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Item 7. Management’s Discussion and Analysis

2025-02-14 compared with 2024-02-14 · 225 added, 172 removed, 333 unchanged (54% of the section changed)

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Item 8 - Financial Statements and Supplementary Data." This discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future.

Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements 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."

This discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future.

Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements as a result of many known and unknown factors, including, but not limited to, those discussed in "Item 1A - Risk Factors" of this Annual Report on Form 10-K.

See "Cautionary Notice Regarding Forward-Looking Statements" located above in "Item 1 - Business" of this Annual Report on Form 10-K.

We operate in two reportable segments:

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See "Note 18—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, 2022 compared to the year ended December 31, 2021 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 Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the United States Securities and Exchange Commission on February 17, 2023.

Discussion of our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 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 Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the United States Securities and Exchange Commission on February 14, 2024.

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

These investments include new product development and innovation to further enhance and differentiate our suite of technology and cloud-based solutions available to customers, along with migration of certain underlying technology platforms to cloud environments to enhance performance, improve speed to market and drive cost efficiencies.

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

We have furthered our business strategy through several recent key transactions during 2023 as follows:

• We completed the acquisition of EVO Payments, Inc.

(“EVO”) for total purchase consideration of $4.3 billion.

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

The cash portion of the purchase consideration was funded through cash on hand and borrowings from our revolving credit facility.

• We completed the sale of the consumer portion of our Netspend business for approximately $1 billion.

In connection with the sale, we provided $675 million of seller financing and a five-year $50 million secured revolving facility that became available from the date of closing of the sale.

We also completed the sale of our gaming business for approximately $400 million.

• Our capital structure initiatives during 2023 included the issuance of Euro-denominated senior notes and the launch of a commercial paper program:

◦ 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.

The net proceeds from the offering were used for general corporate purposes.

◦ 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 as a cost effective means of satisfying our short-term liquidity needs.

Highlights related to our financial condition at December 31, 2023, and results of operations for the year then ended, include the following:

We have grown organically, as well as through acquisitions, and continue to invest in new technology solutions, infrastructure to support our growing business and the ongoing 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 solutions available to customers, along with migration of certain underlying technology platforms to cloud environments to enhance performance, improve speed to market and drive cost efficiencies.

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

We have furthered our business strategy through the following key transactions during 2024:

• We completed the sale of AdvancedMD, Inc.

("AdvancedMD") in December 2024 for approximately $1 billion, subject to certain closing adjustments, and up to $125 million contingent upon the purchaser achieving certain specified returns.

AdvancedMD is a provider of software-as-a-service solutions to small-to-medium sized ambulatory physician practices in the United States and was included in our Merchant Solutions segment prior to disposition.

We recognized a gain on the sale of $273.1 million during the year ended December 31, 2024.

• Our capital structure initiatives during 2024 included the issuance of $2.0 billion in aggregate principal amount of 1.500% convertible senior notes due March 2031 through a private placement.

In connection with the issuance of the notes, we entered into privately negotiated capped call transactions to hedge the potential dilutive effect upon conversion of the notes, or offset our cash obligation if the cash settlement option were to be elected, for amounts in excess of the principal amount of converted notes up to a cap price.

Highlights related to our results of operations for the year ended December 31, 2024 include the following:

• Consolidated revenues for the year ended December 31, 2024 increased to $10,105.9 million, compared to $9,654.4 million for the prior year.

The increase in consolidated revenues was primarily due to an increase in transaction volumes, including from the recently acquired EVO business, partially offset by the effects on revenue of the divested businesses.

• Merchant Solutions and Issuer Solutions segment operating income and operating margin for the year ended December 31, 2023 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 expense management.

• Consolidated operating income for the year ended December 31, 2023 included the favorable effects of the increase in revenues as compared to the prior year, partially offset by an increase in expenses primarily related to the acquisition of EVO.

Consolidated operating income for the year ended December 31, 2023 also included the effects of a loss on the sale of our consumer business, which was partially offset by a gain on the sale of our gaming business.

The increase in consolidated revenues was primarily due to growth in transaction volume.

The year-over-year favorable effect on revenues from the EVO business acquired in March 2023 was offset by the unfavorable effect on revenues from the dispositions of our gaming and consumer businesses in April 2023.

• Merchant Solutions and Issuer Solutions segment operating income and operating margin for the year ended December 31, 2024 increased compared to the prior year primarily due to the favorable effect of increases in revenues, as certain fixed costs do not vary with revenues.

Merchant Solutions operating income for the year ended December 31, 2024 also reflected an increase related to the acquired EVO business, as the year ended December 31, 2023 only included the acquisition for a portion of the period.

• Consolidated operating income for the year ended December 31, 2024 included the favorable effects of the increase in revenues as compared to the prior year, as well as lower acquisition and integration expenses and share-based compensation expense.

These favorable effects were offset by expenses related to business transformation activities, a technology asset charge and an increase in amortization of acquired intangibles, primarily related to the acquisition of EVO as discussed in further detail below.

Consolidated operating income for the year ended December 31, 2024 included the gain on the sale of AdvancedMD described above.

Consolidated operating income for the year ended December 31, 2023 included the effects of the gain on the sale of our gaming business and the loss on the sale of our consumer business.

Strategy and Business Transformation

Early in 2024, we launched a holistic review of our business to examine our strategy, operations and ability to deliver sustainable performance.

We have refreshed our strategy and are focusing our resources, efforts and investments on the areas of the business that will drive the best opportunities for growth.

These strategic, organizational and operational transformation activities are expected to continue over the next few years.

As we focus on executing and delivering transformation initiatives, we have incurred and anticipate incurring incremental expenses related to the transformation and potential additional asset impairment charges through early 2027.

We are also undertaking a strategic review of our business portfolio to evaluate potential assets for disposition to further streamline our business and create value for shareholders.

We currently expect our transformation initiatives to generate more than $600 million of annual run-rate operating income benefit by the first half of 2027.

Refer to "Item 1 - Business" of this Annual Report on Form 10-K for further details regarding this business transformation initiative.

Continuing and Emerging Trends

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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.

We believe the increased use of cards and the availability of more sophisticated technology services to all market segments will continue to result in an increasingly competitive and specialized industry.

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.

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We also believe new markets will continue to develop and expand in areas that have been previously dominated by paper-based transactions.

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 expect industries such as education, government and healthcare, as well as recurring payments and business-to-business ("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 revenues in the future.

Furthermore, due to its benefits and growth potential, we anticipate the increased exploration of use of artificial intelligence in the payments industry.

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.

Furthermore, due to its benefits and growth potential, we anticipate the increased exploration of use of AI in the payments industry.

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 of this Annual Report on Form 10-K.

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 other conditions that affect the overall level of consumer, business and government spending, which could negatively affect our financial performance.

When adverse macroeconomic conditions arise, we evaluate where we may be able to implement cost-saving measures, including those related to headcount and discretionary expenses.

We may also experience the effects of heightened geopolitical and economic instability or increased difficulty of conducting business in a country or region due to actual or potential political or military conflict or action.

Certain of our operations are conducted in foreign currencies.

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however, we are unable to predict the extent of the potential effect on our financial results.

We have sought to reduce our interest rate risk through issuance of fixed rate debt in place of variable rate debt, including the effect of interest rate swap hedging arrangements to convert a significant portion of the eligible variable rate borrowings under our revolving credit facility to a fixed rate.

However, inflationary pressure or interest rate fluctuations have affected and could continue to 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.

In addition, failures of several financial institutions in the first quarter of 2023, including Silicon Valley Bank and Credit Suisse, have created some uncertainty in the global financial markets and a greater focus on the potential failure of other banks in the future.

Although we do not have exposure to and did not experience losses as a result of these failures, 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.

A disruption in financial markets could impair our banking partners, which could affect our ability to access our cash or cash equivalents, our ability to provide settlement services or our customers' ability to access their existing cash to fulfill their payment obligations to us.

We have sought to reduce our interest rate risk through the issuance of fixed rate debt in place of variable rate debt and through interest rate swap hedging arrangements that convert a significant portion of the eligible variable rate borrowings under our revolving credit facility to a fixed rate.

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 have 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, we are unable to project the extent of the potential effect on our financial results.

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.

A disruption in financial markets could harm our banking partners, which could affect our ability to access our cash or cash equivalents, our ability to provide settlement services or our customers' ability to access their existing cash to fulfill their payment obligations to us.

The occurrence of these events could negatively affect our business, financial condition and results of operations.

When adverse macroeconomic conditions arise, we evaluate where we may be able to implement cost-saving measures, including those related to headcount and discretionary expenses.

While economic conditions have shown moderate improvement in recent months, a downturn in macroeconomic conditions could have an adverse effect on our financial condition and results of operations.

Other Global Conditions

We continue to evaluate the potential effects on our business from health and social events, including pandemics like the COVID-19 pandemic.

Although the COVID-19 pandemic has subsided, it caused an economic slowdown and other macroeconomic effects in the U.S.

and other markets in which we operate.

The global macroeconomic effects of the pandemic may persist for an indefinite period.

We also continue to evaluate the potential effects on our business from heightened geopolitical and economic instability or increased difficulty of conducting business in a country or region due to actual or potential political or military conflict or action, such as those arising from recent global events, which have increased the level of economic and political uncertainty in various regions of the world.

Although we have not experienced significant exposure or adverse effects on our business and financial results to date, the extent to which these events could affect the global economy and our operations is difficult to predict at this time.

However, a significant escalation, expansion of the scope or continuation of the related economic disruptions 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.

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

Results of Operations

Key Drivers of our Results of Operations

Our revenues for both of our segments are dependent upon the volume of payment transactions we process, cardholder accounts on file and other factors (referred to herein as "transaction volume").

As the majority of our services are priced as a percentage of transaction value or specified fee per unit or transaction, many under multi-year customer arrangements, our revenues generally grow period-over-period in line with the rate of increase in transaction volume.

Our operating expenses consist primarily of amortization of intangible assets, the cost of the technology to provide services to our customers and our people costs to support the operations.

Many of those costs do not vary directly with the level of payment transactions we process for our customers, generating operating leverage.

As revenues increase, operating income and operating margin (operating income as a percentage of revenues) generally increase.

We also grow our business through strategic acquisitions of similar businesses.

Our revenues increase from the transaction volume from the customers of the acquired businesses.

As we integrate the businesses, we also are able to improve operating income and operating margin by generating synergies to lower the cost base of those businesses.

Merchant Solutions.

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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.

Merchant Solutions segment 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 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, payment facilitators and financial institutions.

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.

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

We also provide services to merchants referred by ISOs, payment facilitators and financial institutions.

In certain of these arrangements, the 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.

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Revenues principally consisted of fees collected from cardholders and fees generated by cardholder activity in connection with the programs that we managed.

Customers were typically charged a fee for each purchase transaction made using their cards, unless the customer was on a monthly or annual service plan, in which case the customer was instead charged

a monthly or annual subscription fee, as applicable.

Customers were also charged a monthly maintenance fee after a specified period of inactivity.

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and, when applicable, integration costs.

In our Issuer Solutions segment, cost of service also includes out-of-pocket reimbursable costs, such as postage and other production items.

Selling, General and Administrative Expenses.

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other selling expenses;

occupancy costs of leased space directly related to these functions;

depreciation and occupancy costs of leased space directly related to these functions;

advertising costs;

and, when applicable, acquisition and integration costs.

and, when applicable, acquisition and integration costs and business transformation costs.

Operating Income and Operating Margin

For the purpose of discussing segment operations, we refer to "operating income," which is calculated by subtracting segment direct expenses from segment revenues.

For the purpose of discussing segment operations, we refer to "operating income," which is calculated by subtracting segment direct expenses, including both cost of service and selling, general and administrative expenses, from segment revenues.

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

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The following table sets forth key selected financial data for the years ended December 31, 2024 and 2023, this data as a percentage of total revenues, and the changes between periods in dollars and as a percentage of the prior-period amount.

The income statement data for the years ended December 31, 2023 and 2022 is derived from the accompanying consolidated financial statements included in "Item 8 - Financial Statements and Supplementary Data."

The income statement data for the years ended December 31, 2024 and 2023 is derived from the accompanying consolidated financial statements included in "Item 8 - Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Year Ended December 31, Year Ended December 31,

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Consolidated revenues $ 10,105,894 100.0 % $ 9,654,419 100.0 % $ 451,475 4.7 %

Consolidated operating expenses (2) :

Operating expenses (2) :

Cost of service:

Merchant Solutions $ 2,008,126 $ 1,925,880 $ 82,246 4.3 %

Issuer Solutions 1,795,001 1,738,047 56,954 3.3 %

Consumer Solutions — 120,436 (120,436) (100.0) %

Intersegment eliminations (43,011) (56,842) 13,831 (24.3) %

Consolidated cost of service $ 3,760,116 37.2 % $ 3,727,521 38.6 % $ 32,595 0.9 %

Selling, general and administrative:

Impairment of goodwill (3)

— — % 833,075 9.3 % (833,075) NM

Net loss on business dispositions 136,744 1.4 % 199,094 2.2 % (62,350) (31.3) %

Operating expenses $ 7,938,033 82.2 % $ 8,335,364 92.9 % $ (397,331) (4.8) %

Merchant Solutions $ 3,067,662 $ 2,880,658 $ 187,004 6.5 %

Issuer Solutions 246,214 251,016 (4,802) (1.9) %

Consumer Solutions — 66,212 (66,212) (100.0) %

Corporate 994,886 898,024 96,862 10.8 %

Intersegment eliminations (23,455) (22,142) (1,313) 5.9 %

Consolidated selling, general and administrative $ 4,285,307 42.4 % $ 4,073,768 42.2 % $ 211,539 5.2 %

Net (gain) loss on business dispositions (273,134) 136,744 (409,878) NM

Consolidated operating expenses $ 7,772,289 76.9 % $ 7,938,033 82.2 % $ (165,744) (2.1) %

Operating income (loss) (2) :

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Corporate (994,886) (898,024) (96,862) 10.8 %

Impairment of goodwill (3)

— — % (833,075) (9.3) % 833,075 NM

Net loss on business dispositions (136,744) (1.4) % (199,094) (2.2) % 62,350 (31.3) %

Operating income $ 1,716,386 17.8 % $ 640,151 7.1 % $ 1,076,235 168.1 %

Net gain (loss) on business dispositions 273,134 (136,744) 409,878 NM

Consolidated operating income $ 2,333,605 23.1 % $ 1,716,386 17.8 % $ 617,219 36.0 %

Operating margin (2) :

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Issuer Solutions 17.8 % 17.1 % 0.7 %

Consumer Solutions (2.1) % 8.6 % (10.7) %

Consumer Solutions — % (2.1) % NM

NM = Not meaningful

(1) Percentage amounts may not sum to the total due to rounding.

(2) Revenues, consolidated operating expenses, operating income 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.

(2) Revenues, operating expenses, operating income and operating margin reflect the effects of acquired businesses from the respective acquisition dates and the effects of disposed businesses through the respective disposal dates.

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

Operating income included acquisition and integration expenses of $341.9 million and $259.2 million for the years ended December 31, 2023 and 2022, respectively, which were primarily included within Corporate expenses.

Operating income included acquisition and integration expenses of $211.6 million and $341.9 million for the years ended December 31, 2024 and 2023, respectively, which were primarily included within Corporate selling, general and administrative expenses.

For the years ended December 31, 2024 and 2023, operating loss for Corporate also included $13.4 million and $18.5 million, respectively, of other charges related to facilities exit activities.

(3) 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.

Consolidated revenues for the year ended December 31, 2023 increased by 7.6% to $9,654.4 million, compared to $8,975.5 million for the prior year.

The increase in revenues was primarily due to an increase in transaction volumes, including from the EVO business acquired in 2023.

During the year ended December 31, 2024, Corporate expenses also reflected costs of $99.1 million associated with our business transformation initiative, employee termination benefits of $99.6 million, which included $19.4 million of share-based compensation expense, and charges of $55.8 million for technology assets that will no longer be utilized under a revised technology architecture development strategy.

Consolidated revenues for the year ended December 31, 2024 increased by $451.5 million, or 4.7%, to $10,105.9 million from $9,654.4 million in the prior year.

Merchant Solutions Segment.

Revenues from our Merchant Solutions segment for the year ended December 31, 2023 increased by 15.3% to $7,151.8 million, compared to $6,204.9 million for the prior year.

The increase in revenues was primarily due to an increase in transaction volumes, including from the EVO business, and growth in subscription and software revenue.

Revenues from our Merchant Solutions segment for the year ended December 31, 2024 increased by $536.9 million, or 7.5%, to $7,688.7 million from $7,151.8 million in the prior year.

The increase in segment revenues was primarily due to the $479.5 million effect of higher transaction volume.

In addition, our acquisition of EVO in March 2023 contributed $189.3 million to segment revenue growth during the year ended December 31, 2024, as the year ended December 31, 2023 only included the acquisition for a portion of the period.

The revenues of the EVO business include the cross-selling of our service offerings into the acquired EVO customer base and other benefits to revenues from initiatives of the combined organization.

There were no other material factors contributing to the change in segment revenues.

Issuer Solutions Segment.

Revenues from our Issuer Solutions segment for the year ended December 31, 2023 increased by 6.8% to $2,398.9 million, compared to $2,245.6 million for the prior year.

The increase in revenues was primarily due to an increase in transaction volumes.

Revenues from our Issuer Solutions segment for the year ended December 31, 2024 increased by $84.8 million, or 3.5%, to $2,483.7 million from $2,398.9 million in the prior year.

The increase in revenues was primarily due to an increase in transaction volume of $74.3 million driven by cardholder activity.

Consumer Solutions Segment.

The year ended December 31, 2023 included revenues of $182.7 million related to the consumer business disposed of in April 2023.

Operating Expenses

Cost of Service.

Cost of service for the year ended December 31, 2023 was $3,727.5 million, compared to $3,778.6 million for the prior year.

Cost of service as a percentage of revenues decreased to 38.6% for the year ended December 31, 2023, compared to 42.1% for the prior year.

Compared to the prior year, cost of service for the year ended December 31, 2023 decreased primarily due to continued prudent expense management and inclusion of costs related to the divested businesses for only a portion of the current year.

These favorable effects were partially offset by the inclusion of costs for the EVO business, including the related amortization of acquired intangibles.

Cost of service included amortization of acquired intangibles of $1,318.5 million and $1,263.0 million for the years ended December 31, 2023 and 2022, respectively.

Cost of service for the year ended December 31, 2024 increased by $32.6 million, or 0.9%, to $3,760.1 million from $3,727.5 million in the prior year.

Cost of service as a percentage of revenues decreased to 37.2% for the year ended December 31, 2024 from 38.6% in the prior year.

Merchant Solutions Segment.

Cost of service from our Merchant Solutions segment for the year ended December 31, 2024 increased by $82.2 million, or 4.3%, to $2,008.1 million from $1,925.9 million in the prior year.

Cost of service as a percentage of segment revenues decreased to 26.1% for the year ended December 31, 2024 from 26.9% in the prior year.

The effects of the acquired EVO business on cost of service was an increase of $73.0 million in the year ended December 31, 2024 compared to the prior year, and an unfavorable impact on cost of service as a percentage of segment revenues of 0.3%.

Cost of service as a percentage of revenue was lower due to improved operating leverage and synergies related to the EVO acquisition.

Issuer Solutions Segment.

Cost of service from our Issuer Solutions segment for the year ended December 31, 2024 increased by $57.0 million, or 3.3%, to $1,795.0 million from $1,738.0 million in the prior year due to costs that vary with revenues.

Cost of service as a percentage of segment revenues decreased to 72.3% for the year ended December 31, 2024 from 72.5% in the prior year primarily as a result of costs that do not vary with revenues, including the effects of amortization and depreciation as discussed below, generating operating leverage.

Consumer Solutions Segment.

The year ended December 31, 2023 included cost of service of $120.4 million related to the consumer business disposed of in April 2023.

Our consumer business had a higher cost of service as a percentage of segment revenues relative to our Merchant Solutions and Issuer Solutions segments and the disposition had the effect of reducing consolidated cost of service as a percentage of revenues by 0.5% for the year ended December 31, 2023.

Amortization of Acquired Intangible Assets.

The most significant component of our cost of service is amortization of acquired intangibles, which was $1,369.3 million and $1,318.5 million, or approximately 36% and 35% of cost of service for the years ended December 31, 2024 and 2023, respectively.

These costs generally do not vary in proportion to changes in revenues, but rather are most significantly affected by acquisition activities.

The effects of the acquired EVO business on amortization expense was an increase of $67.6 million for the year ended December 31, 2024.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses for the year ended December 31, 2023 increased by 15.6% to $4,073.8 million, compared to $3,524.6 million for the prior year.

Selling, general and administrative expenses as a percentage of revenues was 42.2% for the year ended December 31, 2023, compared to 39.3% for the prior year.

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 the inclusion of costs for the EVO business.

In addition, the increase was driven by the effects of higher acquisition and integration expenses, related primarily to the acquisition of EVO, and higher compensation and benefits costs, including an increase in share-based compensation expense for retirement eligible executives and our previous CEO, whose departure was announced on May 1, 2023.

Selling, general and administrative expenses included acquisition and integration expenses of $341.4 million and $258.0 million for the years ended December 31, 2023 and 2022, respectively.

Share-based compensation expense was $209.0 million and $163.3 million for the years ended December 31, 2023 and 2022, respectively.

Corporate expenses for the year ended December 31, 2023 were $898.0 million, compared to $777.7 million for the prior year.

The increase for the year ended December 31, 2023 was primarily due to the increase in acquisition and integration and compensation expenses, partially offset by lower charges related to facilities exit activities in the current year.

Selling, general and administrative expenses for the year ended December 31, 2024 increased by $211.5 million, or 5.2%, to $4,285.3 million from $4,073.8 million in the prior year.

Selling, general and administrative expenses as a percentage of revenues was 42.4% for the year ended December 31, 2024, compared to 42.2% in the prior year.

Merchant Solutions Segment.

Selling, general and administrative expenses from our Merchant Solutions segment for the year ended December 31, 2024 increased by $187.0 million, or 6.5%, to $3,067.7 million from $2,880.7 million in the prior year.

Selling, general and administrative expenses as a percentage of segment revenues was 39.9% for the year ended December 31, 2024, compared to 40.3% in the prior year.

The effects of the acquired EVO business on selling, general and administrative expenses was an increase of $72.0 million for the year ended December 31, 2024 compared to the prior year, and a favorable impact on selling, general and administrative expenses as a percentage of segment revenues of 0.1%.

The remainder of the increase in selling, general and administrative expenses for the year ended December 31, 2024 was due to costs that vary with revenues of $32.0 million, depreciation expense of $32.4 million and software license related expenses of $23.1 million.

Issuer Solutions Segment.

Selling, general and administrative expenses from our Issuer Solutions segment for the year ended December 31, 2024 decreased by $4.8 million, or 1.9%, to $246.2 million from $251.0 million in the prior year.

Selling, general and administrative expenses as a percentage of segment revenues was 9.9% for the year ended December 31, 2024, compared to 10.5% in the prior year, primarily due to fixed costs that do not vary with revenues.

Consumer Solutions Segment.

The year ended December 31, 2023 included selling, general and administrative expenses of $66.2 million related to the consumer business disposed of in April 2023.

The disposition had the effect of increasing consolidated selling, general and administrative expenses as a percentage of revenues by 0.1% for the year ended December 31, 2023.

Corporate expenses for the year ended December 31, 2024 increased by $96.9 million, or 10.8%, to $994.9 million from $898.0 million in the prior year.

The higher amount of corporate expenses was primarily driven by charges incurred in the year ended December 31, 2024, including $99.1 million associated with our business transformation initiative, $80.1 million related to employee termination benefits, which excludes share-based compensation expense, and $55.8 million for technology assets that will no longer be utilized under a revised technology architecture development strategy.

These increases were partially offset by lower acquisition and integration expenses of $130.3 million, as we completed the acquisition of EVO in March 2023, and lower share-based compensation expense of $44.8 million.

The lower share-based compensation expense is primarily due to higher expense in the year ended December 31, 2023 related to the retirement of eligible executives and departure of our previous CEO.

Operating Income and Operating Margin

Consolidated operating income for the year ended December 31, 2024 was $2,333.6 million, compared to $1,716.4 million for the prior year.

Consolidated operating income and operating margin for the year ended December 31, 2023 compared to the prior year included the favorable effects of the increase in revenues, since certain fixed costs do not vary with revenues, prudent expense management and lower charges related to facilities exit activities as described above.

These effects were partially offset by higher acquisition and integration expenses, amortization of acquired intangibles and compensation expenses as described above.

Consolidated operating income for the year ended December 31, 2023 also included the effects of a $106.9 million gain on the sale of our gaming business and a $243.6 million loss on the sale of our consumer business.

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 consumer business disposal group to estimated fair value less costs to sell.

Segment Operating Income and Operating Margin

In our Merchant Solutions segment, operating income and operating margin for the year ended December 31, 2023 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 expense management.

These favorable effects were partially offset by incremental expenses related to continued investment in products, innovation and our technology environments.

In addition, the inclusion of EVO had an unfavorable effect on the Merchant Solutions operating margin for the year ended December 31, 2023 as compared to the prior year.

In our Issuer Solutions segment, operating income and operating margin for the year ended December 31, 2023 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 expense management.

Other Income/Expense, Net

Interest and other income for the year ended December 31, 2023 increased to $113.7 million, compared to $33.6 million for the prior year, primarily due to interest income associated with the new seller financing notes receivable of $58.3 million recognized during the year ended December 31, 2023.

Other income for the year ended December 31, 2022 included 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, 2023 increased to $660.2 million, compared to $449.4 million for the prior year, nearly equally affected by an increase in our average outstanding borrowings and higher average interest rates on outstanding borrowings.

In addition, during the year ended December 31, 2023, we incurred a noncash charge of $15.2 million for the estimated future credit losses on the new seller financing notes receivable.

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 for the EVO acquisition.

Consolidated operating margin for the year ended December 31, 2024 was 23.1% compared to 17.8% for the prior year.

• Consolidated operating income and operating margin for the year ended December 31, 2024 included the effects of a $273.1 million gain on the sale of AdvancedMD, compared to a $243.6 million net loss on the sale of our consumer business and a $106.9 million gain on the sale of our gaming business in the prior year.

The combination of these items increased operating income by $409.9 million and had a favorable effect on operating margin of approximately 4.1% for the year ended December 31, 2024;

• Consolidated operating income reflected higher corporate costs, as described above, which had an unfavorable effect on operating margin of approximately 2.5% for the year ended December 31, 2024;

• Merchant Solutions segment operating income increased $267.7 million and operating margin increased 1.2% primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues.

In addition, the inclusion of EVO had an unfavorable effect on the Merchant Solutions operating margin of 0.3% for the year ended December 31, 2024 as compared to the prior year;

• Issuer Solutions segment operating income increased $32.6 million and operating margin increased 0.7% primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues.

Other Income and Expense, Net

Interest and other income for the year ended December 31, 2024 increased $55.5 million to $169.2 million, compared to $113.7 million for the prior year primarily due to an increase of $31.6 million in interest income on the seller financing notes that were issued in connection with the sales of our consumer and gaming businesses in April 2023 and a gain of $18.8 million recognized during the year ended December 31, 2024 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 a further discussion of our Visa preferred shares.

Interest and other expense for the year ended December 31, 2024 decreased $26.2 million to $634.0 million, compared to $660.2 million for the prior year primarily due to lower average interest rates on outstanding borrowings.

Interest and other expense for the year ended December 31, 2023 also included a noncash charge of $15.2 million for the estimated future credit losses on the new seller financing notes receivable.

Income Tax Expense

Our effective income tax rates for the years ended December 31, 2024 and 2023 were 15.8% and 17.9%, respectively.

The effective tax rate for the year ended December 31, 2023 reflects recognition of a gain on the dispositions of our consumer and gaming businesses for income tax reporting purposes, while an aggregate net loss on the dispositions was recognized for financial reporting purposes.

This was partially offset by the favorable effect on the rate of foreign interest income not subject to tax, tax credits, the foreign-derived intangible income deduction, and the realization of built in losses on corporate restructurings.

The effective tax rate for the year ended December 31, 2022 included 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, 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, 2024 was lower because the effective tax rate for the year ended December 31, 2023 reflects recognition of a gain on the dispositions of our consumer and gaming businesses for income tax reporting purposes, while an aggregate net loss on the dispositions was recognized for financial reporting purposes.

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 year ended December 31, 2023, we reflected excise tax of $3.9 million within equity as part of the cost of common stock repurchased, net of share issuances, during the period.

In December 2022, the EU Member States formally adopted the Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development Pillar Two Framework.

The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive.

A significant number of other countries are expected to also implement similar legislation with varying effective dates in the future.

We are continuing to evaluate the potential effect on future periods of the Pillar Two Framework, pending legislative adoption by additional individual countries.

Equity in Income of Equity Method Investments

Equity in income of equity method investments decreased to $67.9 million compared to $85.7 million for the prior year.

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 that did not recur in the current year.

The corporate alternative minimum tax did not have a material effect on our reported results, cash flows or financial position.

During the year ended December 31, 2024 and 2023, we reflected excise taxes of $15.6 million and $3.9 million, respectively, within equity as part of the cost of common stock repurchased, net of share issuances, during the period.

During the year ended December 31, 2024, additional jurisdictions globally enacted local legislation formally adopting the Global Anti-Base Erosion Model Rules ("Pillar Two"), which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development ("OECD") Pillar Two Framework.

The effective dates are generally January 1, 2024, and January 1, 2025, for different aspects of the rules and vary by jurisdiction.

Additional jurisdictions are expected to implement the model rules under local law in the future, with varying effective dates.

The Pillar Two directive did not have a material effect on our financial statements for the year ended December 31, 2024, and we are continuing to evaluate the potential effect on future periods of the Pillar Two implementation, pending legislative adoption by additional individual countries and the ongoing issuance of additional administrative guidance by the OECD.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests increased $31.2 million to $73.8 million, compared to $42.6 million for the prior year primarily due to redemption price adjustments related to our subsidiary in Greece, which is discussed in further detail in "Note 16—Noncontrolling Interests" in the notes to the accompanying consolidated financial statements.

Net Income Attributable to Global Payments

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Diluted earnings per share was $6.16 compared to $3.77 for the prior year.

Diluted earnings per share for the year ended December 31, 2023 reflects the changes in net income and a decrease in the weighted-average number of shares outstanding.

Diluted earnings per share for the year ended December 31, 2024 reflects the changes in net income noted above and a decrease in diluted weighted-average number of shares outstanding for the year ended December 31, 2024 compared to the prior year primarily due to the cumulative effect of share repurchases.

Liquidity and Capital Resources

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In the ordinary course of our business, a significant portion of our liquidity comes from operating cash flows and borrowings, including the capacity under our revolving credit facility.

Our capital allocation priorities are to make planned capital investments in our business, to pursue acquisitions that meet our corporate objectives, to pay dividends, to pay principal and interest on our outstanding debt and to repurchase shares of our common stock.

Our capital allocation priorities are to pay dividends, to repurchase shares of our common stock, to pursue acquisitions that meet our corporate objectives, to make planned capital investments in our business and to pay principal and interest on our outstanding debt.

Our significant contractual cash requirements also include ongoing payments for lease liabilities and contractual obligations related to service arrangements with suppliers for fixed or minimum amounts, which primarily relate to software, technology infrastructure and related services.

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To supplement cash from operating activities, we use a combination of bank financing, such as borrowings under our credit facilities, commercial paper program and senior note issuances for general corporate purposes and to fund acquisitions.

Our commercial paper program, established during the first quarter of 2023, provides a cost effective means of addressing our short-term liquidity needs and 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.

Our commercial paper program provides a cost effective means of addressing our short-term liquidity needs and 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.

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.

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The available cash of $1,067.5 million does not include the following:

(i) settlement-related cash balances, (ii) funds held as collateral for merchant losses ("Merchant Reserves") and (iii) funds held for customers.

(i) settlement-related cash balances, (ii) funds held as collateral for merchant losses ("Merchant Reserves") and (iii) certain funds held for customers.

Settlement-related cash balances represent funds that we hold when the incoming amount from the card networks precedes the funding obligation to the merchant.

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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.

We also had restricted cash of $167.2 million as of December 31, 2023, representing amounts deposited by customers for prepaid card transactions and funds held as a liquidity reserve.

We also had restricted cash of $197.6 million as of December 31, 2024, representing amounts under legal restriction, amounts deposited by customers for prepaid card transactions and funds held as a liquidity reserve.

These balances are subject to local regulatory restrictions requiring appropriate segregation and restriction in their use.

Operating activities provided net cash of $2,248.7 million and $2,244.0 million for the years ended December 31, 2023 and 2022, respectively, which reflect net income adjusted for noncash items, including depreciation, amortization and the provision for credit losses, charges associated with the net loss on business dispositions and facility exit charges and changes in operating assets and liabilities.

The increase in cash flows from operating activities from the prior year was due to fluctuations in operating results and related 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 liability balances.

Operating activities provided net cash of $3,532.7 million and $2,248.7 million for the years ended December 31, 2024 and 2023, respectively, which reflect net income adjusted for noncash items, including depreciation, amortization, the provision for credit losses and the net gain or loss on business dispositions, and changes in operating assets and liabilities.

The increase in cash flows from operating activities from the prior year was due to general improvement in the results of the business and assets and liabilities that are affected primarily by timing of month-end and transaction volume, including changes in settlement processing assets and obligations.

We used net cash in investing activities of $173.9 million and $4,361.1 million during the years ended December 31, 2024 and 2023, respectively.

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

Cash used for investing activities primarily represents cash used to fund acquisitions and capital expenditures.

During the years ended December 31, 2024 and 2023, we used cash of $487.1 million and $4,225.6 million, respectively, for acquisitions.

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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 during the year ending December 31, 2024.

Additionally, investing cash flows for the year ended December 31, 2023 includes the net effect on cash from the sale of our consumer and gaming businesses, cash received from the sale of investments in Visa common shares of $42.1 million and the issuance and subsequent repayment of a $50.0 million secured revolving credit facility available from the date of the sale to the purchasers of the consumer business.

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.

We expect to continue to make capital investments in the business, and we anticipate capital expenditures to be approximately $800 million during the year ending December 31, 2025.

Additionally, investing cash flows for the year ended December 31, 2024 includes net cash received of $981.4 million from the sale of AdvancedMD and our investments in Visa common shares.

Investing cash flows for the year ended December 31, 2023 includes the net effect on cash from the sale of our consumer and gaming businesses, and cash received from the sale of our investments in Visa common shares of $42.1 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.

Our borrowing arrangements are further described in "Note 9—Long-Term Debt and Lines of Credit" in the notes to the accompanying consolidated financial statements and below under "Long-Term Debt and Lines of Credit." Financing activities also include cash flows associated with common stock repurchase programs and share-based compensation programs, cash distributions made to our shareholders and cash contributions from and distributions to noncontrolling interests.

Financing activities provided net cash of $2,141.1 million during the year ended December 31, 2023, and we used net cash in financing activities of $1,376.7 million during the year ended December 31, 2022.

We used net cash in financing activities of $2,766.9 million during the year ended December 31, 2024, and financing activities provided net cash of $2,141.1 million during the year ended December 31, 2023.

Proceeds from long-term debt were $9,635.0 million and $10,336.9 million for the years ended December 31, 2024 and 2023, respectively.

Repayments of long-term debt were $8,334.8 million and $9,099.9 million for the years ended December 31, 2024 and 2023, respectively.

Proceeds from and repayments of long-term debt consist of borrowings and repayments that we make with available cash, from time-to-time, under our revolving credit facility, as well as scheduled principal repayments we make on our term loans, finance leases and other vendor financing arrangements.

During the year ended December 31, 2023, we also had net borrowings of $1,371.6 million under our commercial paper program.

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 senior notes, finance leases and other vendor financing arrangements.

During the year ended December 31, 2024 and 2023, we had net repayments of $1,371.6 million and net borrowings of $1,371.6 million, respectively, under our commercial paper program.

Furthermore, in connection with the issuance of convertible notes in February 2024, we paid $256.3 million to purchase privately negotiated capped call transactions to hedge the potential dilutive effect upon conversion of the notes, or offset our cash obligation if the cash settlement option were to be elected.

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 years ended December 31, 2023 and 2022, we had net borrowings of settlement lines of credit of $220.7 million and $285.6 million, respectively.

During the years ended December 31, 2024 and 2023, we had net repayments of $442.7 million and net borrowings of $220.7 million, respectively, under our settlement lines of credit.

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

During the years ended December 31, 2023 and 2022, we used $418.3 million and $2,921.3 million, respectively, to repurchase shares of our common stock.

During the years ended December 31, 2024 and 2023, we used $1,552.0 million and $418.3 million, respectively, to repurchase and retire 12.7 million and 4.1 million shares of our common stock, respectively.

The share repurchase activity for the year ended December 31, 2024 included the repurchase of 1,414,759 shares using a portion of the net proceeds from our offering of 1.500% convertible senior notes due March 2031 through privately negotiated transactions with purchasers of notes in the offering, or one of their respective affiliates.

The purchase price per share of the common stock repurchased in such transactions equaled the closing price of the common stock on February 20, 2024, which was $130.80 per share.

The share repurchase activity for the year ended December 31, 2024 also included the repurchase of 5,320,781 shares at an average price of $112.77 per share under an ASR agreement we entered into on October 30, 2024 with a financial institution to repurchase an aggregate of $600.0 million of our common stock during the ASR program purchase period.

This ASR program was completed on December 20, 2024.

On October 24, 2024, our board of directors approved an increase to our existing share repurchase program authorization, which raised the total available authorization to $2.5 billion.

As of December 31, 2024, the remaining amount available under our share repurchase program was $1,850.0 million.

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We made distributions to noncontrolling interests in the amount of $38.1 million and $33.0 million during the years ended December 31, 2024 and 2023, respectively.

On January 30, 2025, our board of directors declared a cash dividend of $0.25 per share payable on March 28, 2025 to common shareholders of record as of March 14, 2025.

Long-Term Debt and Lines of Credit

We have $10.8 billion in aggregate principal amount of senior unsecured notes, which mature at various dates ranging from November 2024 to August 2052.

We have $11.1 billion in aggregate principal amount of senior unsecured notes outstanding as of December 31, 2024, which mature at various dates ranging from February 2025 to August 2052.

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

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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.

In November 2024, we repaid our $500.0 million aggregate principal amount of 1.500% senior notes upon maturity.

We have $1.1 billion in aggregate principal amount of 1.200% senior unsecured notes due March 2026.

We incurred debt issuance costs of approximately $8.6 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.

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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 $15.7 million and $27.4 million for the years ended December 31, 2023 and 2022, respectively.

The amortization of this fair value adjustment was $15.7 million for each of the years ended December 31, 2024 and 2023.

Convertible Notes

We have $1.5 billion in aggregate principal amount of 1.000% convertible notes due 2029, which were issued on August 8, 2022 in a private placement pursuant to an investment agreement with Silver Lake Partners.

1.500% Convertible Notes due March 1, 2031

On February 23, 2024, we issued $2.0 billion in aggregate principal amount of 1.500% convertible senior notes due March 2031 through a private placement.

The net proceeds from this offering were approximately $1.97 billion reflecting debt issuance costs of $33.5 million, which were capitalized and reflected as a reduction of the related carrying amount of the convertible notes in our consolidated balance sheet as of December 31, 2024.

Interest on the convertible notes is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2024, to the holders of record on the preceding February 15 and August 15, respectively.

Prior to December 1, 2030, the notes are convertible at the option of the holders only under certain conditions, including:

(i) if the last reported sale price of our common stock has been at least 130% of the conversion price for at least 20 trading days within the last 30 consecutive trading days of the immediately preceding calendar quarter;

(ii) for a five business day period following a ten-day consecutive trading period where the trading price of the notes is less than 98% of the product of the last reported sale price of our common stock and the conversion rate;

(iii) if we call any or all of the notes for redemption;

or (iv) upon the occurrence of certain corporate events.

On or after December 1, 2030, the notes are convertible at the option of the holders at any time until the second scheduled trading day prior to the maturity date.

The notes are convertible into cash and shares of our common stock based on a conversion rate of 6.371 shares of common stock per $1,000 principal amount of the convertible notes (which is equal to a conversion price of approximately $156.96 per share), subject to customary 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.

We may not redeem the notes prior to March 6, 2028.

On or after March 6, 2028, we have the option to redeem all or any portion of the notes for cash if the last reported sale price of our common stock has been at least 130% of the conversion price for at least 20 trading days within the last 30 consecutive trading day period at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest.

If certain corporate events that constitute a fundamental change (as defined in the indenture governing the notes) occur, any holder of the notes may require that we repurchase all or a portion of their notes for cash at a purchase price equal to 100% of the principal amount of the notes to be repurchased plus accrued and unpaid interest.

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

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

In connection with the issuance of the notes, we entered into privately negotiated capped call transactions with certain of the initial purchasers of the notes and other financial institutions to cover, subject to customary adjustments, the number of shares of common stock initially underlying the notes.

The economic effect of the capped call transactions is to hedge the potential dilutive effect upon the conversion of the notes, or offset our cash obligation if the cash settlement option is elected, for amounts in excess of the principal amount of converted notes subject to a cap.

The initial cap price of the capped call transactions is $228.90 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 $256.3 million incurred in connection with the capped call transactions was reflected as a reduction to paid-in-capital in our consolidated balance sheet as of December 31, 2024, net of applicable income taxes.

1.000% Convertible Notes due August 15, 2029

We also have $1.5 billion in aggregate principal amount of 1.000% convertible notes due August 2029, which were issued during 2022 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.

Interest on the 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 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 and are presented within long-term debt in our consolidated balance sheet based on our intent and ability to refinance on a long-term basis should

a conversion event occur.

The notes are convertible into cash and shares of our common stock based on a conversion rate of 7.1727 shares of common stock per $1,000 principal amount of the convertible notes (which is equal to a conversion price of approximately $139.42 per share), subject to customary anti-dilution and other adjustments upon the occurrence of certain events.

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The notes include customary covenants for 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 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 notes.

In connection with the issuance of the 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 notes.

The economic effect of the capped call transactions is to hedge the potential dilutive effect upon conversion of the 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.

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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 reflected as a reduction to paid-in-capital in our consolidated balance sheet at December 31, 2022, net of applicable income taxes.

The cost of $302.4 million incurred in connection with the capped call transactions was reflected as a reduction to paid-in-capital in our consolidated statement of changes in equity during the year ended December 31, 2022, net of applicable income taxes.

Revolving Credit Facility

On August 19, 2022, we entered into a 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 issuance under the revolving credit facility.

On August 19, 2022, we entered into a credit agreement with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents.

The 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.

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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.

We have 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.

The 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.

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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 December 31, 2023 , we had net borrowings und er our commercial paper program of $1,371.6 million outstanding with a weighted average annual interest rate of 6.06%.

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.

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.

As of December 31, 2024 , we ha d no borrowings outstanding under our commercial paper program.

Compliance with Covenants

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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 acquisition of EVO, and will gradually step-down over eight quarters to the original required ratio of 3.75 to 1.00.

As of December 31, 2023, the required leverage ratio is 4.50 to 1.00, and the required interest coverage ratio is 3.00 to 1.00.

The required leverage ratio was increased as a result of the acquisition of EVO, and will gradually step-down over eight quarters to the original required ratio of 3.75 to 1.00.

As of December 31, 2024, the required leverage ratio was 4.00 to 1.00, and the required interest coverage ratio was 3.00 to 1.00.

We were in compliance with all applicable covenants as of December 31, 2024.

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Certain of such agreements contain financial covenants, and we were in compliance with all such covenants as of December 31, 2024.

Future Obligations

We have contractual obligations related to service arrangements with suppliers for fixed or minimum amounts.

Future minimum payments for purchase obligations at December 31, 2024 are disclosed in “Note 19—Commitments and Contingencies” in the notes to the accompanying consolidated financial statements.

Critical Accounting Estimates

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Therefore, the following descriptions of our critical accounting 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" to the accompanying consolidated financial statements and the risk factors contained in "Item 1A - Risk Factors" in this Annual Report.

Business Combinations

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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 .

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

Furthermore, 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 our Issuer Solutions reporting unit was still greater than its carrying amount, 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.

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 former Business and Consumer Solutions segment to include the B2B portion within our Issuer Solutions segment and the consumer portion forming our 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.

During the second quarter of 2023, we completed the sale of our consumer business.

In addition, during 2023, we realigned our reporting units based on organizational changes and the acquired operations of EVO.

There were no significant changes in the methodology used to assess goodwill for potential impairment during the year ended December 31, 2023.

As of October 1, 2024, our reporting units consisted of the following:

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

As of October 1, 2023, we performed a quantitative assessment of impairment for our Issuer Solutions, Asia-Pacific Merchant Solutions and Latin America Merchant Solutions reporting units and a qualitative assessment for all other reporting units.

We determined on the basis of the quantitative assessments of our Issuer Solutions, Asia-Pacific Merchant Solutions and Latin America Merchant Solutions reporting units that the fair value of each reporting unit was greater than its respective carrying amount, indicating no impairment.

As of October 1, 2024, we performed a quantitative assessment of impairment for our Issuer Solutions, Europe Merchant Solutions, Spain Merchant Solutions and Latin America Merchant Solutions reporting units and a qualitative assessment for all other reporting units.

We determined on the basis of the quantitative assessments of our Issuer Solutions, Europe Merchant Solutions, Spain Merchant Solutions and Latin America Merchant 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 Latin America Merchant Solutions reporting unit, which has smaller excess compared to the other reporting units since it was recently acquired in connection with the EVO acquisition, and our Issuer Solutions reporting unit, whose fair value exceeded its carrying amount by approximately 4% as of October 1, 2023.

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, whose fair value exceeded its carrying amount by approximately 7% as of October 1, 2024.

During the quarter ended December 31, 2024, we realigned our reporting units based on strategic and organizational changes.

The new reporting units are Core Payments Solutions, Integrated and Embedded Solutions, Point-of-Sale and Software Solutions, International Merchant Solutions and Issuer Solutions.

Upon realignment of our reporting units, we performed a quantitative assessment of impairment for our Core Payments Solutions, Integrated and Embedded Solutions and Point-of-Sale and Software Solutions reporting units, and determined on the basis of those assessments that the fair value of each reporting unit was substantially in excess of its respective carrying amount, indicating no impairment.

Additionally, our International Merchant Solutions reporting unit was an aggregation of existing reporting units, and we concluded that the fair value was substantially in excess of the carrying amount.

The realignment did not affect our Issuer Solutions reporting unit.

We continue to closely monitor developments related to global events and macroeconomic conditions.

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

As a result of actions taken during the years ended December 31, 2023 and 2022 to reduce our facility footprint in certain markets around the world, we recognized charges of $6.0 million and $30.4 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.

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During the years ended December 31, 2023 and 2022, we recognized net losses of $243.6 million and $71.9 million, respectively, on the consumer business disposition to reduce the carrying amount of the consumer disposal group to estimated fair value less costs to sell, including 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.

In addition, we recognized a $106.9 million gain on the sale of the gaming business in our consolidated statement of income during the year ended December 31, 2023.

Capitalization of Internal-Use Software Costs

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Costs capitalized during the year ended December 31, 2024 totaled $45.1 million.

There were no significant changes in the accounting methodology used for capitalization of internal-use software during the year ended December 31, 2023.

During the year ended December 31, 2024, we recognized a charge of $55.8 million for technology assets that will no longer be utilized under a revised technology architecture development strategy.

Revenue Recognition

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Redeemable noncontrolling interests

Redeemable noncontrolling interests in our subsidiaries in Poland, Greece, and Chile relate to the portion of equity in each of those subsidiaries not attributable, directly or indirectly, to us, which is redeemable upon the occurrence of an event that is not solely within our control.

Redeemable noncontrolling interests in our subsidiaries in Greece, Chile, and Germany relate to the portion of equity in each of those subsidiaries not attributable, directly or indirectly, to us, which is redeemable upon the occurrence of an event that is not solely within our control.

The redeemable noncontrolling interest for each subsidiary is reflected at the higher of:

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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