GLOBAL PAYMENTS INC MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

0
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."

Discussions of our results of operations for the year ended December 31, 2020
compared to the year ended December 31, 2019 that have been omitted under this
item can be found in "Part II, Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our Form 10-K for the year
ended December 31, 2020, which was filed with the United States Securities and
Exchange Commission on February 19, 2021. On September 18, 2019, we consummated
our merger with Total System Services, Inc. ("TSYS") (the "Merger") for total
purchase consideration of $24.5 billion, primarily funded with shares of our
common stock. Consolidated operating results for the years ended December 31,
2020 and 2021 each reflect a full year of the acquired operations of TSYS, while
consolidated operating results for the year ended December 31, 2019 include the
acquired operations of TSYS only from the acquisition date through December 31,
2019. See "Note 2-Acquisitions" in the notes to the accompanying consolidated
financial statements for further discussion of the Merger.

                                       32
--------------------------------------------------------------------------------
  Table of Contents
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 operate in three reportable segments: Merchant
Solutions, Issuer Solutions and Business and Consumer Solutions. See "Note
16-Segment Information" in the notes to the accompanying consolidated financial
statements for additional information about our segments.

We have grown organically as well as through acquisitions. We also continue to
invest in new technology solutions, infrastructure to support our growing
business and the continued consolidation and enhancement of our operating
platforms. These investments include new product development and innovation to
further enhance and differentiate our suite of technology and cloud-based
solutions available to customers, along with migration of certain underlying
technology platforms to cloud environments to enhance performance and drive cost
efficiencies. We also continue to execute on merger and integration activities,
primarily related to the Merger, such as combining business operations,
streamlining technology infrastructure, eliminating duplicative corporate and
operational support structures and realizing scale efficiencies.

Highlights related to our financial situation as of December 31, 2021 and results of operations for the year then ended include the following:

•Consolidated revenues for the year ended December 31, 2021 increased to
$8,523.8 million, compared to $7,423.6 million for the prior year. The increase
in consolidated revenues is primarily due to an increase in transaction volumes
from continued economic recovery as COVID-19 restrictions eased and acceleration
in the use of digital payment solutions.

•Consolidated operating income for the year ended December 31, 2021 increased to
$1,358.9 million, compared to $894.0 million for the prior year. Operating
margin for the year ended December 31, 2021 increased to 15.9% compared to 12.0%
for the prior year. The increase in consolidated operating income and operating
margin for the year ended December 31, 2021 is primarily due to the increase in
revenues and favorable effects of Merger-related cost synergies.

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

•On June 10, 2021, we acquired Zego, a real estate technology company that
provides a comprehensive resident experience management software and digital
commerce solutions to property managers, primarily in the United States, for
cash consideration of approximately $933 million. This acquisition aligns with
our technology-enabled, software driven strategy and expands our business into a
new vertical market.

•During the year ended December 31, 2021, we completed other strategic business
acquisitions for an aggregate purchase price of approximately $963 million. Our
acquisition of MineralTree, a leading provider of accounts payable automation
and B2B payments solutions, expands our target addressable market and provides
incremental avenues for growth in one of the most attractive technology markets.
Our acquisitions of the Bankia merchant services business and Worldline's PayOne
Austrian acquiring business deepen our presence in Europe and expand the scale
of our distribution and technologies.

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

•On November 22, 2021, we issued $2.0 billion aggregate principal amount of
senior unsecured notes consisting of the following: (i) $500.0 million aggregate
principal amount of 1.500% senior notes due November 2024; (ii) $750.0 million
aggregate principal amount of 2.150% senior notes due January 2027; and (iii)
$750.0 million aggregate principal amount of 2.900% senior notes due November
2031. We used the net proceeds from the offering to repay the outstanding
indebtedness under our revolving credit facility and for general corporate
purposes.

•On February 26, 2021, we issued $1.1 billion aggregate principal amount of
1.200% senior unsecured notes due March 2026. We used the net proceeds from the
offering to fund the redemption in full of the 3.800% senior unsecured notes due
April 2021, to repay a portion of the outstanding indebtedness under our
revolving credit facility and for general corporate purposes.

                                       33
--------------------------------------------------------------------------------
  Table of Contents
Emerging Trends

The payments technology industry continues to grow worldwide and as a result,
certain large payment technology companies, including us, have expanded
operations globally by pursuing acquisitions and creating alliances and joint
ventures. We expect to continue to expand into new markets internationally and
increase our scale and improve our competitiveness in existing markets by
pursuing additional acquisitions and joint ventures.

The industry continues to grow as a result of wider merchant acceptance and
increased use of credit and debit cards, advances in payment processing
technology and migration to ecommerce, omnichannel and contactless payment
solutions. The proliferation of credit and debit cards, as well as other digital
payment solutions, has made the acceptance of digital payments a virtual
necessity for many businesses, regardless of size, in order to remain
competitive. Further, the expanding digitization of the economy and availability
and access to financial services increases the demand for cards and digital
payment solutions, which in turn drives growth in acceptance and transaction
volumes.

The use of digital payment solutions, the need for development of technologies
and digital-based solutions and expansion of ecommerce, omnichannel and
contactless payment solutions has accelerated, in part as a result of the
COVID-19 pandemic. We believe that the number of digital payment transactions
will continue to grow and that an increasing percentage of these will be
facilitated through emerging technologies. As a result, we expect an increasing
portion of our future capital investment will be allocated to support the
development of new and emerging technologies, including technology
modernization, innovation and integration through strategic partnerships.

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

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

COVID-19 Update

Since early 2020, the global economy has been affected by the COVID-19 pandemic.
The pandemic has caused and may continue to cause significant disruptions to
businesses and markets worldwide through the continued spread of the virus,
including through a resurgence of COVID-19 cases or emergence of new more
contagious or vaccine-resistant virus variants in certain jurisdictions.
Beginning in mid-March 2020, our financial results were affected by decreased
spending and transaction volumes, as governments implemented measures in an
effort to contain the virus, including lockdowns, physical distancing, travel
restrictions, limitations on public gatherings, work from home and restrictions
on nonessential businesses. We saw improvement in our financial results during
the latter half of 2020 and in 2021, driven by an increase in spending and
transaction volumes as a result of an ease in restrictions and distribution of
economic stimulus provided by certain governments and continued vaccine
distribution. While we continue to see signs of economic recovery, which has
positively affected our financial results in 2021 compared to the prior year,
the rate of recovery on a global basis has been and may continue to be affected
by additional developments related to COVID-19.

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

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

                                       34
--------------------------------------------------------------------------------
  Table of Contents
Results of Operations

Revenues

Merchant Solutions. The majority of our Merchant Solutions segment revenues is
generated by services priced as a percentage of transaction value or a specified
fee per transaction, depending on card type or industry vertical. We also earn
software subscription and licensing fees, as well as other fees based on
specific value-added services that may be unrelated to the number or value of
transactions. These revenues depend upon a number of factors, such as demand for
and price of our services, the technological competitiveness of our offerings,
our reputation for providing timely and reliable service, competition within our
industry and general economic conditions.

We provide payment technology and software solutions to customers and fund
settlement either directly, in markets where we have direct membership with the
payment networks, or through our relationship with a member financial
institution in markets where we are sponsored. Revenues are generally recognized
in the amount of customer billing, net of interchange fees and payment network
fees. We market our services through a variety of relationship-led and
technology-enabled distribution channels, including a direct sales force, trade
associations, agent and enterprise software providers and referral arrangements
with value-added resellers ("VARs"). We also sell services to ISOs and financial
institutions. In certain of these arrangements, the ISO receives a share of the
customer profitability in the form of a monthly residual payment, which is
reflected as a component of selling, general and administrative expenses in the
consolidated statements of income.

Issuer Solutions. Issuer Solutions segment revenues are derived from long-term
processing contracts with financial institutions and other financial services
providers. Payment processing services revenues are generated primarily from
charges based on the number of accounts on file, transactions and authorizations
processed, statements generated and/or mailed, managed services, cards embossed
and mailed, and other processing services for cardholder accounts on file. Most
of these contracts have prescribed annual minimums, penalties for early
termination, and service level agreements that may affect contractual fees if
specific service levels are not achieved. Issuer Solutions revenues also include
loyalty redemption services and professional services.

Business and Consumer Solutions. Business and Consumer Solutions segment
revenues principally consist of fees collected from cardholders and fees
generated by cardholder activity in connection with the programs that we manage.
Customers are typically charged a fee for each purchase transaction made using
their cards, unless the customer is on a monthly or annual service plan, in
which case the customer is instead charged a monthly or annual subscription fee,
as applicable. Customers are also charged a monthly maintenance fee after a
specified period of inactivity. We also charge fees associated with additional
services offered in connection with certain cards, including the use of
overdraft features, a variety of bill payment options, card replacement, foreign
exchange and card-to-card transfers of funds initiated through our call centers.
Revenues are recognized net of fees charged by the payment networks for services
they provide in processing transactions routed through them. Additionally,
revenues include fees from B2B payment services and software-as-a-service
("SaaS") offerings that automate key procurement processes and enable virtual
cards and integrated payments options. We have recently commenced a strategic
evaluation of the consumer portion of this segment with the intent to focus on
our growing B2B portfolio.

Operating Expenses

Cost of Service

Cost of service consists primarily of salaries, wages and related expenses paid
to operations and technology-related personnel, including those who monitor our
transaction processing systems and settlement functions; the cost of transaction
processing systems, including third-party services; the cost of network
telecommunications capability; depreciation and occupancy costs associated with
the facilities supporting these functions; amortization of intangible assets;
amortization of costs to fulfill customer contracts; provisions for operating
losses; and, when applicable, integration expenses.

Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of salaries,
wages, commissions and related expenses paid to sales personnel, customer
support functions other than those supporting revenue, administrative employees
and management; share-based compensation expense; amortization of costs to
obtain customer contracts; residuals paid to ISOs; fees paid to VARs,
independent contractors and other third parties; other selling expenses;
occupancy costs of leased space directly related to these functions; advertising
costs; and, when applicable, acquisition and integration expenses.

                                       35
--------------------------------------------------------------------------------
  Table of Contents
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. Overhead and shared expenses, including share-based compensation, are
not allocated to segment operations; they are reported in the caption
"Corporate." Similarly, we refer to "operating margin" regarding segment
operations, which is calculated by dividing segment operating income by segment
revenues.

Equity in investment income under the equity method

We have equity method investments, including a 45% interest in China UnionPay
Data Co., Ltd., which we account for using the equity method of accounting.
Equity in income of equity method investments reflects our proportional share of
earnings from these investments.

                                       36
--------------------------------------------------------------------------------
  Table of Contents
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

The following table sets forth key selected financial data for the years ended
December 31, 2021 and 2020, 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, 2021 and 2020
are derived from the accompanying consolidated financial statements included in
"Item 8 - Financial Statements and Supplementary Data."

                                                    Year Ended December 31,                               Year Ended December 31,
(dollar amounts in thousands)                  2021                  % of Revenue(1)                 2020                  % of Revenue(1)              Change              % Change
Revenues(2):
Merchant Solutions                      $         5,665,557                     66.5  %       $         4,688,335                     63.2  %       $      977,222              20.8  %
Issuer Solutions                                  2,065,971                     24.2  %                 1,981,435                     26.7  %               84,536               4.3  %
Business and Consumer Solutions                     886,443                     10.4  %                   829,505                     11.2  %               56,938               6.9  %
Intersegment eliminations                          (94,209)                     (1.1) %                  (75,717)                     (1.0) %             (18,492)              24.4  %
     Consolidated revenues              $         8,523,762                    100.0  %       $         7,423,558                    100.0  %       $    1,100,204              14.8  %

Consolidated operating expenses(2):
Cost of service                         $         3,773,725                     44.3  %       $         3,650,727                     49.2  %       $      122,998               3.4  %
Selling, general and administrative               3,391,161                     39.8  %                 2,878,878                     38.8  %              512,283              17.8  %
     Operating expenses                 $         7,164,886                     84.1  %       $         6,529,605                     88.0  %       $      635,281               9.7  %

Operating income (loss)(2)(3):
Merchant Solutions                      $         1,725,990                     20.2  %       $         1,162,741                     15.7  %       $      563,249              48.4  %
Issuer Solutions                                    301,119                      3.5  %                   277,651                      3.7  %               23,468               8.5  %
Business and Consumer Solutions                     167,777                      2.0  %                   138,630                      1.9  %               29,147              21.0  %
Corporate                                         (836,010)                     (9.8) %                 (685,069)                     (9.2) %            (150,941)              22.0  %
     Operating income                   $         1,358,876                     15.9  %       $           893,953                     12.0  %       $      464,923              52.0  %

Operating margin(2):
Merchant Solutions                                  30.5  %                                               24.8  %                                           5.7  %
Issuer Solutions                                    14.6  %                                               14.0  %                                           0.6  %
Business and Consumer Solutions                     18.9  %                                               16.7  %                                           2.2  %


(1) Percentages may not add up to total due to rounding.

(2) Revenues, consolidated operating expenses, operating profit (loss) and operating margin reflect the effects of the businesses acquired from the respective acquisition dates.

(3) Operating loss for Corporate included acquisition and integration expenses
of $335.5 million and $313.0 million during the years ended December 31, 2021
and 2020, respectively. During the year ended December 31, 2021, operating loss
for Corporate also included $56.8 million of other charges related to facilities
exit activities in response to the transition to remote and flexible work
arrangements.

Revenue

Consolidated revenues for the year ended December 31, 2021 increased by 14.8% to
$8,523.8 million, compared to $7,423.6 million for the prior year. Starting in
mid-March 2020, COVID-19 began to have an unfavorable effect on transaction
volumes and on our revenues. We saw improvements during the latter half of 2020
and in 2021, and revenues for the year ended December 31, 2021 increased
compared to the prior year primarily due to an increase in transaction volumes
from continued economic recovery as COVID-19 restrictions eased and acceleration
in the use of digital payment solutions. While we continue to see signs of
economic recovery, which has positively affected our financial results in 2021
compared to the prior year, the rate of recovery on a global basis has been and
may continue to be affected by additional developments related to COVID-19.

                                       37
--------------------------------------------------------------------------------
  Table of Contents
Merchant Solutions Segment. Revenues from our Merchant Solutions segment for the
year ended December 31, 2021 increased by 20.8% to $5,665.6 million, compared to
$4,688.3 million for the prior year. Starting in mid-March 2020, COVID-19 began
to have an unfavorable effect on our revenues as a result of a reduction in
transaction volumes and restrictions on certain of our customer businesses
throughout North America, Europe and Asia Pacific. We saw improvement in our
financial results during the latter half of 2020 and in 2021 as certain
governments eased pandemic-related restrictions and consumer and business
spending increased. Revenues for the year ended December 31, 2021 increased
compared to the prior year due to an increase in transaction volumes from
continued economic recovery as COVID-19 restrictions eased and acceleration in
the use of digital payment solutions. While we continue to see signs of economic
recovery, which has positively affected our financial results in 2021 compared
to the prior year, additional developments related to COVID-19 slowed the rate
of recovery during the fourth quarter of 2021.

Issuer Solutions Segment. Revenues from our Issuer Solutions segment for the
year ended December 31, 2021 increased by 4.3% to $2,066.0 million, compared to
$1,981.4 million for the prior year. Starting in mid-March 2020, COVID-19 began
to have an unfavorable effect on our revenues as a result of lower transaction
volumes, particularly related to the processing of commercial cards. We saw
improvement in our financial results during the latter half of 2020 and in 2021
as certain governments began to gradually ease pandemic-related restrictions.
The increase in revenues for the year ended December 31, 2021 was primarily due
to an increase in transaction volumes from continued economic recovery as
COVID-19 restrictions eased and growth in our output services of card and
statement production.

Business and Consumer Solutions Segment. Revenues from our Business and Consumer
Solutions segment for the year ended December 31, 2021 increased by 6.9% to
$886.4 million, compared to $829.5 million for the prior year. Our Business and
Consumer Solutions segment experienced an unfavorable effect on revenues
starting in mid-March 2020 due to reduced consumer spending as a result of
COVID-19. We saw improvement in our financial results throughout the latter half
of 2020 and in 2021 from increases in consumer spending driven by government
stimulus programs and the easing of COVID-19 related restrictions. Increases in
consumer spending and additional spending volumes driven by further individual
stimulus payments distributed to our customers by the United States government
had a favorable effect on revenues for the year ended December 31, 2021. Our
revenues for the year ended December 31, 2020 also included the favorable effect
of revenues from individual stimulus payments and supplementary unemployment
insurance distributions to our customers resulting from the Coronavirus Aid,
Relief and Economic Security Act. To a lesser extent, revenues from recently
acquired businesses contributed to the increase in revenues for the year ended
December 31, 2021. We do not expect any recurring effect on our revenues in 2022
related to government stimulus payment distributions.

Functionnary costs


Cost of Service. Cost of service for the year ended December 31, 2021 increased
by 3.4% to $3,773.7 million, compared to $3,650.7 million for the prior year.
Cost of service as a percentage of revenues decreased to 44.3% for the year
ended December 31, 2021, compared to 49.2% for the prior year. The increase in
cost of service is primarily due to higher variable costs associated with the
increase in revenues. The increase in costs of service also reflects an increase
in amortization of acquired intangibles, which were $1,295.0 million and
$1,256.9 million for the years ended December 31, 2021 and 2020, respectively.
The decrease in cost of service as a percentage of revenues is primarily due to
the favorable effects of the increases in revenues, since certain fixed costs do
not vary with revenues, and Merger-related cost synergies.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 2021 increased by 17.8%
to $3,391.2 million, compared to $2,878.9 million for the prior year. Selling,
general and administrative expenses as a percentage of revenues was 39.8% for
the year ended December 31, 2021, compared to 38.8% for the prior year. The
increase in selling, general and administrative expenses is primarily due to an
increase in variable selling and other costs related to the increase in
revenues. The increase in selling, general and administrative expenses as a
percentage of revenues is primarily due to higher employee compensation expense,
including an increase in share-based compensation expense of $32.0 million, and
higher acquisition and integration expenses, which were $340.2 million for the
year ended December 31, 2021, compared to $319.5 million for the prior year.
Employee compensation costs were lower in the prior year as a result of certain
temporary cost-saving actions taken to help mitigate the financial effects of
the COVID-19 pandemic. Additionally, share-based compensation expense was higher
in the current year primarily driven by the vesting of certain performance-based
restricted stock units upon achievement of performance measures during the
period. In addition, opportunities were identified during the fourth quarter of
2021 to reduce our facility footprint in certain markets around the world given
the success of remote work and flexible arrangements implemented during the
COVID-19 pandemic. Actions taken to exit certain leased facilities resulted in
charges of $56.8 million during the year ended December 31, 2021, primarily to
reduce the carrying amount of the affected asset groups to estimated fair value.
We continue to evaluate our physical footprint and additional charges may be
incurred as these facilities exit activities continue in 2022.

Corporate. Corporate expenses for the year ended December 31, 2021 increased by
$150.9 million to $836.0 million, compared to $685.1 million for the prior year.
The increase for the year ended December 31, 2021 is primarily due to higher
employee compensation expense, including an increase in share-based compensation
expense of $32.0 million as described
                                       38
--------------------------------------------------------------------------------
  Table of Contents
above, higher acquisition and integration expenses, which were $335.5 million
for the year ended December 31, 2021 compared to $313.0 million for the prior
year, and other charges related to facilities exit activities in the fourth
quarter of 2021 as described above. Certain of the Merger-related integration
activities resulted in the recognition of employee termination benefits. During
the years ended December 31, 2021 and 2020, Corporate expenses included charges
for employee termination benefits of $43.4 million and $83.3 million,
respectively, which included $1.2 million and $6.7 million, respectively, of
share-based compensation expense. As of December 31, 2021, the cumulative amount
of recognized charges for employee termination benefits resulting from
Merger-related integration activities was $183.8 million, which included
$25.2 million of share-based compensation expense. Employee termination benefits
from Merger-related integration activities are substantially complete as of
December 31, 2021.

Operating profit and operating margin


Consolidated operating income for the year ended December 31, 2021 increased to
$1,358.9 million, compared to $894.0 million for the prior year. Operating
margin for the year ended December 31, 2021 increased to 15.9%, compared to
12.0% for the prior year. The increase in consolidated operating income and
operating margin for the year ended December 31, 2021 was primarily due to the
increases in revenues, the operating margin effect in part being driven by the
fact that certain fixed costs do not vary with revenues. The unfavorable effects
of COVID-19 on our revenues and incremental expenses directly related to
COVID-19 contributed to the lower consolidated operating income and operating
margin in the prior year. We saw improvement in our financial results and
positive trends during the latter half of 2020 and in 2021 as a result of the
recovery seen across our markets as COVID-19 restrictions eased. Further,
Merger-related cost synergies and lower credit loss expense had a favorable
effect on operating income and operating margin for the year ended December 31,
2021. The increase in consolidated operating income and operating margin for the
year ended December 31, 2021 was partially offset by an increase in acquisition
and integration expenses of $20.3 million compared to the prior year, charges
related to facilities exit activities in the fourth quarter of 2021 as described
above and an increase in amortization of acquired intangibles of $38.1 million
compared to the prior year. Operating income and operating margin for the year
ended December 31, 2021 also reflects an increase in employee compensation
expense compared to the prior year as a result of certain temporary cost-saving
actions taken in the prior year to help mitigate the financial effects of the
COVID-19 pandemic and higher share-based compensation expense in the current
year associated with performance-based awards.

Segment Operating Income and Operating Margin. Operating income and operating
margin in each of our Merchant Solutions, Issuer Solutions and Business and
Consumer Solutions segments for the year ended December 31, 2021 increased
compared to the prior year due to the increase in revenues. We saw improvement
in our financial results and positive trends during the latter half of 2020 and
in 2021 as a result of the recovery seen across our geographic markets as
COVID-19 restrictions eased and consumer and business spending increased, in
part as a result of government stimulus payments. Further, across all of our
segments, Merger-related cost synergies had a favorable effect on segment
operating income and operating margin for the year ended December 31, 2021. In
our Business and Consumer Solutions segment, operating income and operating
margin for the year ended December 31, 2021 were favorably affected by spending
volumes driven by additional stimulus payments distributed by the United States
government in early 2021, and operating income and operating margin for the year
ended December 31, 2020 included the favorable effect from our customers loading
individual stimulus payments and supplementary unemployment insurance
distributions during the second quarter of 2020.

Other income/expenses, net


Interest and other income for the year ended December 31, 2021 decreased by
$24.2 million to $19.3 million, compared to $43.6 million for the prior year.
Interest and other income for the year ended December 31, 2020 included a gain
of $27.7 million in connection with the release and conversion of a portion of
our Visa convertible preferred shares. See "Note 7-Other Assets" in the notes to
the accompanying consolidated financial statements for further discussion of
this transaction.

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

                                       39
--------------------------------------------------------------------------------
  Table of Contents
Income Tax Expense


Our effective income tax rates for the years ended December 31, 2021 and 2020
were 16.2% and 13.0%, respectively. The increase in our effective tax rate for
the year ended December 31, 2021 from the prior year was primarily due to the
geographical mix of earnings compared to the prior year and a change in the U.K.
statutory income tax rate that was enacted during the year ended December 31,
2021, which required a remeasurement of deferred tax balances to increase the
effective tax rate. The effective tax rate for the year ended December 31, 2020
also included the effect of a change in the U.K. statutory income tax rate that
took effect during the year, which required a remeasurement of deferred tax
balances to increase the effective tax rate; however, the 2021 U.K. tax rate
change had a more significant effect on our effective tax rate than the 2020
U.K. tax rate change. These effects were partially offset by a change in the
assessment of the need for a valuation allowance related to foreign net
operating losses and foreign tax credit carryforwards during the year ended
December 31, 2021. In addition, the lower effective tax rate in 2020 reflects
the effect of permanent differences on lower income before income taxes, since
the amounts of certain of our permanent differences do not vary with income
before income taxes.

Equity in investment income under the equity method

The share of income from equity-accounted investments increased to $112.4 million
compared to $88.3 million for the prior year, primarily due to increased trading volumes and appreciation in the fair value of investments held in certain investees.

Net income attributable to Global Payments

Net income attributable to Global Payments increased to $965.5 million compared to $584.5 million for the previous year, reflecting the increase in operating profit and equity in the result of equity-accounted investments.

Diluted earnings per share

Diluted earnings per share was $3.29 compared to $1.95 for the prior year.
Diluted earnings per share for the year ended December 31, 2021 reflects the
increase in net income and a decrease in the weighted-average number of shares
outstanding.

Cash and capital resources

We have many sources of capital, including cash and cash flow generated from operations as well as various sources of financing. In the normal course of our business, a significant portion of our liquidity comes from operating cash flow and borrowings, including 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. For additional information regarding our cash commitments and
contractual obligations, see "Note 6-Leases," "Note 8-Long-Term Debt and Lines
of Credit" and "Note 17-Commitments and Contingencies" in the notes to the
accompanying consolidated financial statements.

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

We believe that our current level of cash and borrowing capacity under our
senior unsecured revolving credit facility, together with expected future cash
flows from operations, will be sufficient to meet both the near-term and
long-term needs of our existing operations and planned requirements. Early
actions taken to preserve our available capital and provide financial
flexibility in response to the effects of COVID-19 on our business, including
the temporary reduction of certain operating expenses, employee compensation
costs, other discretionary spending and planned capital expenditures, added to
the strength of our financial profile. 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.

AT December 31, 2021we had cash and cash equivalents totaling $1,979.3 million. Of this amount, we considered $894.6 million be available for general purposes, including $32.7 million is undistributed foreign income considered to be reinvested abroad indefinitely United States. The available cash of $894.6 million does not include the following: (i) cash balances related to settlement, (ii) funds held as collateral against merchant losses (“Merchant Reserves”), and (iii) funds held for

                                       40
--------------------------------------------------------------------------------
  Table of Contents
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.
Accumulated cash balances are invested in high-quality, marketable short-term
instruments.

We also had tight cash of $143.7 million from December 31, 2021, representing amounts deposited by customers for prepaid card transactions. These balances are subject to local regulatory restrictions requiring appropriate segregation and restriction of their use.

Operating activities provided net cash of $2,780.8 million and $2,314.2 million
for the years ended December 31, 2021 and 2020, respectively, which reflect net
income adjusted for noncash items, including depreciation and amortization,
facility exit charges and changes in operating assets and liabilities.
Fluctuations in operating assets and liabilities are affected primarily by
timing of month-end and transaction volume, including changes in settlement
processing assets and obligations and accounts payable and other liabilities
balances, and by the effects of businesses we acquire that have different
working capital requirements. The increase in cash flows from operating
activities from the prior year was primarily due to an increase in earnings, an
increase in accounts payable and other liabilities balances due to timing of
month-end and transaction volume, partially offset by an increase in accounts
receivable as a result of higher revenues in the current year.

We used net cash in investing activities of $2,293.8 million and $438.3 million
during the years ended December 31, 2021 and 2020, respectively. Cash used for
investing activities primarily represents cash used to fund acquisitions, net of
cash and restricted cash acquired, and capital expenditures. During the year
ended December 31, 2021, we used cash of $1,904.7 million for acquisitions.
During the year ended December 31, 2020, we used cash of $167.9 million for
acquisitions and recorded a cash inflow of $119.4 million from restricted cash
balances acquired during the year. Cash from investing activities for the year
ended December 31, 2020 also reflects cash received from the sale of Visa common
shares of $27.7 million.

We made capital expenditures of $493.2 million and $436.2 million during the
years ended December 31, 2021 and 2020, respectively. These investments include
software and hardware to support the development of new technologies,
infrastructure to support our growing business and the continued consolidation
and enhancement of our operating platforms. These investments also include new
product development and innovation to further enhance and differentiate our
suite of technology and cloud-based solutions available to customers, along with
the migration of certain underlying technology platforms to cloud environments
to enhance performance and drive cost efficiencies. Capital expenditures and
other investments in the business have recently returned to more normalized
levels, and we expect to continue to make significant capital investments in the
business. We anticipate capital expenditures to grow at a similar rate as our
revenue growth for the year ending December 31, 2022.

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 8-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. We used net
cash in financing activities of $405.4 million and $1,546.1 million during the
years ended December 31, 2021 and 2020, respectively.

Proceeds from long-term debt were $7,057.7 million and $2,401.1 million for the
years ended December 31, 2021 and 2020, respectively. Repayments of long-term
debt were $4,826.8 million and $2,342.1 million for the years ended December 31,
2021 and 2020, 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
March 2026. We used the net proceeds from this offering to fund the redemption
in full of the 3.800% senior unsecured notes due April 2021, to repay a portion
of the outstanding indebtedness under our revolving credit facility and for
general corporate purposes. On November 22, 2021, we issued $2.0 billion
aggregate principal amount of senior unsecured notes consisting of the
following: (i) $500.0 million aggregate principal amount of 1.5% senior notes
due November 2024; (ii) $750.0 million aggregate principal amount of 2.150%
senior notes due January 2027; and (iii) $750.0 million aggregate principal
amount of 2.900% senior notes due November 2031. We used the net proceeds from
the offering to repay the outstanding indebtedness under our revolving credit
facility and for general corporate purposes.

                                       41
--------------------------------------------------------------------------------
  Table of Contents
Activity under our settlement lines of credit is affected primarily by timing of
month-end and transaction volume. During the year ended December 31, 2021, we
had net borrowings from settlement lines of credit of $149.5 million. During the
year ended December 31, 2020, we had net repayments of settlement lines of
credit of $133.3 million.

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, 2021 and 2020, we used cash of $2,533.6 million and
$631.1 million, respectively, to repurchase shares of our common stock. The
share repurchase activity for the year ended December 31, 2021, included the
repurchase of 2,491,161 shares at an average price of $200.71 per share under an
ASR agreement we entered into on February 10, 2021 with a financial institution
to repurchase an aggregate of $500.0 million of our common stock during the ASR
program purchase period, which ended on March 31, 2021. We temporarily suspended
repurchases of our common stock during the second and third quarters of 2020,
and reactivated our repurchase program in the fourth quarter of 2020. As of
December 31, 2021, we had $1,540.0 million of share repurchase authority
remaining under a share repurchase program authorized by our board of directors.
On January 27, 2022, our board of directors approved an increase to our existing
share repurchase program authorization, which raised the total available
authorization to $2.0 billion.

We paid dividends to our common shareholders in the amount of $259.7 million
and $233.2 million over the past years December 31, 2021 and 2020, respectively.

During the year ended December 31, 2021, Global Payments and noncontrolling
shareholders made contributions of $209.6 million and $70.0 million,
respectively, to certain of our majority-owned subsidiaries based on each
shareholder's proportionate ownership, primarily to fund acquisitions that
closed in the fourth quarter of 2021. During the year ended December 31, 2020,
we paid $578.2 million to noncontrolling interest holders to increase our
controlling financial interest in Comercia Global Payments Entidad de Pago, S.L.
("Comercia") from 51% to 80%, which was funded through a combination of
available cash resources and borrowings on our unsecured revolving credit
facility. Additionally, during the year ended December 31, 2020, we made
distributions to noncontrolling interests in the amount of $26.2 million.

Long-term debt and lines of credit

Senior Unsecured Notes

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

On November 22, 2021, we issued $2.0 billion aggregate principal amount of
senior unsecured notes consisting of the following: (i) $500.0 million aggregate
principal amount of 1.500% senior notes due November 2024; (ii) $750.0 million
aggregate principal amount of 2.150% senior notes due January 2027; and (iii)
$750.0 million aggregate principal amount of 2.900% senior notes due November
2031. We incurred debt issuance costs of approximately $14.4 million, including
underwriting fees, fees for professional services and registration fees, which
were capitalized and reflected as a reduction of the related carrying amount of
the notes in our consolidated balance sheet at December 31, 2021. Interest on
the senior unsecured notes is payable semi-annually in arrears on May 15 and
November 15 for the 2024 and 2031 notes and January 15 and July 15 on the 2027
note, commencing May 15, 2022 for the 2024 note and the 2031 note and July 15,
2022 for the 2027 note. The notes are unsecured and unsubordinated indebtedness
and rank equally in right of payment with all of our other outstanding unsecured
and unsubordinated indebtedness. We used the net proceeds from the offering to
repay the outstanding indebtedness under our revolving credit facility and for
general corporate purposes.

On February 26, 2021, we issued $1.1 billion 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 at December 31, 2021. Interest on the notes is payable
semi-annually in arrears on March 1 and September 1 of each year, commencing
September 1, 2021. The notes are unsecured and unsubordinated indebtedness and
rank equally in right of payment with all of our other outstanding unsecured and
unsubordinated indebtedness. We used the net proceeds from this offering to fund
the redemption in full of the 3.800% senior unsecured notes due April 2021, to
repay a portion of the outstanding indebtedness under our revolving credit
facility and for general corporate purposes.
                                       42

————————————————– ——————————

Contents

On May 15, 2020, we issued $1.0 billion aggregate principal amount of 2.900%
senior unsecured notes due May 2030 and received proceeds of $996.7 million. We
incurred debt issuance costs of approximately $8.4 million, including
underwriting fees, fees for professional services and registration fees, which
were capitalized and reflected as a reduction of the related carrying amount of
the notes in our consolidated balance sheet at December 31, 2021. Interest on
the notes is payable semi-annually in arrears on May 15 and November 15 of each
year, commencing November 15, 2020. The notes are unsecured and unsubordinated
indebtedness and rank equally in right of payment with all of our other
outstanding unsecured and unsubordinated indebtedness. We used the net proceeds
from the offering to repay a portion of the outstanding indebtedness on our
revolving credit facility and for general corporate purposes.

On August 14, 2019, we issued $3.0 billion aggregate principal amount of senior
unsecured notes consisting of the following: (i) $1.0 billion aggregate
principal amount of 2.650% senior notes due 2025; (ii) $1.25 billion aggregate
principal amount of 3.200% senior notes due 2029; and (iii) $750.0 million
aggregate principal amount of 4.150% senior notes due 2049. Interest on the
senior notes is payable semi-annually in arrears on each February 15 and August
15, beginning on February 15, 2020. 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. We
issued the senior notes at a total discount of $6.1 million and capitalized
related debt issuance costs of $29.6 million.

From August 14, 2019 until the closing of the Merger on September 18, 2019, the
proceeds from the issuance of the senior notes were held in escrow. Upon
closing, the funds were released and used together with borrowings under the
term loan facility and the revolving credit facility, as well as cash on hand,
to repay TSYS' unsecured revolving credit facility, refinance certain of our
existing indebtedness, fund cash payments made in lieu of fractional shares and
pay transaction fees and costs related to the Merger.

In addition, in connection with the Merger, we assumed $3.0 billion aggregate
principal amount of senior unsecured notes of TSYS, consisting of the following:
(i) $750.0 million aggregate principal amount of 3.800% senior notes due 2021,
which were redeemed in February 2021; (ii) $550.0 million aggregate principal
amount of 3.750% senior notes due 2023; (iii) $550.0 million aggregate principal
amount of 4.000% senior notes due 2023; (iv) $750 million aggregate principal
amount of 4.800% senior notes due 2026; and (v) $450 million aggregate principal
amount of 4.450% senior notes due 2028. For the 3.800% senior notes due 2021 and
the 4.800% senior notes due 2026, interest is payable semi-annually each April 1
and October 1. For the 3.750% senior notes due 2023, the 4.000% senior notes due
2023 and the 4.450% senior notes due 2028, interest is payable semi-annually
each June 1 and December 1. The difference between the acquisition-date fair
value and face value of senior notes assumed in the Merger is recognized over
the terms of the respective notes as a reduction of interest expense. The
amortization of this fair value adjustment was $29.6 million and $36.2 million
for the years ended December 31, 2021 and 2020, respectively.

Senior unsecured credit facilities

We have a term loan credit agreement ("Term Loan Credit Agreement") and a
revolving credit agreement ("Unsecured Revolving Credit Agreement") in each case
with Bank of America, N.A., as administrative agent, and a syndicate of
financial institutions, as lenders and other agents. The Term Loan Credit
Agreement provides for a senior unsecured $2.0 billion term loan facility, and
the Unsecured Revolving Credit Agreement provides for a senior unsecured $3.0
billion revolving credit facility. Borrowings under the term loan facility were
made in U.S. dollars and borrowings under the revolving credit facility are
available to be made in U.S. dollars, euros, sterling, Canadian dollars and,
subject to certain conditions, certain other currencies at our option.
Borrowings in U.S. dollars and certain other London Interbank Offered Rate
("LIBOR")-quoted currencies will bear interest, at our option, at a rate equal
to either (1) the rate (adjusted for any statutory reserve requirements for
eurocurrency liabilities) for eurodollar deposits in the London interbank
market, (2) a floating rate of interest set forth on the applicable LIBOR screen
page designated by Bank of America or (3) the highest of (a) the federal funds
effective rate plus 0.5%, (b) the rate of interest as publicly announced by Bank
of America as its "prime rate" or (c) LIBOR plus 1.0%, in each case, plus an
applicable margin. In connection with the sunset of certain LIBOR reference
rates occurring at the end of 2021, we amended the Unsecured Revolving Credit
Agreement in December 2021 to replace the London Interbank Offered Rate as
administered by the ICE Benchmark Administration with the Sterling Overnight
Index Average Reference Rate and the Euro Interbank Offered Rate for any
extension of credit denominated in sterling or euros, respectively. As of
December 31, 2021, borrowings outstanding under the term loan facility were $2.0
billion and there were no outstanding borrowings under the revolving credit
facility.

As described in "Note 1-Basis of Presentation and Summary of Significant
Accounting Policies" in the notes to the accompanying consolidated financial
statements, we continue to monitor developments related to the upcoming
transition from USD LIBOR to an alternative benchmark reference rate after June
30, 2023. Additionally, we maintain contact with our lenders and other
stakeholders to evaluate the potential effects of these changes on any future
financing activities.
                                       43

————————————————– ——————————

Contents

As of December 31, 2021, the interest rate on the term loan facility was 1.48%.
In addition, we are required to pay a quarterly commitment fee with respect to
the unused portion of the revolving credit facility at an applicable rate per
annum ranging from 0.125% to 0.300% depending on our credit rating. Beginning on
December 31, 2022, and at the end of each quarter thereafter, the term loan
facility must be repaid in quarterly installments in the amount of 2.50% of
original principal through the maturity date with the remaining principal
balance due upon maturity in September 2024. The revolving credit facility also
matures in September 2024.

We may issue standby letters of credit of up to $250 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 December 31, 2021, the total
available commitments under the revolving credit facility were $1.9 billion.

Compliance with commitments

The term loan facility and the revolving credit facility contain customary
conditions to funding, affirmative covenants, negative covenants, financial
covenants and events of default. As of December 31, 2021, financial covenants
under the term loan facility required a leverage ratio of 3.50 to 1.00 and an
interest coverage ratio of 3.00 to 1.00. We were in compliance with all
applicable covenants as of December 31, 2021.

Settlement credit lines

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

As of December 31, 2021, we had $484.2 million outstanding under these lines of
credit with additional capacity to fund settlement of $1,693.2 million. During
the year ended December 31, 2021, the maximum and average outstanding balances
under these lines of credit were $1,267.4 million and $487.7 million,
respectively. The weighted-average interest rate on these borrowings was 2.22%
at December 31, 2021.

See "Note 8-Long-Term Debt and Lines of Credit" in the notes to the accompanying
consolidated financial statements for further information about our borrowing
agreements.

BIN/ICA Agreements

We have entered into sponsorship or depository and processing agreements with
certain banks. These agreements allow us to use the banks' identification
numbers, referred to as Bank Identification Number ("BIN") for Visa transactions
and Interbank Card Association ("ICA") number for Mastercard transactions, to
clear credit card transactions through Visa and Mastercard. Certain of such
agreements contain financial covenants, and we were in compliance with all such
covenants as of December 31, 2021.

Significant Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States, which often
require the judgment of management in the selection and application of certain
accounting principles and methods. We consider the following accounting policies
to be critical to understanding our consolidated financial statements because
the application of these policies requires significant judgment on the part of
management, and as a result, actual future developments may be different from
those expected at the time that we make these critical judgments. We have
discussed these critical accounting policies with the audit committee of the
board of directors.

Accounting estimates necessarily require subjective determinations about future
events and conditions. Therefore, the following descriptions of our critical
accounting policies are forward-looking statements, and actual results could
differ materially from the results anticipated by these forward-looking
statements. You should read the following in conjunction with "Note 1-Basis of
Presentation and Summary of Significant Accounting Policies" of the notes to the
accompanying
                                       44
--------------------------------------------------------------------------------
  Table of Contents
consolidated financial statements and the risk factors contained in "Item 1A -
Risk Factors" of this Annual Report on Form 10-K.

Business combinations

From time to time, we make strategic acquisitions that may have a material
effect on our consolidated results of operations and financial position. The
measurement principle for the assets acquired and the liabilities assumed in a
business combination is at estimated fair value as of the acquisition date, with
certain exceptions. The excess of the total consideration transferred over the
amount of the net identifiable assets acquired determined in accordance with the
measurement guidance for such items is recorded as goodwill.

The estimates we use to determine the fair value of long-lived assets, such as
intangible assets, can be complex and require significant judgments. We use
information available to us to make fair value determinations and engage
independent valuation specialists, when necessary, to assist in the fair value
determination of significant acquired long-lived assets. The estimated fair
values of customer-related and contract-based intangible assets are generally
determined using the income approach, which is based on projected cash flows
discounted to their present value using discount rates that consider the timing
and risk of the forecasted cash flows. The discount rates used represented a
risk adjusted market participant weighted-average cost of capital, derived using
customary market metrics. These measures of fair value also require considerable
judgments about future events, including forecasted revenue growth rates,
forecasted customer attrition rates, contract renewal estimates and technology
changes. Acquired technologies are generally valued using the replacement cost
method, which requires us to estimate the costs to construct an asset of
equivalent utility at prices available at the time of the valuation analysis,
with adjustments in value for physical deterioration and functional and economic
obsolescence. Trademarks and trade names are generally valued using the
"relief-from-royalty" approach. This method assumes that trademarks and trade
names have value to the extent that their owner is relieved of the obligation to
pay royalties for the benefits received from them. This method requires us to
estimate the future revenues for the related brands, the appropriate royalty
rate and the weighted-average cost of capital. This measure of fair value
requires considerable judgment about the value a market participant would be
willing to pay in order to achieve the benefits associated with the trade name.

While we use our best estimates and assumptions to determine the fair values of
the assets acquired and the liabilities assumed, our estimates are inherently
uncertain and subject to refinement. As a result, during the measurement period,
which may be up to one year from the acquisition date, we record adjustments to
the assets acquired and liabilities assumed. Upon the conclusion of the
measurement period, any subsequent adjustments are recorded to our consolidated
statements of income. We are also required to estimate the useful lives of
intangible assets to determine the period over which to recognize the amount of
acquisition-related intangible assets as an expense. We periodically review the
estimated useful lives assigned to our intangible assets to determine whether
such estimated useful lives continue to be appropriate.

Goodwill- We perform our annual goodwill impairment test as of October 1 each
year. We test goodwill for impairment at the reporting unit level annually and
more often if an event occurs or circumstances change that indicate the fair
value of a reporting unit is below its carrying amount. We have the option of
performing a qualitative assessment of impairment to determine whether any
further quantitative assessment for impairment is necessary. The option of
whether or not to perform a qualitative assessment is made annually and may vary
by reporting unit.

Factors we consider in the qualitative assessment include general macroeconomic
conditions, industry and market conditions, cost factors, overall financial
performance of our reporting units, events or changes affecting the composition
or carrying amount of the net assets of our reporting units, sustained decrease
in our share price, and other relevant entity-specific events. If we elect to
bypass the qualitative assessment or if we determine, on the basis of
qualitative factors, that the fair value of the reporting unit is more likely
than not less than the carrying amount, a quantitative test would be required.

The quantitative assessment compares the estimated fair value of the reporting
unit to its carrying amount, and recognizes an impairment loss for the amount by
which a reporting unit's carrying amount exceeds its fair value, without
exceeding the total amount of goodwill allocated to that reporting unit. When
applying the quantitative assessment, we determine the fair value of our
reporting units based on a weighted average of multiple valuation techniques,
principally a combination of an income approach and a market approach. The
income approach calculates a value based upon the present value of estimated
future cash flows, while the market approach uses earnings multiples of
similarly situated guideline public companies. Determining the fair value of a
reporting unit involves judgment and the use of significant estimates and
assumptions, which include assumptions regarding the revenue growth rates and
operating margins used to calculate estimated future cash flows, risk-adjusted
discount rates and future economic and market conditions.

                                       45
--------------------------------------------------------------------------------
  Table of Contents
Our reporting units consist of the following: North America Payment Solutions,
Integrated Solutions, Vertical Market Software Solutions, Europe Merchant
Solutions, Spain Merchant Solutions, Asia-Pacific Merchant Solutions, Issuer
Solutions and Business and Consumer Solutions. As of October 1, 2021, we
performed a quantitative assessment of impairment for our Vertical Market
Software Solutions, Issuer Solutions and Business and Consumer Solutions
reporting units and a qualitative assessment for all other reporting units. We
determined on the basis of the quantitative assessment of our Vertical Market
Software Solutions, Issuer Solutions and Business and Consumer Solutions
reporting units that the fair value of each reporting unit is greater than its
respective carrying amount. Additionally, we determined on the basis of the
qualitative factors that the fair value of other reporting units was not more
likely than not less than the respective carrying amounts. We believe that the
fair value of each of our reporting units is substantially in excess of its
carrying amount, except for Issuer Solutions and Business and Consumer
Solutions, which have smaller excess compared to the other reporting units since
they were recently acquired in the Merger.

Our current year assessments, performed as of October 1, 2021, included
consideration of the expected effects of the COVID-19 pandemic on revenues and
our cost mitigation efforts, as well as longer term performance expectations. We
continue to closely monitor developments related to COVID-19. The future
magnitude, duration and effects of the pandemic are difficult to predict at this
time, and it is reasonably possible that future developments could have a
negative effect on the estimates and assumptions utilized in our goodwill
impairment assessments and could result in material impairment charges in future
periods.

There were no changes in reporting units or significant changes in the methodology used to assess goodwill impairment during the year ended
December 31, 2021. We regularly monitor any changes in the business and assess whether these changes affect the determination of our operating units.

Intangible and Long-lived Assets- Intangible assets are amortized over their
estimated useful lives. The useful lives for customer-related intangible assets
are determined based primarily on forecasted cash flows, which include estimates
for the revenues, expenses, and customer attrition associated with the assets.
The useful lives of contract-based intangible assets are equal to the terms of
the agreements. The useful lives of acquired technologies are based on an
estimate of the period over which we expect to receive economic benefit. The
useful lives of amortizable trademarks and trade names are based on an estimate
of the period over which we will earn revenues for the related brands, including
contemplation of any future plans to phase out the trademarks and trade names in
the applicable markets.

We use the straight-line method of amortization for our amortizable acquired
technologies, trademarks and trade names and certain contract-based intangibles.
Amortization for most of our customer-related intangible assets and certain
contract-based intangibles is determined using an accelerated method. Under this
accelerated method, the first step in determining the amortization expense for
any period is that we divide the expected cash flows for that period that were
used in determining the acquisition-date fair value of the asset divided by the
expected total cash flows over the estimated life of the asset. We then multiply
that ratio by the initial carrying amount of the asset to arrive at the
amortization expense for that period. If the cash flow patterns that we
experience differ significantly from our initial estimates, we adjust the
amortization schedule prospectively. We believe that our accelerated method
reflects the expected pattern of the benefit to be derived. We did not make any
significant adjustments to the amortization schedules of our intangible assets
during the year ended December 31, 2021.

We regularly evaluate whether events and circumstances have occurred that
indicate the carrying amount of property and equipment, lease right-of-use
assets and finite-life intangible assets may not be recoverable. When factors
indicate that these long-lived assets should be evaluated for possible
impairment, we assess the potential impairment by determining whether the
carrying amount of such long-lived assets will be recovered through the future
undiscounted cash flows expected from use of the asset and its eventual
disposition. The evaluation is performed at the asset group level, which is the
lowest level of identifiable cash flows. If the carrying amount of the asset
group is determined not to be recoverable and exceeds its fair value, an
impairment loss is recorded, measured as the difference between the fair value
and the carrying amount. Fair values are determined based on quoted market
prices or discounted cash flow analysis as applicable. We regularly evaluate
whether events and circumstances have occurred that indicate the useful lives of
property and equipment and finite-life intangible assets may warrant revision.

As a result of actions taken in the fourth quarter of 2021 to reduce our
facilities footprint in certain markets around the world given the success of
remote work and flexible arrangements implemented during the COVID-19 pandemic,
we recognized charges of $51.3 million, primarily related to certain lease
right-of-use assets, leasehold improvements, furniture and fixtures and
equipment to reduce the carrying amount of each asset group to estimated fair
value. We continue to evaluate our physical footprint and additional charges may
be incurred as these facilities exit activities continue in 2022.

                                       46
--------------------------------------------------------------------------------
  Table of Contents
Capitalization of Internal-Use Software

We develop software that is used in providing services to customers.
Capitalization of internal-use software, primarily associated with operating
platforms, occurs when we have completed the preliminary project stage,
management authorizes the project, management commits to funding the project, it
is probable the project will be completed and the project will be used to
perform the function intended. The preliminary project stage consists of the
conceptual formulation of alternatives, the evaluation of alternatives, the
determination of existence of needed technology and the final selection of
alternatives. Costs incurred during the preliminary project stage are recognized
as expense as incurred. Currently unforeseen circumstances in software
development, such as a significant change in the manner in which the software is
intended to be used, obsolescence or a significant reduction in revenues due to
merchant attrition, could require us to implement alternative plans with respect
to a particular effort, which could result in the impairment of previously
capitalized software development costs. The carrying amount of internal-use
software, including work-in-progress, at December 31, 2021 was $742.0 million.
Costs capitalized during the year ended December 31, 2021 totaled $255.9
million. Internal-use software is amortized over its estimated useful life,
which is typically 5 to 10 years, in a manner that best reflects the pattern of
economic use of the assets. There were no significant changes in the accounting
methodology used for capitalization of internal-use software during the year
ended December 31, 2021.

During the year ended December 31, 2019, we preliminarily determined our target
technology architecture for the combined company. As a result, we wrote-off
capitalized software assets of $31.1 million related to legacy Global Payments
technology that will no longer be utilized.

Revenue recognition

In accordance with Accounting Standards Codification Topic 606, Revenue from
Contracts with Customers ("ASC 606"), we apply judgment in the determination of
performance obligations, in particular related to large customer contracts
within the Issuer Solutions segment. Performance obligations in a contract are
identified based on the goods or services that will be transferred to the
customer that are both capable of being distinct, whereby the customer can
benefit from the service either on its own or together with other resources that
are readily available from third parties or from us, and are distinct in the
context of the contract, whereby the transfer of the services is separately
identifiable from other promises in the contract. To the extent a contract
includes multiple promised services, we must apply judgment to determine whether
promised services are capable of being distinct and are distinct in the context
of the contract. If these criteria are not met, the promised services are
combined and accounted for as a single performance obligation. In addition, a
single performance obligation may comprise a series of distinct goods or
services that are substantially the same and that have the same pattern of
transfer to the customer.

Income taxes

We determine our provision for income taxes using management's judgments,
estimates and the interpretation and application of complex tax laws in each of
the jurisdictions in which we operate. Judgment is also required in assessing
the timing and amounts of deductible and taxable items. These differences result
in deferred tax assets and liabilities in our consolidated balance sheet.

We believe our tax return positions are fully supportable; however, we recognize
the benefit for tax positions only when it is more likely than not that the
position will be sustained based on its technical merits. Issues raised by a tax
authority may be resolved at an amount different than the related benefit
recognized. When facts and circumstances change (including an effective
settlement of an issue or statute of limitations expiration), the effect is
recognized in the period of change. The unrecognized tax benefits that exist at
December 31, 2021 would affect our provision for income taxes in the future, if
recognized.

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

See "Note 10-Income Tax" in the notes to the accompanying consolidated financial
statements for further information regarding the changes in the amount of
unrecognized tax benefits and deferred tax valuation allowances during the year
ended December 31, 2021.
                                       47

————————————————– ——————————

Contents

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
consolidated financial statements for a discussion of recently adopted
accounting pronouncements and recently issued accounting pronouncements not yet
adopted.

© Edgar Online, source Previews

Share.

Comments are closed.