of the consumer business disposal group and the remaining assets of the reporting unit, 20 Table of Contents we recognized a goodwill impairment charge of $ 833.1 million in our consolidated statement of income for the three and six months ended June 30, 2022. Accumulated impairment losses for goodwill as of June 30, 2023 were $ 357.9 million. Accumulated impairment losses for goodwill as of December 31, 2022 were $ 833.1 million, of which $ 475.2 million related to assets held for sale. NOTE 6— LONG-TERM DEBT AND LINES OF CREDIT As of June 30, 2023 and December 31, 2022, long-term debt consisted of the following: June 30, 2023 December 31, 2022 (in thousands) 3.750 % senior notes due June 1, 2023 $ — $ 552,113 4.000 % senior notes due June 1, 2023 — 552,747 1.500 % senior notes due November 15, 2024 498,654 498,164 2.650 % senior notes due February 15, 2025 997,328 996,485 1.200 % senior notes due March 1, 2026 1,094,900 1,093,932 4.800 % senior notes due April 1, 2026 781,074 786,724 2.150 % senior notes due January 15, 2027 745,571 744,945 4.950 % senior notes due August 15, 2027 495,953 495,463 4.450 % senior notes due June 1, 2028 471,603 473,800 3.200 % senior notes due August 15, 2029 1,240,378 1,239,588 5.300 % senior notes due August 15, 2029 495,712 495,362 2.900 % senior notes due May 15, 2030 991,952 991,367 2.900 % senior notes due November 15, 2031 742,975 742,555 5.400 % senior notes due August 15, 2032 742,496 742,085 4.150 % senior notes due August 15, 2049 740,682 740,503 5.950 % senior notes due August 15, 2052 738,376 738,177 4.875 % senior notes due March 17, 2031 862,855 — 1.000 % convertible notes due August 15, 2029 1,449,359 1,445,225 Revolving credit facility 1,981,700 — Commercial paper notes 1,841,675 — Finance lease liabilities 26,956 32,435 Other borrowings 110,842 96,908 Total long-term debt 17,051,041 13,458,578 Less current portion 75,681 1,169,330 Long-term debt, excluding current portion $ 16,975,360 $ 12,289,248 The carrying amounts of our senior notes and convertible notes in the table above are presented net of unamortized discount and unamortized debt issuance costs, as applicable. At June 30, 2023, the unamortized discount on senior notes and convertible notes was $ 49.9 million, and unamortized debt issuance costs on senior notes and convertible notes were $ 85.6 million. At December 31, 2022, the unamortized discount on senior notes and convertible notes was $ 50.8 million and unamortized debt issuance costs on senior notes and convertible notes were $ 85.4 million. The portion of unamortized debt issuance costs related to revolving credit facilities is included in other noncurrent assets. At June 30, 2023 and December 31, 2022, unamortized debt issuance costs on the unsecured revolving credit facility were $ 21.0 million and $ 23.5 million, respectively. 21 Table of Contents At June 30, 2023, future maturities of long-term debt (excluding finance lease liabilities) are as follows by year (in thousands): Year Ending December 31, 2023 $ 26,093 2024 554,394 2025 1,009,577 2026 1,860,108 2027 5,084,044 2028 450,000 2029 and thereafter 8,122,720 Total $ 17,106,936 Senior Notes On March 17, 2023, we issued € 800 million aggregate principal amount of 4.875 % senior unsecured notes due March 2031 and received net proceeds of € 790.6 million, or $ 843.6 million based on the exchange rate on the issuance date. We issued the senior notes at a discount of $ 2.8 million, and we incurred debt issuance costs of $ 7.2 million, including underwriting fees, professional services fees 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 June 30, 2023. Interest on the senior unsecured notes is payable annually in arrears on March 17 of each year, commencing March 17, 2024. The notes are unsecured and unsubordinated indebtedness and rank equally in right of payment with all of our other outstanding unsecured and unsubordinated indebtedness. The net proceeds from the offering were used for general corporate purposes. During the three months ended June 30, 2023, we used borrowings under the revolving credit facility to fund the redemption in full of the 3.750 % and 4.000 % senior unsecured notes that were due June 1, 2023. Commercial Paper In January 2023, we established a $ 2.0 billion commercial paper program under which we may issue senior unsecured commercial paper notes with maturities of up to 397 days from the date of issue. Commercial paper notes are expected to be issued at a discount from par, or they may bear interest, each at commercial paper market rates dictated by market conditions at the time of their issuance. The proceeds from issuances of commercial paper notes will be used primarily for general corporate purposes but may also be used for acquisitions, to pay dividends, for debt refinancing or for other purposes. As of June 30, 2023, we had net borrowings under our comm ercial paper program of $ 1,841.7 million outstanding, presented within long-term debt in our consolidated balance sheet based on our intent and ability to continually refinance on a long-term basis, with a weighted average annual interest rate of 5.96 %. The commercial program is backstopped by our revolving credit agreement, in that the amount of commercial paper notes outstanding cannot exceed the undrawn portion of our revolving credit facility. As suc h, we could draw on the revolving credit facility to repay commercial paper notes that cannot be rolled over or refinanced with similar debt . 22 Table of Contents Fair Value of Long-Term Debt As of June 30, 2023, our senior notes had a total carrying amount of $ 11.6 billion and an estimated fair value of $ 10.6 billion. The estimated fair value of our senior notes was based on quoted market prices in an active market and is considered to be a Level 1 measurement of the valuation hierarchy. As of June 30, 2023, our convertible notes had a total carrying amount of $ 1.4 billion and an estimated fair value of $ 1.4 billion. The estimated fair value of our convertible notes was based on a lattice pricing model and is considered to be a Level 3 measurement of the valuation hierarchy. The fair value of other long-term debt approximated its carrying amount at June 30, 2023. Compliance with Covenants The convertible notes include customary covenants and events of default for convertible notes of this type. The revolving credit agreement contains customary affirmative covenants and restrictive covenants, including, among others, financial covenants based on net leverage and interest coverage ratios, and customary events of default. The required leverage ratio was increased to 4.50 to 1.00 as a result of the qualifying acquisition of EVO, which will remain in effect for up to eight consecutive quarters with a gradual step-down to 3.75 to 1.00, and the required interest coverage ratio is 3.00 to 1.00. We were in compliance with all applicable covenants as of June 30, 2023. Interest Expense Interest expense was $ 172.3 million and $ 97.1 million for the three months ended June 30, 2023 and 2022, respectively, and $ 291.3 million and $ 186.4 million for the six months ended June 30, 2023 and 2022, respectively. NOTE 7— DERIVATIVES AND HEDGING INSTRUMENTS Net Investment Hedge We have designated our aggregate € 800 million Euro-denominated senior notes due March 2031 as a hedge of our net investment in our Euro-denominated operations. The purpose of the net investment hedge is to reduce the volatility of our net investment in our Euro-denominated operations due to changes in foreign currency exchange rates. Investments in foreign operations with functional currencies other than the reporting currency are subject to foreign currency risk as the assets and liabilities of these subsidiaries are translated into the reporting currency at the period-end rate of exchange with the resulting foreign currency translation adjustment presented as a component of other comprehensive income and included in accumulated comprehensive income within equity in our consolidated balance sheets. Net investment hedge accounting offers protection from this risk, and the foreign currency remeasurement gains and losses associated with the Euro-denominated senior notes are presented within the same components of other comprehensive income and accumulated comprehensive income. We recognized a gain (loss) of $ 1.8 million and $( 16.5 ) million within foreign currency translation adjustments in other comprehensive income in our consolidated statement of comprehensive income during the three and six months ended June 30, 2023, respectively. Interest Rate Swaps We have interest rate swap agreements with financial institutions to hedge changes in cash flows attributable to interest rate risk on a portion of our variable-rate debt instruments. In the first quarter of 2023, we entered into new interest rate swap agreements with an aggregate notional amount of $ 1.5 billion to convert eligible borrowings under our revolving credit facility from a floating term Secured Overnight Financing Rate to a fixed rate. Net amounts to be received or paid under the swap agreements are reflected as adjustments to interest expense. Since we have designated the interest rate swap agreements as cash 23 Table of Contents flow hedges, unrealized gains or losses resulting from adjusting the swaps to fair value are recorded as components of other comprehensive income. The fair values of our interest rate swaps were determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date. These derivative instruments were classified within Level 2 of the valuation hierarchy. The table below presents information about our interest rate swaps, designated as cash flow hedges, included in the consolidated balance sheets: Fair Values Derivative Financial Instruments Balance Sheet Location Weighted-Average Fixed Rate of Interest at June 30, 2023 Range of Maturity Dates at June 30, 2023 June 30, 2023 December 31, 2022 (in thousands) Interest rate swaps (Notional of $ 1.5 billion at June 30, 2023) Other noncurrent liabilities 4.26 % April 17, 2027 - August 17, 2027 $ 8,585 $ — The table below presents the effects of our interest rate swaps on the consolidated statements of income and statements of comprehensive income for the three and six months ended June 30, 2023 and 2022: Three Months Ended Six Months Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 (in thousands) Net unrealized gains (losses) recognized in other comprehensive income (loss) $ 40,078 $ 5,051 $ ( 7,973 ) $ 13,985 Net unrealized gains (losses) reclassified out of other comprehensive income (loss) to interest expense $ 901 $ ( 7,534 ) $ ( 485 ) $ ( 16,979 ) As of June 30, 2023, the amount of net unrealized gains in accumulated other comprehensive loss related to our interest rate swaps that is expected to be reclassified into interest expense during the next 12 months was $ 9.4 million. NOTE 8— INCOME TAX For the three and six months ended June 30, 2023, we reported a tax expense of 39.2 % and 36.7 %, respectively, of the reported income before taxes. For the three and six months ended June 30, 2023, tax expense was greater than the U.S. statutory tax rate as a result of a gain on the dispositions of our consumer and gaming businesses for income tax reporting purposes, while a net loss on the dispositions was recognized for financial reporting purposes. These effects were partially offset by the favorable effect on the rate of foreign interest income not subject to tax, tax credits and the foreign-derived intangible income deduction. For the three and six months ended June 30, 2022, we incurred income tax expense in spite of reporting a loss before income taxes, primarily due to the unfavorable effects of the goodwill impairment charge and loss on the sale of our Merchant Solutions business in Russia for which no tax benefit was recognized. These unfavorable effects were partially offset by the favorable effects of foreign interest income not subject to tax, tax credits and the foreign-derived intangible income deduction. 24 Table of Contents On August 16, 2022, the U.S. government enacted the Inflation Reduction Act into law, which, among other things, implemented a 15% corporate alternative minimum tax based on global adjusted financial statement income and a 1% excise tax on share repurchases effective beginning January 1, 2023. We do not expect the corporate alternative minimum tax will have a material effect on our reported results, cash flows or financial position. During the three and six months ended June 30, 2023, we reflected excise taxes of $ 2.0 million and $ 4.3 million, respectively, within equity as part of the price of common stock repurchased during the periods. NOTE 9— REDEEMABLE NONCONTROLLING INTERESTS Through the acquisition of EVO, we have certain redeemable noncontrolling interests related to the portion of equity in our consolidated subsidiaries in Poland, Greece, and Chile, not attributable, directly or indirectly, to us, that is redeemable upon the occurrence of an event that is not solely within our control. We own 66 % of our subsidiary in Poland, 51 % of our subsidiary in Greece and 50.1 % of our subsidiary in Chile. Under the shareholder agreements, the minority shareholders have the option to compel us to purchase their shares at a price per share based on the fair value of the shares, or under certain limited circumstances, at a price determined as stipulated in the shareholder agreement. The option held by the minority shareholder in Poland expires on January 1, 2024. The other options have no expiration date. Because the exercise of each of these redemption options is not solely within our control, the redeemable noncontrolling interests are presented in the mezzanine section between total liabilities and shareholders’ equity, as temporary equity, in our consolidated balance sheet as of June 30, 2023. The redeemable noncontrolling interest for each subsidiary is reflected at the higher of: (i) the initial carrying amount, increased or decreased for the noncontrolling interest's share of comprehensive income (loss), c apital contributions and distributions or (ii) the redemption price . Estimates of redemption price are based on projected operating performance of each subsidiary, including key assumptions - revenue growth rates, current and expected market conditions and weighted-average cost of capital. NOTE 10— SHAREHOLDERS’ EQUITY We repurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase ("ASR") programs. During the three months ended June 30, 2023 and 2022, we repurchased and retired 2,006,016 and 4,523,563 shares of our common stock, respectively, at a cost, including commissions and applicable excise taxes, of $ 207.5 million and $ 600.3 million, or $ 103.44 and $ 132.64 per share, respectively. During the six months ended June 30, 2023 and 2022, we repurchased and retired 4,064,918 and 9,039,189 shares of our common stock, respectively, at a cost, including commissions and applicable excise taxes, of $ 414.0 million and $ 1,250.0 million, or $ 101.86 and $ 138.29 per share, respectively. As of June 30, 2023, the remaining amount available under our share repurchase program was $ 1,090.2 million. On July 27, 2023, our board of directors declared a dividend of $ 0.25 per share payable on September 29, 2023 to common shareholders of record as of September 15, 2023. NOTE 11— SHARE-BASED AWARDS AND STOCK OPTIONS The following table summarizes share-based compensation expense and the related income tax benefit recognized for our share-based awards and stock options: Three Months Ended Six Months Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 (in thousands) Share-based compensation expense $ 47,135 $ 47,014 $ 136,701 $ 85,414 Income tax benefit $ 22,474 $ 10,318 $ 31,890 $ 19,997 25 Table of Contents Share-Based Awards The following table summarizes the changes in unvested restricted stock and performance awards for the six months ended June 30, 2023: Shares Weighted-Average Grant-Date Fair Value (in thousands) Unvested at December 31, 2022 2,145 $ 159.04 Replacement awards 202 98.44 Granted 1,252 112.42 Vested ( 940 ) 160.85 Forfeited ( 86 ) 136.88 Unvested at June 30, 2023 2,573 $ 131.35 The total fair value of restricted stock and performance awards vested during the six months ended June 30, 2023 and June 30, 2022 was $ 151.1 million and $ 96.4 million, respectively. For restricted stock and performance awards, we recognized compensation expens e of $ 44.7 million and $ 43.6 million during the three months ended June 30, 2023 and 2022, respectively, and $ 119.9 million and $ 78.7 million during the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, there was $ 222.7 million of unrecognized compensation expense related to unvested restricted stock and performance awards that we expect to recognize over a weighted-average period of 2.0 years. Stock Options The following table summarizes stock option activity for the six months ended June 30, 2023: Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) (years) (in millions) Outstanding at December 31, 2022 1,139 $ 111.75 5.4 $ 17.3 Replacement awards 142 98.44 Granted 233 110.83 Forfeited ( 36 ) 109.92 Exercised ( 17 ) 52.80 Outstanding at June 30, 2023 1,461 $ 109.07 3.7 $ 19.0 Options vested and exercisable at June 30, 2023 1,155 $ 110.39 2.4 $ 16.5 We recognized compensation expense for stock options of $ 1.1 million and $ 1.8 million during the three months ended June 30, 2023 and 2022, respectively, and $ 13.9 million and $ 3.6 million during the six months ended June 30, 2023 and 2022, respectively. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2023 and 2022 was $ 0.9 million and $ 3.8 million, respectively. As of June 30, 2023, we had $ 3.6 million of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of 2.0 y ears. 26 Table of Contents The weighted-average grant-date fair value of stock options granted, including replacement awards granted in connection with the EVO acquisition, during the six months ended June 30, 2023 and 2022 was $ 46.17 and $ 48.88 , respectively. Fair value was estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions: Six Months Ended June 30, 2023 June 30, 2022 Risk-free interest rate 3.84 % 1.87 % Expected volatility 45 % 40 % Dividend yield 0.81 % 0.56 % Expected term (years) 5 5 The risk-free interest rate was based on the yield of a zero coupon U.S. Treasury security with a maturity equal to the expected life of the option from the date of the grant. Our assumption on expected volatility was based on our historical volatility. The dividend yield assumption was determined using our average stock price over the preceding year and the annualized amount of our most current quarterly dividend per share. We based our assumptions on the expected term of the options on our analysis of the historical exercise patterns of the options and our assumption on the future exercise pattern of options. NOTE 12— EARNINGS PER SHARE Basic earnings per share ("EPS") was computed by dividing net income (loss) attributable to Global Payments by the weighted-average number of shares outstanding during the period. Earnings available to common shareholders was the same as reported net income (loss) attributable to Global Payments for all periods presented. Diluted EPS is computed by dividing net income (loss) attributable to Global Payments by the weighted-average number of shares outstanding during the period, including the effect of share-based awards, convertible notes or other potential securities that would have a dilutive effect on EPS. All stock options with an exercise price lower than the average market share price of our common stock for the period are assumed to have a dilutive effect on EPS. The dilutive share base for the three and six months ended June 30, 2023 excluded approximately 0.9 million shares related to stock options that would have an antidilutive effect on the computation of diluted earnings per share. Due to a net loss for the three and six months ended June 30, 2022, no incremental shares were included in the computation of diluted earnings per share because the effect would be antidilutive. Approximately 2.0 million shares related to stock options and share-based awards were therefore excluded from the diluted share base for the three and six months ended June 30, 2022. The effect of the potential shares needed to settle the conversion spread on the convertible notes is included in diluted EPS if the effect is dilutive. The effect depends on the market share price of our common stock at the time of conversion and would be dilutive if the average market share price of our common stock for the period exceeds the conversion price. For the three and six months ended June 30, 2023, the convertible notes were not included in the computation of diluted EPS as the effect would have been anti-dilutive. Further, the effect of the related capped call transactions is not included in the computation of diluted EPS as it is always anti-dilutive. 27 Table of Contents The following table sets forth the computation of diluted weighted-average number of shares outstanding for the three and six months ended June 30, 2023 and 2022: Three Months Ended Six Months Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 (in thousands) Basic weighted-average number of shares outstanding 260,827 278,181 261,965 280,130 Plus: Dilutive effect of stock options and other share-based awards 501 — 429 — Diluted weighted-average number of shares outstanding 261,328 278,181 262,394 280,130 NOTE 13 - SUPPLEMENTAL BALANCE SHEET INFORMATION Cash, cash equivalents and restricted cash Cash and cash equivalents include cash on hand and all liquid investments with a maturity of three months or less when purchased. We regularly maintain cash balances with financial institutions in excess of the Federal Deposit Insurance Corporation insurance limit or the equivalent outside the U.S. As of June 30, 2023, approximately 75 % of our total balance of cash and cash equivalents was held within a small group of financial institutions, primarily large money center banks. Although we currently believe that the financial institutions with whom we do business will be able to fulfill their commitments to us, there is no assurance that those institutions will be able to continue to do so. We have not experienced any losses associated with our balances in such accounts for the six months ended June 30, 2023. Restricted cash includes amounts that cannot be withdrawn or used for general operating activities under legal or regulatory restrictions. Restricted cash consists of amounts deposited by customers for prepaid card transactions and funds held as a liquidity reserve that are subject to local regulatory restrictions requiring appropriate segregation and restriction in their use. Restricted cash is included in prepaid expenses and other current assets in the consolidated balance sheets with a corresponding liability in accounts payable and accrued liabilities. A reconciliation of the amounts of cash and cash equivalents and restricted cash in the consolidated balance sheets to the amount in the consolidated statements of cash flows is as follows: June 30, 2023 December 31, 2022 (in thousands) Cash and cash equivalents $ 1,919,591 $ 1,997,566 Restricted cash included in prepaid expenses and other current assets 193,318 147,422 Cash included in assets held for sale 1,442 70,618 Cash, cash equivalents and restricted cash shown in the statement of cash flows $ 2,114,351 $ 2,215,606 Long-lived assets During the six months ended June 30, 2023, we entered into a new agreement to acquire software, of which $ 48.0 million was financed utilizing a five-year vendor financing arrangement. In connection with the completion of the EVO acquisition, we acquired right-of-use assets for operating leases of approximately $ 40.0 million, primarily related to real estate leases, and assumed the associated lease liabilities. As of June 30, 2023, maturities of the acquired operating lease liabilities were as follows: $ 4.4 million in 2023, $ 9.3 million in 2024, $ 8.6 million in 2025, $ 7.8 million in 2026, $ 6.3 million in 2027, $ 3.2 million in 2028 and $ 0.8 million thereafter. 28 Table of Contents NOTE 14— ACCUMULATED OTHER COMPREHENSIVE LOSS The changes in the accumulated balances for each component of other comprehensive income (loss) were as follows for the three and six months ended June 30, 2023 and 2022: Foreign Currency Translation Gains (Losses) Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss (in thousands) Balance at March 31, 2023 $ ( 349,695 ) $ ( 58,135 ) $ ( 2,987 ) $ ( 410,817 ) Other comprehensive income (loss) 2,405 30,033 ( 22 ) 32,416 Balance at June 30, 2023 $ ( 347,290 ) $ ( 28,102 ) $ ( 3,009 ) $ ( 378,401 ) Balance at March 31, 2022 $ ( 209,895 ) $ ( 34,567 ) $ ( 2,743 ) $ ( 247,205 ) Other comprehensive income (loss) ( 133,506 ) 9,533 — ( 123,973 ) Balance at June 30, 2022 $ ( 343,401 ) $ ( 25,034 ) $ ( 2,743 ) $ ( 371,178 ) Other comprehensive income (loss) attributable to noncontrolling interests, which relates only to foreign currency translation, was $ 1.8 million and $( 13.5 ) million for the three months ended June 30, 2023 and 2022, respectively. Foreign Currency Translation Gains (Losses) Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss (in thousands) Balance at December 31, 2022 $ ( 380,584 ) $ ( 22,420 ) $ ( 2,965 ) $ ( 405,969 ) Other comprehensive income (loss) 33,294 ( 5,682 ) ( 44 ) 27,568 Balance at June 30, 2023 $ ( 347,290 ) $ ( 28,102 ) $ ( 3,009 ) $ ( 378,401 ) Balance at December 31, 2021 $ ( 182,949 ) $ ( 48,490 ) $ ( 2,743 ) $ ( 234,182 ) Other comprehensive income (loss) ( 160,452 ) 23,456 — ( 136,996 ) Balance at June 30, 2022 $ ( 343,401 ) $ ( 25,034 ) $ ( 2,743 ) $ ( 371,178 ) Other comprehensive income (loss) attributable to noncontrolling interests, which relates only to foreign currency translation, was $ 8.2 million and $( 18.8 ) million for the six months ended June 30, 2023 and 2022, respectively. NOTE 15— SEGMENT INFORMATION During 2022, as a result of the pending divestiture of the consumer business and changes in how the business is managed, we realigned the businesses previously comprising our Business and Consumer Solutions segment to include the business-to-business portion within our Issuer Solutions segment and the consumer portion forming our Consumer Solutions segment. The presentation of segment information for the three months ended June 30, 2022 has been recast to align with the segment presentation for the three months ended June 30, 2023. As described in "Note 3 - Business Dispositions," during the second quarter of 2023, we completed the sale of the consumer portion of our Netspend business, which comprised of our former Consumer Solutions segment. Our reportable segments now include: Merchant Solutions and Issuer Solutions. Our former Consumer Solutions segment is presented below for periods prior to disposition. We evaluate performance and allocate resources based on the operating income of each operating segment. The operating income of each operating segment includes the revenues of the segment less expenses that are directly related to those revenues. Operating overhead, shared costs and share-based compensation costs are included in Corporate. Impairment of goodwill and 29 Table of Contents gains or losses on business dispositions are not included in segment operating income. Interest and other income, interest and other expense, income tax expense and equity in income of equity method investments, net of tax, are not allocated to the individual segments. We do not evaluate the performance of or allocate resources to our operating segments using asset data. The accounting policies of the reportable operating segments are the same as those described in our Annual Report on Form 10-K for the year ended December 31, 2022 and our summary of significant accounting policies in "Note 1—Basis of Presentation and Summary of Significant Accounting Policies." Information on segments and reconciliations to consolidated revenues, consolidated operating income (loss) and consolidated depreciation and amortization were as follows for the three and six months ended June 30, 2023 and 2022: Three Months Ended Six Months Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 (in thousands) Revenues : (1) Merchant Solutions $ 1,842,293 $ 1,581,716 $ 3,447,903 $ 3,054,735 Issuer Solutions 590,441 559,639 1,161,349 1,096,965 Consumer Solutions 39,031 161,629 182,740 330,744 Intersegment eliminations ( 19,296 ) ( 22,078 ) ( 47,076 ) ( 45,284 ) Consolidated revenues $ 2,452,469 $ 2,280,906 $ 4,744,916 $ 4,437,160 Operating income (loss) (1) : Merchant Solutions $ 603,548 $ 535,359 $ 1,110,757 $ 979,889 Issuer Solutions 95,701 77,499 178,511 146,641 Consumer Solutions 1,890 21,942 ( 3,908 ) 44,560 Corporate (2) ( 204,136 ) ( 179,372 ) ( 486,790 ) ( 339,715 ) Impairment of goodwill — ( 833,075 ) — ( 833,075 ) Net gain (loss) on business dispositions 105,738 ( 152,211 ) ( 139,095 ) ( 152,211 ) Consolidated operating income (loss) $ 602,741 $ ( 529,858 ) $ 659,475 $ ( 153,911 ) Depreciation and amortization : (1) Merchant Solutions $ 295,058 $ 248,891 $ 536,631 $ 498,852 Issuer Solutions 161,922 155,807 322,775 310,352 Consumer Solutions — 17,918 — 35,764 Corporate 5,110 4,960 10,022 11,280 Consolidated depreciation and amortization $ 462,090 $ 427,576 $ 869,428 $ 856,248 (1) Revenues, operating income (loss) and depreciation and amortization reflect the effects of acquired businesses from the respective acquisition dates and the effects of divested businesses through the respective disposal dates. See “Note 2—Acquisition” and “Note 3—Business Dispositions” for further discussion. (2) Operating loss for Corporate included acquisition and integration expenses of $ 60.2 million and $ 61.4 million for the three months ended June 30, 2023 and 2022, respectively. Operating loss for Corporate included acquisition and integration expenses of $ 148.0 million and $ 109.5 million for the six months ended June 30, 2023 and 2022, respectively. NOTE 16— COMMITMENTS AND CONTINGENCIES Legal Matters We are party to a number of claims and lawsuits incidental to our business. In our opinion, the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, are not expected to have a material adverse effect on our financial position, liquidity, results of operations or cash flows. 30 Table of Contents