Global Payments 10-Q 2022-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2022

OR

For the transition period from to

Commission file number: 001-16111

GLOBAL PAYMENTS INC.

(Exact name of registrant as specified in charter)

Registrant’s telephone number, including area code: (770) 829-8000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The number of shares of the issuer’s common stock, no par value, outstanding as of April 28, 2022 was 281,539,612.

GLOBAL PAYMENTS INC.

FORM 10-Q

For the quarterly period ended March 31, 2022

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

See Notes to Unaudited Consolidated Financial Statements.

GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

See Notes to Unaudited Consolidated Financial Statements.

GLOBAL PAYMENTS INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

See Notes to Unaudited Consolidated Financial Statements.

GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report and the Management’s Discussion and Analysis of Financial Condition and Results of Operations and consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2021. This discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements.

Executive Overview

We are a leading payments technology company delivering innovative software and services to our customers globally. Our technologies, services and team member expertise allow us to provide a broad range of solutions that enable our customers to operate their businesses more efficiently across a variety of channels around the world.

We have grown organically as well as through acquisitions. We continue to invest in new technology solutions and innovation, infrastructure to support our growing business and the consolidation and enhancement of our operating platforms. These investments include new product development and innovation to further enhance and differentiate our suite of technology and cloud-based solutions available to customers, along with migration of certain underlying technology platforms to cloud environments to enhance performance, improve speed to market and drive cost efficiencies. We continue to execute on merger and integration activities, such as combining business operations, streamlining technology infrastructure, eliminating duplicative corporate and operational support structures and realizing scale efficiencies. We have also recently commenced a strategic evaluation of the consumer portion of our Business and Consumer Solutions segment with the intent to focus on our growing business-to-business portfolio of assets.

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

• Consolidated revenues for the three months ended March 31, 2022 increased to $2,156.3 million compared to $1,990.0 million for the prior year. The increase in consolidated revenues was primarily due to an increase in transaction volumes as a result of growth in customer base, acceleration in the use of digital payment solutions and continued economic recovery from the effects of the COVID-19 pandemic.

• Consolidated operating income for the three months ended March 31, 2022 increased to $375.9 million compared to $275.3 million for the prior year. Operating margin for the three months ended March 31, 2022 increased to 17.4% compared to 13.8% for the prior year. The increase in consolidated operating income and operating margin for the three months ended March 31, 2022 was primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues, and lower acquisition and integration expenses.

Effect of COVID-19 and Other Global Events

The COVID-19 pandemic has caused and may continue to cause significant disruptions to businesses and markets worldwide through the continued spread of the virus, including through a resurgence of COVID-19 cases or emergence of new virus variants in certain jurisdictions. The pandemic and measures to prevent its spread have affected and may continue to affect our financial results in various geographic locations as a result of volatility in spending and transaction volumes as governments implement or ease restrictions in response to the virus. While we continue to see signs of economic recovery, which has positively affected our financial results, the rate of recovery on a global basis has been and may continue to be affected by additional developments related to COVID-19.

At the onset of the pandemic, we took early actions to preserve our available capital and provide financial flexibility in response to the effects of COVID-19 on our business, including the temporary reduction of certain operating expenses, employee compensation costs, other discretionary spending and planned capital expenditures, adding to the strength of our financial profile. Certain operating expenses, capital expenditures and other investments in the business have returned to more normalized levels. We expect to continue to make significant capital investments in the business while also continuing to manage other discretionary spending. We continue to closely monitor the COVID-19 pandemic; however, the implications on future global economic conditions and related effects on our business and financial condition are difficult to predict due to continuing uncertainties around the ultimate severity, scope and duration of the pandemic, vaccine administration rates and efficacy, resurgence of COVID-19 cases and emergence of new virus variants and the direction or extent of current or future restrictive actions that may be imposed by governments or public health authorities.

We also continue to evaluate the potential effects on our business from other economic conditions and global events, including the situation in Ukraine and Russia that began in February 2022. In response to the invasion of Ukraine by Russia, economic sanctions were imposed on individuals and entities in Russia, including financial institutions, by governments around the world, including the U.S. and the European Union. Our business in Russia represents an immaterial portion of our operations and financial results. In 2021, Russia contributed less than one half of one percent of total consolidated revenues. We have no team members or operations in Ukraine. As a result of additional sanctions imposed in April 2022 that will affect our ability to continue normal operations in Russia, we sold our merchant business in Russia effective April 29, 2022. Based on our current estimates, we expect to recognize a charge of approximately $130 million during the second quarter of 2022 associated with the sale. The invasion of Ukraine by Russia and the sanctions and other measures imposed in response to this situation have increased the level of economic and political uncertainty in Russia and other areas of the world. Risks associated with heightened geopolitical and economic instability include, among others, reduction in consumer, government or corporate spending, international sanctions, embargoes, heightened inflation, volatility in global financial markets and foreign currency rates, increased cyber disruptions and higher supply chain costs. We continue to take actions to comply with all applicable restrictions and sanctions. The extent to which the effects of the invasion of Ukraine by Russia will affect the global economy and our operations outside of Russia is difficult to predict at this time. However, a significant escalation or expansion of the scope or of the related economic disruption could have an adverse effect on our business and financial results.

We also continue to monitor other potential effects on our financial statements as a result of these global developments, including fluctuations in foreign currency. Certain of our operations are conducted in foreign currencies. Recently, the US dollar has strengthened against certain foreign currencies in the markets in which we operate. Consequently, a portion of our revenues and expenses may be affected by fluctuations in foreign currency exchange rates. For the three months ended March 31, 2022, currency exchange rate fluctuations decreased our consolidated revenues by approximately $14.7 million and decreased our operating income by approximately $4.7 million, calculated by converting revenues and operating income for the current year in local currencies using exchange rates for the prior year. A continuation or worsening of conditions could result in adverse effect on our future financial results; however, we are unable to predict the extent of the potential effect on our financial results.

For a further discussion of trends, uncertainties and other factors that could affect our future operating results, see “Item 1A – Risk Factors” included in Item 1 of this Quarterly Report and the section entitled "Risk Factors" in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2021.

Results of Operations

We operate in three reportable segments: Merchant Solutions, Issuer Solutions and Business and Consumer Solutions. We evaluate performance and allocate resources based on the operating income of each operating segment. For further information about our reportable segments, see "Item 1. Business—Business Segments" within our Annual Report on Form 10-K for the year ended December 31, 2021, incorporated herein by reference, and "Note 12—Segment Information" in the notes to the accompanying unaudited consolidated financial statements.

The following table sets forth key selected financial data for the three months ended March 31, 2022 and 2021, this data as a percentage of total revenues and the changes between the periods in dollars and as a percentage of the prior-year amount. The income statement data for the three months ended March 31, 2022 and 2021 is derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 - Financial Statements.

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

(2) Revenues, consolidated operating expenses, operating income (loss) and operating margin reflect the effects of acquired businesses from the respective acquisition dates. During the first quarter of 2022, the recently acquired operations of MineralTree were reassigned to the Issuer Solutions segment to reflect how the business will be managed going forward.

(3) Operating loss for Corporate included acquisition and integration expenses of $48.2 million and $90.1 million during the three months ended March 31, 2022 and 2021, respectively.

Revenues

Consolidated revenues for the three months ended March 31, 2022 increased by 8.4% to $2,156.3 million compared to $1,990.0 million for the prior year. The increase in revenues for the three months ended March 31, 2022 was primarily due to an increase in transaction volumes as a result of growth in customer base, acceleration in the use of digital payment solutions and continued economic recovery from the effects of the COVID-19 pandemic. While we continue to see signs of economic recovery, which has positively affected our financial results in the first quarter of 2022 compared to the first quarter of 2021, the rate of recovery on a global basis has been and may continue to be affected by additional developments related to COVID-19.

Merchant Solutions Segment. Revenues from our Merchant Solutions segment for the three months ended March 31, 2022 increased by 16.2% to $1,473.0 million compared to $1,267.9 million for the prior year. The increase in revenues for the three months ended March 31, 2022 was primarily due to an increase in transaction volumes as a result of growth in customer base, acceleration in the use of digital payment solutions and continued economic recovery from the effects of the COVID-19 pandemic.

Issuer Solutions Segment. Revenues from our Issuer Solutions segment for the three months ended March 31, 2022 increased by 2.2% to $511.5 million compared to $500.3 million for the prior year. The increase in revenues for the three months ended March 31, 2022 was primarily due to an increase in transaction volumes from continued economic recovery from the effects of the COVID-19 pandemic and the inclusion of the recently acquired MineralTree business within the Issuer Solutions Segment beginning with the first quarter of 2022.

Business and Consumer Solutions Segment. Revenues from our Business and Consumer Solutions segment for the three months ended March 31, 2022 were $195.8 million compared to $243.6 million for the prior year. Revenues for the three months ended March 31, 2021 were favorably affected by additional spending volumes driven by individual stimulus payments and supplementary unemployment amounts distributed to our customers by the U.S. government in the first quarter of 2021, which did not recur in the first quarter of 2022.

Operating Expenses

Cost of Service. Cost of service for the three months ended March 31, 2022 increased by 3.4% to $957.2 million compared to $925.2 million for the prior year. Cost of service as a percentage of revenues decreased to 44.4% for the three months ended March 31, 2022 compared to 46.5% for the prior year. The increase in cost of service was primarily due to higher variable costs associated with the increase in revenues. The decrease in cost of service as a percentage of revenues was primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues. Cost of service includes amortization of acquired intangibles, which were $329.0 million and $329.2 million for the three months ended March 31, 2022 and 2021, respectively.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ended March 31, 2022 increased by 4.3% to $823.1 million compared to $789.5 million for the prior year. Selling, general and administrative expenses as a percentage of revenues decreased to 38.2% for the three months ended March 31, 2022 compared to 39.7% 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. The decrease in selling, general and administrative expenses as a percentage of revenues is primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues, and lower acquisition and integration expenses in the current year. Selling, general and administrative expenses included acquisition and integration expenses of $51.0 million and $91.8 million for the three months ended March 31, 2022 and 2021, respectively.

Corporate. Corporate expenses for the three months ended March 31, 2022 decreased by $34.8 million to $160.3 million compared to $195.1 million for the prior year. The decrease for the three months ended March 31, 2022 was primarily due to lower acquisition and integration expenses, which were $48.2 million for the three months ended March 31, 2022 compared to $90.1 million for the three months ended March 31, 2021.

Operating Income and Operating Margin

Consolidated operating income for the three months ended March 31, 2022 increased to $375.9 million compared to $275.3 million for the prior year. Operating margin for the three months ended March 31, 2022 increased to 17.4% compared to 13.8% for the prior year. The increase in consolidated operating income and operating margin was primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues, and lower acquisition and integration expenses.

Segment Operating Income and Operating Margin. Operating income and operating margin in our Merchant Solutions segment for the three months ended March 31, 2022 increased compared to the three months ended March 31, 2021 primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues, and continued management of discretionary spending, slightly offset by incremental expenses related to continued investment in new product, innovation and our technology environments. In our Issuer Solutions segment, operating income and operating margin for the three months ended March 31, 2022 decreased compared to the three months ended March 31, 2021 primarily due to the recently acquired operations of MineralTree. In our Business and Consumer Solutions segment, operating income and operating margin for the three months ended March 31, 2021 were favorably affected by additional stimulus payments and supplementary unemployment amounts distributed by the U.S. government in the first quarter of 2021, which did not recur in the first quarter of 2022.

Other Income/Expense, Net

Interest and other expense for the three months ended March 31, 2022 increased to $93.3 million compared to $83.1 million for the prior year, as a result of the increase in our average outstanding borrowings and higher average interest rates on outstanding borrowings, as the average LIBOR rate was higher during the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.

Income Tax Expense

Our effective income tax rate for the three months ended March 31, 2022 was 18.4%, and our effective income tax rate for the three months ended March 31, 2021 was 10.5%. The increase in our effective tax rate for the three months ended March 31, 2022 was primarily the result of a change in the assessment of the need for a valuation allowance related to foreign credit carryforwards that favorably affected the rate for the three months ended March 31, 2021, and a lower tax benefit on share-based awards in the current year.

Net Income Attributable to Global Payments

Net income attributable to Global Payments increased to $244.7 million for the three months ended March 31, 2022 compared to $196.7 million for the prior year, reflecting the increase in operating income.

Diluted Earnings per Share

Diluted earnings per share was $0.87 for the three months ended March 31, 2022 compared to $0.66 for the prior year. Diluted earnings per share for the three months ended March 31, 2022 reflects the increase in net income and the decrease in the weighted-average number of shares outstanding.

Liquidity and Capital Resources

We have numerous sources of capital, including cash on hand and cash flows generated from operations as well as various sources of financing. In the ordinary course of our business, a significant portion of our liquidity comes from operating cash flows and borrowings, including the capacity under our credit facilities.

Our capital allocation priorities are to make planned capital investments in our business, to pursue acquisitions that meet our corporate objectives, to pay dividends, to pay principal and interest on our outstanding debt and to repurchase shares of our common stock. Our significant contractual cash requirements also include ongoing payments for lease liabilities and contractual obligations related to service arrangements with suppliers for fixed or minimum amounts, which primarily relate to software, technology infrastructure and related services. Commitments under our borrowing arrangements are further described in "Note 5—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements and below under "Long-Term Debt and Lines of Credit." For additional information regarding our other cash commitments and contractual obligations, see "Note 6—Leases," and “Note 17—Commitments and Contingencies” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Our capital plan objectives are to support our operational needs and strategic plan for long-term growth while optimizing our cost of capital and financial position. To supplement cash from operating activities, we use a combination of bank financing, such as borrowings under our credit facilities, and senior note issuances for general corporate purposes and to fund acquisitions. In addition, specialized lines of credit are also used in certain of our markets to fund merchant settlement prior to receipt of funds from the card networks.

We believe that our current level of cash and borrowing capacity under our senior unsecured revolving credit facility, together with expected future cash flows from operations, will be sufficient to meet both the near-term and long-term needs of our existing operations and planned requirements. We regularly evaluate our liquidity and capital position relative to cash requirements, and we may elect to raise additional funds in the future through the issuance of debt or equity or by other means. Accumulated cash balances are invested in high-quality, marketable short-term instruments.

At March 31, 2022, we had cash and cash equivalents totaling $2,045.3 million. Of this amount, we considered $797.3 million to be available for general purposes, of which $33.1 million is undistributed foreign earnings considered to be indefinitely reinvested outside the United States. The available cash of $797.3 million does not include the following: (i) settlement-related cash balances, (ii) funds held as collateral for merchant losses ("Merchant Reserves") and (iii) funds held for customers. Settlement-related cash balances represent funds that we hold when the incoming amount from the card networks precedes the funding obligation to the merchant. Settlement-related cash balances are not restricted in their use; however, these funds are generally paid out in satisfaction of settlement processing obligations the following day. Merchant Reserves serve as collateral to minimize contingent liabilities associated with any losses that may occur under the merchant's agreement. While this cash is not restricted in its use, we believe that designating this cash as a Merchant Reserve strengthens our fiduciary standing with our member sponsors. Funds held for customers, which are not restricted in their use, include amounts collected before the corresponding obligation is due to be settled to or at the direction of our customers.

We also had restricted cash of $134.4 million as of March 31, 2022, representing amounts deposited by customers for prepaid card transactions. These balances are subject to local regulatory restrictions requiring appropriate segregation and restriction in their use.

Operating activities provided net cash of $630.0 million and $599.4 million for the three months ended March 31, 2022 and 2021, respectively, which reflect net income adjusted for noncash items, including depreciation and amortization and changes in operating assets and liabilities. Fluctuations in operating assets and liabilities are affected primarily by timing of month-end and transaction volume, including changes in settlement processing assets and obligations and accounts payable and other liabilities balances. The increase in cash flows from operating activities from the prior year was primarily due to an increase in earnings and an increase in accounts payable and other liabilities balances due to timing of month-end and transaction volume, partially offset by an increase in prepaid expenses and other assets as a result of additional capitalized contract costs, capitalized implementation costs associated with cloud computing arrangements and timing associated with other prepaid services.

We used net cash in investing activities of $160.8 million and $96.9 million during the three months ended March 31, 2022 and 2021, respectively, primarily to fund acquisitions and capital expenditures. During the three months ended March 31, 2022 and 2021, we used cash of $4.7 million and $11.1 million, respectively, for acquisitions. We made capital expenditures of $156.1 million and $86.2 million during the three months ended March 31, 2022 and 2021, respectively. These investments include software and hardware to support the development of new technologies, infrastructure to support our growing business and the consolidation and enhancement of our operating platforms. These investments also include new product development and innovation to further enhance and differentiate our suite of technology and cloud-based solutions available to customers. We expect to continue to make significant capital investments in the business, and we anticipate capital expenditures to remain as a similar percentage of revenues for the year ending December 31, 2022 as compared to the year ended December 31, 2021.

Financing activities include borrowings and repayments under our various debt arrangements, as well as borrowings and repayments made under specialized lines of credit to fund daily settlement activities. Our borrowing arrangements are further described in "Note 5—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements and below under "Long-Term Debt and Lines of Credit." Financing activities also include cash flows associated with common stock repurchase programs and share-based compensation programs, cash distributions made to our shareholders and cash contributions from and distributions to noncontrolling interests. We used net cash in financing activities of $376.3 million and $369.0 million during the three months ended March 31, 2022 and 2021, respectively.

Proceeds from long-term debt were $1,529.2 million and $1,987.0 million for the three months ended March 31, 2022 and 2021, respectively. Repayments of long-term debt were $1,176.5 million and $1,575.4 million for the three months ended March 31, 2022 and 2021, respectively. Proceeds from and repayments of long-term debt consist of borrowings and repayments that we make with available cash, from time-to-time, under our revolving credit facility, as well as scheduled principal repayments we make on our term loans. On February 26, 2021, we issued $1.1 billion aggregate principal amount of 1.200% senior unsecured notes due February 2026. We used the net proceeds from this offering to fund the redemption in full of the 3.800% senior unsecured notes due April 2021, to repay a portion of the outstanding indebtedness under our revolving credit facility and for general corporate purposes.

Activity under our settlement lines of credit is affected primarily by timing of month-end and transaction volume. During the three months ended March 31, 2022 and 2021, we had net borrowings from settlement lines of credit of $16.5 million and $108.5 million, respectively.

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 March 31, 2022 and 2021, we used $649.7 million and $803.0 million, respectively, to repurchase shares of our common stock. The activity for the three months ended March 31, 2021 included the repurchase of 2,491,161 shares at an average price of $200.71 per share under an ASR agreement we entered into on February 10, 2021 with a financial institution to repurchase an aggregate of $500 million of our common stock during the ASR program purchase period, which ended on March 31, 2021. As of March 31, 2022, we had $1,707.0 million of share repurchase authority remaining under our share repurchase program.

We paid dividends to our common shareholders in the amounts of $70.2 million and $57.6 million during the three months ended March 31, 2022 and 2021, respectively. Additionally, during the three months ended March 31, 2022, we made distributions to noncontrolling interests in the amount of $5.5 million.

Long-Term Debt and Lines of Credit

Senior Unsecured Notes

We have $9.4 billion in aggregate principal amount of senior unsecured notes, which mature at various dates ranging from June 2023 to August 2049. Interest on the senior notes is payable semi-annually at various dates. Each series of the senior notes is redeemable, at our option, in whole or in part, at any time and from time-to-time at the redemption prices set forth in the related indenture.

Senior Unsecured Credit Facilities

As of March 31, 2022, borrowings outstanding under the term loan and revolving credit facility were $2.0 billion and $0.4 billion, respectively.

We may issue standby letters of credit of up to $250 million in the aggregate under the revolving credit facility. Outstanding letters of credit under the revolving credit facility reduce the amount of borrowings available to us. The amounts available to borrow under the revolving credit facility are also determined by a financial leverage covenant. As of March 31, 2022, the total available commitments under the revolving credit facility were $1.7 billion.

Compliance with Covenants

The senior unsecured term loan and revolving credit facility contain customary conditions to funding, affirmative covenants, negative covenants, financial covenants and events of default. As of March 31, 2022, financial covenants under the term loan facility required a leverage ratio of 3.50 to 1.00 and an interest coverage ratio of 3.00 to 1.00. We were in compliance with all applicable covenants as of March 31, 2022.

Settlement Lines of Credit

In various markets where we do business, we have specialized lines of credit that are restricted for use in funding settlement. The settlement lines of credit generally have variable interest rates, are subject to annual review and are denominated in local currency but may, in some cases, facilitate borrowings in multiple currencies. For certain of our lines of credit, the available credit is increased by the amount of cash we have on deposit in specific accounts with the lender. Accordingly, the amount of the outstanding lines of credit may exceed the stated credit limit. As of March 31, 2022, a total of $79.3 million of cash on deposit was used to determine the available credit.

As of March 31, 2022, we had $497.3 million outstanding under these lines of credit with additional capacity to fund settlement of $1.7 billion. During the three months ended March 31, 2022, the maximum and average outstanding balances under these lines of credit were $814.7 million and $442.3 million, respectively. The weighted-average interest rate on these borrowings was 2.29% at March 31, 2022.

See "Note 5—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements for further information about our borrowing agreements.

Effect of New Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted

From time-to-time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standards setting bodies that may affect our current and/or future financial statements. See "Note 1—Basis of Presentation and Summary of Significant Accounting Policies" in the notes to the accompanying unaudited consolidated financial statements for a discussion of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.

Forward-Looking Statements

Some of the statements we use in this report, and in some of the documents we incorporate by reference in this report, contain forward-looking statements concerning our business operations, economic performance and financial condition, including in particular: our business strategy and means to implement the strategy; measures of future results of operations, such as revenues, expenses, operating margins, income tax rates, and earnings per share; other operating metrics such as shares outstanding and capital expenditures; the effects of the COVID-19 pandemic on our business; our success and timing in developing and introducing new services and expanding our business; and statements about the benefits of our acquisitions, including future financial and operating results, the company’s plans, objectives, expectations and intentions, and the successful integration of our acquisitions or completion of anticipated benefits and strategic initiatives. You can sometimes identify forward-looking statements by our use of the words "believes," "anticipates," "expects," "intends," "plan," "forecast," "guidance" and similar expressions. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Although we believe that the plans and expectations reflected in or suggested by our forward-looking statements are reasonable, those statements are based on a number of assumptions, estimates, projections or plans that are inherently subject to significant risks, uncertainties and contingencies, many of which are beyond our control, cannot be foreseen and reflect future business decisions that are subject to change. Accordingly, we cannot guarantee that our plans and expectations will be achieved. Our actual revenues, revenue growth rates and margins, other results of operations and shareholder values could differ materially from those anticipated in our forward-looking statements as a result of many known and unknown factors, many of which are beyond our ability to predict or control. Important factors, among others, that may otherwise cause actual events or results to differ materially from those anticipated by such forward-looking statements or historical performance include the effects of global economic, political, market, health and social events or other conditions, including the effects and duration of, and actions taken in response to, the COVID-19 pandemic and the evolving situation involving Ukraine and Russia; our ability to meet our liquidity needs in light of the effects of the COVID-19 pandemic or otherwise; difficulties, delays and higher than anticipated costs related to integrating the businesses of Global Payments and Total System Services, Inc., including with respect to implementing controls to prevent a material security breach of any internal systems or to successfully manage credit and fraud risks in business units; the effect of a security breach or operational failure on the Company's business; failing to comply with the applicable requirements of Visa, Mastercard or other payment networks or card schemes or changes in those requirements; the ability to maintain Visa and Mastercard registration and financial institution sponsorship; the ability to retain, develop and hire key personnel; the diversion of management’s attention from ongoing business operations; the continued availability of capital and financing; increased competition in the markets in which we operate and our ability to increase our market share in existing markets and expand into new markets; our ability to safeguard our data; risks associated with our indebtedness, foreign currency exchange and interest rate risks; our ability to meet environmental, social and governance targets, goals and commitments; the potential effects of climate change including natural disasters; the effects of new or changes in current laws, regulations, credit card association rules or other industry standards on us or our partners and customers, including privacy and cybersecurity laws and regulations; and other events beyond our control, and other factors presented in "Item 1A - Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2021 and this Quarterly Report on Form 10-Q, which we advise you to review. These cautionary statements qualify all of our forward-looking statements, and you are cautioned not to place undue reliance on these forward-looking statements.

Our forward-looking statements speak only as of the date they are made and should not be relied upon as representing our plans and expectations as of any subsequent date. While we may elect to update or revise forward-looking statements at some time in the future, we specifically disclaim any obligation to publicly release the results of any revisions to our forward-looking statements, except as required by law.

For a discussion of our exposure to market risk, refer to Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," contained in our Annual Report on Form 10-K for the year ended December 31, 2021.

Evaluation of Disclosure Controls and Procedures

As of March 31, 2022, management carried out, under the supervision and with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2022, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1—LEGAL PROCEEDINGS

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. See "Note 13—Commitments and Contingencies" in the notes to the accompanying unaudited consolidated financial statements for information about certain legal matters.

The following risk factor is an update to our previously disclosed risk factors and should be considered in conjunction with the Risk Factors section in our Annual Report on Form 10-K for the year ended December 31, 2021.

We are subject to economic and geopolitical risk, the business cycles and credit risk of our customers and the overall level of consumer, business and government spending, which could negatively affect our business, financial condition, results of operations and cash flows.

The global payments technology industry depends heavily on the overall level of consumer, business and government spending. We are exposed to general economic conditions that affect consumer confidence, spending, and discretionary income and changes in consumer purchasing habits. Adverse economic conditions may negatively affect our financial performance by reducing the number or average purchase amount of transactions made using digital payments. A reduction in the amount of consumer spending could result in a decrease in our revenues and profits. If our merchants make fewer sales to consumers using digital payments, or consumers using digital payments spend less per transaction, we will have fewer transactions to process or lower transaction amounts, each of which would contribute to lower revenues. Additionally, credit card issuers may reduce credit limits and become more selective in their card issuance practices. Any of these developments could have a material adverse effect on our financial position and results of operations.

A downturn in the economy could force merchants, financial institutions or other customers to close or petition for bankruptcy protection, resulting in lower revenue and earnings for us and greater exposure to potential credit losses and future transaction declines. We also have a certain amount of fixed costs, including rent, debt service, and salaries, which could limit our ability to quickly adjust costs and respond to changes in our business and the economy. Changes in economic conditions could also adversely affect our future revenues and profits and have a materially adverse effect on our business, financial condition, results of operations and cash flows.

Credit losses arise from the fact that, in most markets, we collect our fees from our merchants on the first day after the monthly billing period. This results in the build-up of a substantial receivable from our customers. If a merchant were to go out of business during the billing period, we may be unable to collect such fees, which could negatively affect our business, financial condition, results of operations and cash flows.

In addition, our business, growth, financial condition or results of operations could be materially adversely affected by political and economic instability or changes in a country’s or region’s economic conditions, changes in laws or regulations or in the interpretation of existing laws or regulations, whether caused by a change in government or otherwise, increased difficulty of conducting business in a country or region due to actual or potential political or military conflict or action by the United States or foreign governments that may restrict our ability to transact business in a foreign country or with certain foreign individuals or entities. Risks associated with heightened geopolitical and economic instability, such as those resulting from the invasion of Ukraine by Russia, include among others, reduction in consumer, government or corporate spending, international sanctions, embargoes, heightened inflation, volatility in global financial markets, increased cyber disruptions or attacks, higher supply chain costs and increased tensions between the United States and countries in which we operate, which could result in charges related to the recoverability of assets, including financial assets, long-lived assets and goodwill and other losses, and could adversely affect our financial position and results of operations. To the extent the invasion of Ukraine by Russia adversely affects our business, it may also have the effect of heightening many other risks disclosed in our Annual

Report on Form 10-K for the year ended December 31, 2021, any of which could materially adversely affect our business, financial condition, access to financing, results of operations and liquidity.

Climate-related events, including extreme weather events and natural disasters and their effect on critical infrastructure in the U.S. or internationally, could have similar adverse effects on our operations, customers or third-party suppliers. Furthermore, our shareholders, customers and other stakeholders have begun to consider how corporations are addressing Environmental, Social and Governance ("ESG") issues. Government regulators, investors, customers and the general public are increasingly focused on ESG practices and disclosures, and views about ESG are diverse and rapidly changing. These shifts in investing priorities may result in adverse effects on the trading price of the Company's common stock if investors determine that the Company has not made sufficient progress on ESG matters. We could also face potential negative ESG-related publicity in traditional media or social media if shareholders or other stakeholders determine that we have not adequately considered or addressed ESG matters. We have been the recipient of proposals from shareholders to promote their governance positions. Shareholders are increasingly submitting proposals related to a variety of ESG issues to public companies, and we may receive other such proposals in the future. Such proposals may not be in the long-term interests of the Company or our stockholders and may divert management’s attention away from operational matters or create the impression that our practices are inadequate.

ITEM 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Information about the shares of our common stock that we repurchased during the quarter ended March 31, 2022 is set forth below:

(1)Our board of directors has authorized us to repurchase shares of our common stock through any combination of Rule 10b5-1 open-market repurchase plans, accelerated share repurchase plans, discretionary open-market purchases or privately negotiated transactions. During the quarter ended March 31, 2022, pursuant to our employee incentive plans, we withheld 195,161 shares, at an average price per share of $137.52, in order to satisfy employees' tax withholding and payment obligations in connection with the vesting of awards of restricted stock.

(2)As of March 31, 2022, we had $1,707.0 million of share repurchase authority remaining under our share repurchase program. The board authorization does not expire but could be revoked at any time. In addition, we are not required by the board’s authorization or otherwise to complete any repurchases by any specific time or at all.

List of Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.