Global Payments Inc 10-Q for FY2024 Q2
Global Payments Inc (GPN)
10-Q
2024-08-07
For: 2024-06-30
View Original
Added on
April 09, 2026
About this 10-Q
Global Payments Inc filed this 10-Q on August 7, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.57B
- up 4.7% from $2.45B a year earlier
- Net income
- $374.76M
- up 36.7% from net income of $274.15M a year earlier
- Diluted EPS
- $1.47
- up 40.0% from $1.05 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the quarterly period ended June 30, 2024
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the transition period from to
Commission file number: 001-16111
(Exact name of registrant as specified in charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||||||||
Registrant’s telephone number, including area code: (770 ) 829-8000
| Securities registered pursuant to Section 12(b) of the Act | ||||||||
| Title of each class | Trading symbol | Name of exchange on which registered | ||||||
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.
| ☑ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
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).
| Yes | ☐ | No | ||||||||||||||||||
The number of shares of the issuer’s common stock, no par value, outstanding as of August 1, 2024 was 254,436,966 .
GLOBAL PAYMENTS INC.
FORM 10-Q
For the quarterly period ended June 30, 2024
TABLE OF CONTENTS
| Page | |||||||||||
| PART I - FINANCIAL INFORMATION | |||||||||||
| ITEM 1. | |||||||||||
| ITEM 2. | |||||||||||
| ITEM 3. | |||||||||||
| ITEM 4. | |||||||||||
| PART II - OTHER INFORMATION | |||||||||||
| ITEM 1. | |||||||||||
| ITEM 1A. | |||||||||||
| ITEM 2. | |||||||||||
| ITEM 5. | |||||||||||
| ITEM 6. | |||||||||||
3
PART I - FINANCIAL INFORMATION
ITEM 1—FINANCIAL STATEMENTS
GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
| Three Months Ended | |||||||||||
| June 30, 2024 | June 30, 2023 | ||||||||||
| Revenues | $ | $ | |||||||||
| Operating expenses: | |||||||||||
| Cost of service | |||||||||||
| Selling, general and administrative | |||||||||||
| Gain on business dispositions | ( | ||||||||||
| Operating income | |||||||||||
| Interest and other income | |||||||||||
| Interest and other expense | ( | ( | |||||||||
| ( | ( | ||||||||||
| Income before income taxes and equity in income of equity method investments | |||||||||||
| Income tax expense | |||||||||||
| Income before equity in income of equity method investments | |||||||||||
| Equity in income of equity method investments, net of tax | |||||||||||
| Net income | |||||||||||
| Net income attributable to noncontrolling interests | ( | ( | |||||||||
| Net income attributable to Global Payments | $ | $ | |||||||||
| Earnings per share attributable to Global Payments: | |||||||||||
| Basic earnings per share | $ | $ | |||||||||
| Diluted earnings per share | $ | $ | |||||||||
See Notes to Unaudited Consolidated Financial Statements.
4
GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
| Six Months Ended | |||||||||||
| June 30, 2024 | June 30, 2023 | ||||||||||
| Revenues | $ | $ | |||||||||
| Operating expenses: | |||||||||||
| Cost of service | |||||||||||
| Selling, general and administrative | |||||||||||
| Net loss on business dispositions | |||||||||||
| Operating income | |||||||||||
| Interest and other income | |||||||||||
| Interest and other expense | ( | ( | |||||||||
| ( | ( | ||||||||||
| Income before income taxes and equity in income of equity method investments | |||||||||||
| Income tax expense | |||||||||||
| Income before equity in income of equity method investments | |||||||||||
| Equity in income of equity method investments, net of tax | |||||||||||
| Net income | |||||||||||
| Net income attributable to noncontrolling interests | ( | ( | |||||||||
| Net income attributable to Global Payments | $ | $ | |||||||||
| Earnings per share attributable to Global Payments: | |||||||||||
| Basic earnings per share | $ | $ | |||||||||
| Diluted earnings per share | $ | $ | |||||||||
See Notes to Unaudited Consolidated Financial Statements.
5
GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
| Three Months Ended | |||||||||||
| June 30, 2024 | June 30, 2023 | ||||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income (loss): | |||||||||||
| Foreign currency translation adjustments | ( | ||||||||||
| Income tax (expense) benefit related to foreign currency translation adjustments | ( | ||||||||||
| Net unrealized gains on hedging activities | |||||||||||
| Reclassification of net unrealized gains on hedging activities to interest expense | ( | ( | |||||||||
| Income tax expense related to hedging activities | ( | ( | |||||||||
| Other, net of tax | ( | ||||||||||
| Other comprehensive income (loss) | ( | ||||||||||
| Comprehensive income | |||||||||||
| Comprehensive income attributable to noncontrolling interests | |||||||||||
| Comprehensive income attributable to Global Payments | $ | $ | |||||||||
| Six Months Ended | |||||||||||
| June 30, 2024 | June 30, 2023 | ||||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income (loss): | |||||||||||
| Foreign currency translation adjustments | ( | ||||||||||
| Income tax (expense) benefit related to foreign currency translation adjustments | ( | ||||||||||
| Net unrealized gains (losses) on hedging activities | ( | ||||||||||
| Reclassification of net unrealized (gains) losses on hedging activities to interest expense | ( | ||||||||||
| Income tax (expense) benefit related to hedging activities | ( | ||||||||||
| Other, net of tax | ( | ||||||||||
| Other comprehensive income (loss) | ( | ||||||||||
| Comprehensive income | |||||||||||
| Comprehensive income (loss) attributable to noncontrolling interests | ( | ||||||||||
| Comprehensive income attributable to Global Payments | $ | $ | |||||||||
See Notes to Unaudited Consolidated Financial Statements.
6
GLOBAL PAYMENTS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| June 30, 2024 | December 31, 2023 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Settlement processing assets | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Goodwill | |||||||||||
| Other intangible assets, net | |||||||||||
| Property and equipment, net | |||||||||||
| Deferred income taxes | |||||||||||
| Notes receivable | |||||||||||
| Other noncurrent assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Settlement lines of credit | $ | $ | |||||||||
| Current portion of long-term debt | |||||||||||
| Accounts payable and accrued liabilities | |||||||||||
| Settlement processing obligations | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred income taxes | |||||||||||
| Other noncurrent liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Redeemable noncontrolling interests | |||||||||||
| Equity: | |||||||||||
Preferred stock, no par value; | |||||||||||
Common stock, no par value; | |||||||||||
| Paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total Global Payments shareholders’ equity | |||||||||||
| Nonredeemable noncontrolling interests | |||||||||||
| Total equity | |||||||||||
| Total liabilities, redeemable noncontrolling interests and equity | $ | $ | |||||||||
See Notes to Unaudited Consolidated Financial Statements.
7
GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Six Months Ended | |||||||||||
| June 30, 2024 | June 30, 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization of property and equipment | |||||||||||
| Amortization of acquired intangibles | |||||||||||
| Amortization of capitalized contract costs | |||||||||||
| Share-based compensation expense | |||||||||||
| Provision for operating losses and credit losses | |||||||||||
| Noncash lease expense | |||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Paid-in-kind interest capitalized to principal of notes receivable | ( | ( | |||||||||
| Equity in income of equity method investments, net of tax | ( | ( | |||||||||
| Net loss on business dispositions | |||||||||||
| Other, net | |||||||||||
| Changes in operating assets and liabilities, net of the effects of business combinations: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Settlement processing assets and obligations, net | ( | ||||||||||
| Prepaid expenses and other assets | ( | ( | |||||||||
| Accounts payable and other liabilities | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Business combinations and other acquisitions, net of cash and restricted cash acquired | ( | ( | |||||||||
| Capital expenditures | ( | ( | |||||||||
| Issuance of notes receivable | ( | ||||||||||
| Net cash from sales of businesses | |||||||||||
| Other, net | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Net borrowings from (repayments of) settlement lines of credit | ( | ||||||||||
| Net borrowings from (repayments of) commercial paper notes | ( | ||||||||||
| Proceeds from long-term debt | |||||||||||
| Repayments of long-term debt | ( | ( | |||||||||
| Payments of debt issuance costs | ( | ( | |||||||||
| Repurchases of common stock | ( | ( | |||||||||
| Proceeds from stock issued under share-based compensation plans | |||||||||||
| Common stock repurchased - share-based compensation plans | ( | ( | |||||||||
| Distributions to noncontrolling interests | ( | ( | |||||||||
| Contributions from noncontrolling interests | |||||||||||
| Payment of deferred consideration in business combination | ( | ||||||||||
| Purchase of capped calls related to issuance of convertible notes | ( | ||||||||||
| Dividends paid | ( | ( | |||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ||||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
| Cash, cash equivalents and restricted cash, beginning of the period | |||||||||||
| Cash, cash equivalents and restricted cash, end of the period | $ | $ | |||||||||
See Notes to Unaudited Consolidated Financial Statements.
8
GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands, except per share data)
| Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Number of Shares | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Global Payments Shareholders’ Equity | Nonredeemable Noncontrolling Interests | Total Equity | Redeemable Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Stock issued under share-based compensation plans | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchased - share-based compensation plans | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Contributions from noncontrolling interests | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Number of Shares | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Global Payments Shareholders’ Equity | Nonredeemable Noncontrolling Interests | Total Equity | Redeemable Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued under share-based compensation plans | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchased - share-based compensation plans | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Redeemable noncontrolling interests measurement period adjustment | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
See Notes to Unaudited Consolidated Financial Statements.
9
GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands, except per share data)
| Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Number of Shares | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Global Payments Shareholders’ Equity | Nonredeemable Noncontrolling Interests | Total Equity | Redeemable Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Stock issued under share-based compensation plans | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchased - share-based compensation plans | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of redeemable noncontrolling interest to nonredeemable noncontrolling interest | ( | ||||||||||||||||||||||||||||||||||||||||||||||
Purchase of capped calls related to issuance of convertible notes, net of taxes of $ | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Number of Shares | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Global Payments Shareholders’ Equity | Nonredeemable Noncontrolling Interests | Total Equity | Redeemable Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued under share-based compensation plans | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchased - share-based compensation plans | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable noncontrolling interests acquired in a business combination | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of share-based awards in connection with a business combination | |||||||||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Redeemable noncontrolling interests measurement period adjustment | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
See Notes to Unaudited Consolidated Financial Statements.
10
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business, consolidation and presentation - We are a leading payments technology company delivering innovative software and services to our customers globally. Our technologies, services and team member expertise allow us to provide a broad range of solutions that enable our customers to operate their businesses more efficiently across a variety of channels around the world. We operate in two reportable segments: Merchant Solutions and Issuer Solutions. As described in "Note 3—Business Dispositions," during the second quarter of 2023, we completed the sale of the consumer portion of our Netspend business, which comprised our former Consumer Solutions segment. Our consolidated financial statements include the results of our former Consumer Solutions segment for periods prior to disposition. See "Note 15—Segment Information" for further information. Global Payments Inc. and its consolidated subsidiaries are referred to herein collectively as "Global Payments," the "Company," "we," "our" or "us," unless the context requires otherwise.
These unaudited consolidated financial statements include our accounts and those of our majority-owned subsidiaries, and all intercompany balances and transactions have been eliminated in consolidation. Investments in entities that we do not control are accounted for using the equity or cost method, based on whether or not we have the ability to exercise significant influence over operating and financial policies. These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The consolidated balance sheet as of December 31, 2023 was derived from the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 but does not include all disclosures required by GAAP for annual financial statements.
In the opinion of our management, all known adjustments necessary for a fair presentation of the results of the interim periods have been made. These adjustments consist of normal recurring accruals and estimates that affect the carrying amount of assets and liabilities. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.
Use of estimates - The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. In particular, uncertainty resulting from global events and other macroeconomic conditions are difficult to predict at this time, and the ultimate effect could result in additional charges related to the recoverability of assets, including financial assets, long-lived assets and goodwill and other losses. These unaudited consolidated financial statements reflect the financial statement effects based upon management’s estimates and assumptions utilizing the most currently available information.
SEC Rule Changes - On March 6, 2024, the SEC adopted final rules that require disclosure of certain climate-related information, including disclosures relating to material climate-related risks, targets or goals, risk management and governance activities and greenhouse gas emissions. In addition, the rules require disclosure of certain climate-related financial metrics in the notes to the audited financial statements. The new disclosures are required on a prospective basis and provide for a phased-in compliance period. However, in April 2024, the SEC stayed the rules pending judicial review. Therefore, the timing of the effectiveness of these rules and their ultimate enforceability is uncertain.
Recently issued accounting pronouncements not yet adopted
ASU 2023-09 - In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvement to Income Tax Disclosures," which is intended to enhance the transparency and decision usefulness of income tax information through improvements to income tax disclosures, primarily related to the rate reconciliation and income taxes paid. The amendments in this update are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis with the option to apply the standard retrospectively. We are evaluating how the enhanced disclosure requirements of ASU 2023-09 will affect our presentation, and we will include the incremental disclosures upon the effective date.
11
ASU 2023-07 - In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, inclusion of all annual disclosures in interim periods and disclosure of the title and position of the chief operating decision maker. The amendments in this update are effective for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. We are evaluating how the enhanced disclosure requirements of ASU 2023-07 will affect our presentation, and we will include the incremental disclosures upon the effective date.
NOTE 2—ACQUISITION
EVO Payments, Inc.
On March 24, 2023, we acquired all of the outstanding common stock of EVO Payments, Inc. (“EVO”). EVO is a payment technology and services provider, offering payment solutions to merchants ranging from small and middle market enterprises to multinational companies and organizations across the Americas and Europe. The acquisition aligns with our technology-enabled payments strategy, expands our geographic presence in attractive markets and augments our business-to-business software and payment solutions business.
Total purchase consideration was $4.3 billion, which consisted of the following (in thousands):
Cash paid to EVO shareholders (1) | $ | |||||||
Cash paid for equity awards attributable to purchase consideration (2) | ||||||||
Value of replacement awards attributable to purchase consideration (3) | ||||||||
| Total purchase consideration transferred to EVO shareholders | ||||||||
| Repayment of EVO's unsecured revolving credit facility (including accrued interest and fees) | ||||||||
Payment of certain acquiree transaction costs and other liabilities on behalf of EVO (4) | ||||||||
| Total purchase consideration | $ | |||||||
(1) Holders of EVO common stock, convertible preferred stock and common units received $34 for each share of EVO common stock held at the effective time of the transaction.
(2) Pursuant to the merger agreement, we cash settled vested options and certain unvested equity awards of EVO equity award holders.
(3) Pursuant to the merger agreement, we granted equity awards for approximately 0.3 million shares of Global Payments common stock to certain EVO equity award holders. Each such replacement award is subject to the same terms and conditions (including vesting and exercisability) that applied to the corresponding EVO equity award. We apportioned the fair value of the replacement awards between purchase consideration (the portion attributable to pre-acquisition services in relation to the total vesting term of the award) and amounts to be recognized in periods following the acquisition as share-based compensation expense over the requisite service period of the replacement awards.
The cash portion of the purchase consideration was funded through cash on hand and borrowings under our revolving credit facility.
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We accounted for the EVO acquisition as a business combination, which generally requires that we recognize the assets acquired and liabilities assumed at fair value as of the acquisition date. The final estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration, were as follows (in thousands):
| Final Amounts | |||||
| Cash and cash equivalents | $ | ||||
| Accounts receivable | |||||
| Settlement processing assets | |||||
| Deferred income tax assets | |||||
| Property and equipment | |||||
| Identifiable intangible assets | |||||
| Other assets | |||||
| Accounts payable and accrued liabilities | ( | ||||
| Settlement lines of credit | ( | ||||
| Settlement processing obligations | ( | ||||
| Deferred income tax liabilities | ( | ||||
| Other liabilities | ( | ||||
| Total identifiable net assets | |||||
| Redeemable noncontrolling interests | ( | ||||
| Goodwill | |||||
| Total purchase consideration | $ | ||||
During the six months ended June 30, 2024, we made measurement-period adjustments that increased the amount of goodwill by $19.9 million, primarily related to deferred income taxes as a result of finalizing the evaluation of the differences in the bases of assets and liabilities for financial reporting and tax purposes. The effects of the measurement-period adjustments on our consolidated statement of income for the six months ended June 30, 2024 were not material.
Goodwill arising from the acquisition was included in the Merchant Solutions segment and was attributable to expected growth opportunities, potential synergies from combining the acquired business into our existing businesses and an assembled workforce. We expect that approximately $1.2 billion of the goodwill from this acquisition will be deductible for income tax purposes.
The following table reflects the estimated acquisition-date fair values of the identified intangible assets of EVO and their respective weighted-average estimated amortization periods:
| Estimated Fair Value | Weighted-Average Estimated Amortization Periods | ||||||||||
| (in thousands) | (years) | ||||||||||
| Customer-related intangible assets | $ | ||||||||||
| Contract-based intangible assets | |||||||||||
| Acquired technologies | |||||||||||
| Trademarks and trade names | |||||||||||
| Total estimated identifiable intangible assets | $ | ||||||||||
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NOTE 3—BUSINESS DISPOSITIONS
Gaming Business - On April 1, 2023, we completed the sale of our gaming business for approximately $400 million, subject to certain closing adjustments. The gaming business was included in our Merchant Solutions segment prior to disposition, and had been presented as held for sale in our consolidated balance sheet since December 31, 2022. In connection with the sale, we provided $32 million of seller financing as described below. We recognized a gain on the sale of $104.1 million during the three and six months ended June 30, 2023.
Consumer Business - On April 26, 2023, we completed the sale of the consumer portion of our Netspend business for approximately $1 billion, subject to certain closing adjustments. The consumer business comprised our former Consumer Solutions segment prior to disposition and had been presented as held for sale with certain adjustments to report the disposal group at fair value less costs to sell in our consolidated balance sheet since June 30, 2022. In connection with the sale, we provided $675 million of seller financing as described below. We recognized a gain (loss) on business dispositions in our consolidated statement of income of $1.6 million and $(243.2 ) million during the three and six months ended June 30, 2023, respectively. The gain (loss) during the three and six months ended June 30, 2023, respectively, included the effects of incremental negotiated closing adjustments, changes in the estimated fair value of the seller financing and the effects of the final tax structure of the transaction.
Notes Receivable and Allowance for Credit Losses
In connection with the sale of our consumer business, we provided seller financing consisting of the following: (1) a first lien seven-year secured term loan facility with an aggregate principal amount of $350 million bearing interest at a fixed annual rate of 9.0 %, including 3.5 % payable quarterly in cash and 5.5 % settled quarterly via the issuance of additional paid-in-kind ("PIK") notes with the same terms as the original notes until December 2024, after which interest will be payable quarterly in cash along with quarterly principal payments of $4.375 million with the remaining balance due at maturity; and (2) a second lien twenty-five year secured term loan facility with an aggregate principal amount of $325 million bearing interest at a fixed annual rate of 13.0 % PIK due at maturity.
In connection with the sale of our gaming business in April 2023, we also provided seller financing consisting of an unsecured promissory note due April 1, 2030 with an aggregate principal amount of $32 million bearing interest at a fixed annual rate of 11.0 %.
We recognized interest income of $22.1 million and $43.6 million on the notes during the three and six months ended June 30, 2024, respectively, and $14.9
As of June 30, 2024 and December 31, 2023, there was an aggregate principal amount of $780.6 million and $753.5 million, respectively, outstanding on the notes, including PIK, and the notes are presented net of the allowance for credit losses of $15.2 million within notes receivable in our consolidated balance sheet. Principal payments due within 12 months are included in prepaid expenses and other current assets in the consolidated balance sheets. We recognized noncash charges for the estimated future credit losses on the notes of $15.2 18.2 766.5 million and $735.6 million as of June 30, 2024 and December 31, 2023, respectively. The estimated fair value of notes receivable was based on a discounted cash flow approach and is considered to be a Level 3 measurement of the valuation hierarchy.
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NOTE 4—REVENUES
The following tables present a disaggregation of our revenues from contracts with customers by geography for each of our reportable segments for the three and six months ended June 30, 2024 and 2023:
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||
| Merchant Solutions | Issuer Solutions | Intersegment Eliminations | Total | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Americas | $ | $ | $ | ( | $ | ||||||||||||||||||
| Europe | |||||||||||||||||||||||
| Asia Pacific | ( | ||||||||||||||||||||||
| $ | $ | $ | ( | $ | |||||||||||||||||||
| Three Months Ended June 30, 2023 | |||||||||||||||||||||||||||||
| Merchant Solutions | Issuer Solutions | Consumer Solutions | Intersegment Eliminations | Total | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| Americas | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
| Europe | |||||||||||||||||||||||||||||
| Asia Pacific | ( | ||||||||||||||||||||||||||||
| $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||
| Merchant Solutions | Issuer Solutions | Intersegment Eliminations | Total | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Americas | $ | $ | $ | ( | $ | ||||||||||||||||||
| Europe | |||||||||||||||||||||||
| Asia Pacific | ( | ||||||||||||||||||||||
| $ | $ | $ | ( | $ | |||||||||||||||||||
| Six Months Ended June 30, 2023 | |||||||||||||||||||||||||||||
| Merchant Solutions | Issuer Solutions | Consumer Solutions | Intersegment Eliminations | Total | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| Americas | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
| Europe | |||||||||||||||||||||||||||||
| Asia Pacific | ( | ||||||||||||||||||||||||||||
| $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
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The following table presents a disaggregation of our Merchant Solutions segment revenues by distribution channel for the three and six months ended June 30, 2024 and 2023:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Relationship-led | $ | $ | $ | $ | |||||||||||||||||||
| Technology-enabled | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
ASC Topic 606, Revenues from Contracts with Customers ("ASC 606") requires that we determine for each customer arrangement whether revenue should be recognized at a point in time or over time. For the three and six months ended June 30, 2024 and 2023, substantially all of our revenues were recognized over time.
Supplemental balance sheet information related to contracts from customers as of June 30, 2024 and December 31, 2023 was as follows:
| Balance Sheet Location | June 30, 2024 | December 31, 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Assets: | |||||||||||||||||
Capitalized costs to obtain customer contracts, net | Other noncurrent assets | $ | $ | ||||||||||||||
Capitalized costs to fulfill customer contracts, net | Other noncurrent assets | $ | $ | ||||||||||||||
| Liabilities: | |||||||||||||||||
| Contract liabilities, net (current) | Accounts payable and accrued liabilities | $ | $ | ||||||||||||||
| Contract liabilities, net (noncurrent) | Other noncurrent liabilities | $ | $ | ||||||||||||||
Net contract assets were not material at June 30, 2024 or December 31, 2023. Revenue recognized for the three months ended June 30, 2024 and 2023 from contract liability balances at the beginning of each period was $84.2 million and $85.2 million, respectively. Revenue recognized for the six months ended June 30, 2024 and 2023 from contract liability balances at the beginning of each period was $150.6 million and $142.9 million, respectively.
ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations. The purpose of this disclosure is to provide additional information about the amounts and expected timing of revenue to be recognized from the remaining performance obligations in our existing contracts. The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at June 30, 2024. However, as permitted, we have elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. Accordingly, the total amount
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of unsatisfied or partially unsatisfied performance obligations related to processing services is significantly higher than the amounts disclosed in the table below (in thousands):
| Year Ending December 31, | |||||
| 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 and thereafter | |||||
| Total | $ | ||||
NOTE 5—GOODWILL AND OTHER INTANGIBLE ASSETS
As of June 30, 2024 and December 31, 2023, goodwill and other intangible assets consisted of the following:
| June 30, 2024 | December 31, 2023 | ||||||||||
| (in thousands) | |||||||||||
| Goodwill | $ | $ | |||||||||
| Other intangible assets: | |||||||||||
| Customer-related intangible assets | $ | $ | |||||||||
| Acquired technologies | |||||||||||
| Contract-based intangible assets | |||||||||||
| Trademarks and trade names | |||||||||||
| Less accumulated amortization: | |||||||||||
| Customer-related intangible assets | |||||||||||
| Acquired technologies | |||||||||||
| Contract-based intangible assets | |||||||||||
| Trademarks and trade names | |||||||||||
| $ | $ | ||||||||||
The following table sets forth the changes by reportable segment in the carrying amount of goodwill for the six months ended June 30, 2024:
| Merchant Solutions | Issuer Solutions | Total | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ||||||||||||||
| Goodwill acquired | |||||||||||||||||
| Effect of foreign currency translation | ( | ( | ( | ||||||||||||||
| Measurement period adjustments | |||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ||||||||||||||
Accumulated impairment losses for goodwill were $357.9
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NOTE 6—LONG-TERM DEBT AND LINES OF CREDIT
As of June 30, 2024 and December 31, 2023, long-term debt consisted of the following:
| June 30, 2024 | December 31, 2023 | ||||||||||
| (in thousands) | |||||||||||
| $ | $ | ||||||||||
| Revolving credit facility | |||||||||||
| Commercial paper notes | |||||||||||
| Finance lease liabilities | |||||||||||
| Other borrowings | |||||||||||
| Total long-term debt | |||||||||||
| Less current portion | |||||||||||
| Long-term debt, excluding current portion | $ | $ | |||||||||
The carrying amounts of our senior notes and convertible notes in the table above are presented net of unamortized discount and unamortized debt issuance costs, as applicable. At June 30, 2024, the unamortized discount on senior notes and convertible notes was $42.3 million, and unamortized debt issuance costs on senior notes and convertible notes were $102.6 million. At December 31, 2023, the unamortized discount on senior notes and convertible notes was $46.1 million and unamortized debt issuance costs on senior notes and convertible notes were $78.4 million. The portion of unamortized debt issuance costs related to revolving credit facilities is included in other noncurrent assets. At June 30, 2024 and December 31, 2023, unamortized debt issuance costs on the unsecured revolving credit facility were $16.0 million and $18.5 million, respectively.
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At June 30, 2024, future maturities of long-term debt (excluding finance lease liabilities) are as follows by year (in thousands):
| Year Ending December 31, | |||||
| 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 and thereafter | |||||
| Total | $ | ||||
Convertible Notes
On February 23, 2024, we issued $2.0 billion in aggregate principal amount of 1.500 % convertible unsecured senior notes due March 2031 through a private placement. The net proceeds from this offering were approximately $1.97 billion reflecting debt issuance costs of $33.5 million, which were capitalized and reflected as a reduction of the related carrying amount of the convertible notes in our consolidated balance sheet. Interest on the convertible notes is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2024, to the holders of record on the preceding February 15 and August 15, respectively.
Prior to December 1, 2030, the notes are convertible at the option of the holders only under certain conditions, including: (i) if the last reported sale price of our common stock has been at least 130 % of the conversion price for at least 20 trading days within the last 30 consecutive trading days of the immediately preceding calendar quarter; (ii) for a five business day period following a ten -day consecutive trading period where the trading price of the notes is less than 98 % of the product of the last reported sale price of our common stock and the conversion rate; (iii) if we call any or all of the notes for redemption; or (iv) upon the occurrence of certain corporate events. On or after December 1, 2030, the notes are convertible at the option of the holders at any time until the second scheduled trading day prior to the maturity date. The conversion rate for the notes is initially 6.371 shares of common stock per $1,000 in principal amount of the notes (which is equal to an initial conversion price of approximately $156.96 per share), subject to customary adjustments upon the occurrence of certain events. Upon conversion, the principal amount of, and interest due on, the convertible notes are required to be settled in cash and any other amounts may be settled in shares, cash or a combination of shares and cash at our election.
We may not redeem the notes prior to March 6, 2028. On or after March 6, 2028, we have the option to redeem all or any portion of the notes for cash if the last reported sale price of our common stock has been at least 130 % of the conversion price for at least 20 trading days within the last 30 consecutive trading day period at a redemption price equal to 100 % of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. If certain corporate events that constitute a fundamental change (as defined in the indenture governing the notes) occur, any holder of the notes may require that we repurchase all or a portion of their notes for cash at a purchase price equal to 100 % of the principal amount of the notes to be repurchased plus accrued and unpaid interest. In addition, if certain corporate events that constitute a make-whole fundamental change (as defined in the indenture governing the notes) occur, then the conversion rate will in certain circumstances be increased. The notes include customary covenants for notes of this type, as well as customary events of default, which may result in the acceleration of the maturity of the convertible notes.
In connection with the issuance of the notes, we entered into privately negotiated capped call transactions with certain of the initial purchasers of the notes and other financial institutions to cover, subject to customary adjustments, the number of shares of common stock initially underlying the notes. The economic effect of the capped call transactions is to hedge the potential dilutive effect upon the conversion of the notes, or offset our cash obligation if the cash settlement option is elected, for amounts in excess of the principal amount of converted notes subject to a cap. The initial cap price of the capped call
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transactions is $228.90 per share. The capped call transactions meet the accounting criteria to be reflected in stockholders’ equity and not accounted for as derivatives. The cost of $256.3 million incurred in connection with the capped call transactions was reflected as a reduction to paid-in-capital in our consolidated balance sheet as of June 30, 2024, net of applicable income taxes.
We have $1.5 billion in aggregate principal amount of 1.000 % convertible notes due August 2029, which were issued during 2022 in a private placement pursuant to an investment agreement with Silver Lake Partners. Interest on the convertible notes is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2023, to the holders of record on the preceding February 1 and August 1, respectively. The convertible notes mature on August 15, 2029, subject to earlier conversion or repurchase. The notes, which are currently convertible, are presented within long-term debt in our consolidated balance sheet based on our intent and ability to refinance on a long-term basis should a conversion event occur.
Revolving Credit Facility
Our revolving credit agreement provides for an unsubordinated unsecured $5.75 billion revolving credit facility that matures in August 2027. As of June 30, 2024, there were borrowings of $1.5 billion outstanding under the revolving credit facility with an interest rate of 6.80 %, and the total available commitments under the revolving credit facility were $3.6 billion.
Commercial Paper
We have a $2.0 billion commercial paper program under which we may issue senior unsecured commercial paper notes with maturities of up to 397 days from the date of issue. Commercial paper notes are expected to be issued at a discount from par, or they may bear interest, each at commercial paper market rates dictated by market conditions at the time of their issuance. The proceeds from issuances of commercial paper notes will be used primarily for general corporate purposes but may also be used for acquisitions, to pay dividends, for debt refinancing or for other purposes.
As of June 30, 2024, we had net borrowings under our commercial paper program of $431.6 million outstanding, presented within long-term debt in our consolidated balance sheet based on our intent and ability to continually refinance on a long-term basis, with a weighted average annual interest rate of 6.03 %. The commercial program is backstopped by our revolving credit agreement, in that the amount of commercial paper notes outstanding cannot exceed the undrawn portion of our revolving credit facility. As such, we could draw on the revolving credit facility to repay commercial paper notes that cannot be rolled over or refinanced with similar debt.
Fair Value of Long-Term Debt
As of June 30, 2024, our senior notes had a total carrying amount of $11.6 billion and an estimated fair value of $10.9 billion. As of June 30, 2024, our 1.500 % convertible notes due March 1, 2031 had a total carrying amount of $2.0 billion and an estimated fair value of $1.8 billion. The estimated fair values were based on quoted market prices in active markets and are considered to be Level 1 measurements of the valuation hierarchy.
As of June 30, 2024, our 1.000 % convertible notes due August 15, 2029 had a total carrying amount of $1.5 billion and an estimated fair value of $1.4 billion. The estimated fair value of our convertible notes was based on a lattice pricing model and is considered to be a Level 3 measurement of the valuation hierarchy.
The fair value of other long-term debt approximated its carrying amount at June 30, 2024.
Compliance with Covenants
The convertible notes include customary covenants and events of default for convertible notes of this type. The revolving credit agreement contains customary affirmative covenants and restrictive covenants, including, among others, financial covenants based on net leverage and interest coverage ratios, and customary events of default. The required leverage ratio was increased as a result of the acquisition of EVO and will gradually step-down over eight quarters to the original required ratio of 3.75 to 1.00. As of June 30, 2024, the required leverage ratio was 4.25 to 1.00, and the required interest coverage ratio was 3.00 to 1.00. We were in compliance with all applicable covenants as of June 30, 2024.
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Interest Expense
Interest expense was $154.4 million and $172.3 million for the three months ended June 30, 2024 and 2023, respectively, and $315.2 million and $291.3 million for the six months ended June 30, 2024 and 2023, respectively.
NOTE 7—DERIVATIVES AND HEDGING INSTRUMENTS
Net Investment Hedge
We have designated our aggregate €800 million Euro-denominated 4.875 % senior notes due March 2031 as a hedge of our net investment in our Euro-denominated operations. The purpose of the net investment hedge is to reduce the volatility of our net investment in our Euro-denominated operations due to changes in foreign currency exchange rates.
Investments in foreign operations with functional currencies other than the reporting currency are subject to foreign currency risk as the assets and liabilities of these subsidiaries are translated into the reporting currency at the period-end rate of exchange with the resulting foreign currency translation adjustment presented as a component of other comprehensive income and included in accumulated comprehensive income within equity in our consolidated balance sheets. Under net investment hedge accounting, the foreign currency remeasurement gains and losses associated with our Euro-denominated senior notes are presented within the same components of other comprehensive income and accumulated comprehensive income, partially offsetting the foreign currency translation adjustment for our foreign subsidiaries.
We recognized a gain (loss) of $6.1 million and $1.8 million within foreign currency translation adjustments in other comprehensive income in our consolidated statements of comprehensive income during the three months ended June 30, 2024 and 2023, respectively, and $(0.9 ) million and $(16.5 ) million during the six months ended June 30, 2024 and 2023, respectively.
Interest Rate Swaps
We have interest rate swap agreements with financial institutions to hedge changes in cash flows attributable to interest rate risk on a portion of our variable-rate debt instruments. In the first quarter of 2023, we entered into new interest rate swap agreements with an aggregate notional amount of $1.5 billion to convert eligible borrowings under our revolving credit facility from a floating term Secured Overnight Financing Rate to a fixed rate. Net amounts to be received or paid under the swap agreements are reflected as adjustments to interest expense. Since we have designated the interest rate swap agreements as cash flow hedges, unrealized gains or losses resulting from adjusting the swaps to fair value are recognized as components of other comprehensive income. The fair values of our interest rate swaps are determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date. These derivative instruments are classified within Level 2 of the valuation hierarchy.
The table below presents information about our interest rate swaps, designated as cash flow hedges, included in the consolidated balance sheets:
| Fair Values | ||||||||||||||||||||||||||||||||
| Derivative Financial Instruments | Balance Sheet Location | Weighted-Average Fixed Rate of Interest at June 30, 2024 | Range of Maturity Dates at June 30, 2024 | June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
Interest rate swaps (Notional of $ | Other noncurrent assets | April 17, 2027 - August 17, 2027 | $ | $ | ||||||||||||||||||||||||||||
Interest rate swaps (Notional of $ | Other noncurrent liabilities | April 17, 2027 - August 17, 2027 | $ | $ | ||||||||||||||||||||||||||||
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The table below presents the effects of our interest rate swaps on the consolidated statements of income and statements of comprehensive income for the three and six months ended June 30, 2024 and 2023:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Net unrealized gains (losses) recognized in other comprehensive income (loss) | $ | $ | $ | $ | ( | ||||||||||||||||||
| Net unrealized gains (losses) reclassified out of other comprehensive income (loss) to interest expense | $ | $ | $ | $ | ( | ||||||||||||||||||
As of June 30, 2024, the amount of net unrealized gains in accumulated other comprehensive loss related to our interest rate swaps that is expected to be reclassified into interest expense during the next 12 months was $6.4 million.
NOTE 8—INCOME TAX
Our effective income tax rates for the three and six months ended June 30, 2024 were 17.3 % and 12.5 %, respectively. Our effective income tax rates for the three and six months ended June 30, 2024 differed favorably from the U.S. statutory rate primarily as a result of foreign interest income not subject to tax, tax credits and the foreign-derived intangible income deduction. Our effective income tax rate for the six months ended June 30, 2024 also included the favorable effect of a change in the assessment of the need for a valuation allowance related to certain foreign tax credit carryforwards.
NOTE 9—REDEEMABLE NONCONTROLLING INTERESTS
The portions of equity in certain of our consolidated subsidiaries that are not attributable, directly or indirectly, to us, are redeemable upon the occurrence of an event that is not solely within our control.
During the second quarter of 2024, we formed a new joint venture in Germany, of which we hold a 51 % controlling interest. Under the shareholder agreement, the minority shareholder has the option to compel us to purchase their shares at fair market value upon the occurrence of a specific change in control event. As of June 30, 2024, the option is not considered probable of becoming redeemable. We also own 51 % of our subsidiary in Greece and 50.1 % of our subsidiary in Chile. Under the respective shareholder agreements, the minority shareholders have the option to compel us to purchase their shares at a price per share based on the fair value of the shares, or under certain circumstances for our subsidiary in Greece, at a price determined by calculations stipulated in the shareholder agreement. The options have no expiration date.
Because the exercise of each of these redemption options is not solely within our control, the redeemable noncontrolling interests are presented in the mezzanine section between total liabilities and shareholders’ equity, as temporary equity, in our consolidated balance sheets. The redeemable noncontrolling interest for each subsidiary is reflected at the higher of: (i) the initial carrying amount, increased or decreased for the noncontrolling interest's share of comprehensive income (loss), capital contributions and distributions or (ii) the redemption price.
The option held by the minority shareholder in Greece, which is redeemable at a price other than fair value, is considered probable of becoming redeemable on December 8, 2025. In determining the measurement method of redemption price, we have elected to accrete changes in the redemption price over the period from the date of issuance to the earliest redemption date of the instrument using the effective interest method, applied prospectively. We have also elected to recognize the entire amount of any redemption price adjustments in net income attributable to noncontrolling interests in our consolidated statements of income.
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In addition, we own 66 % of our subsidiary in Poland. The redemption option held by the minority shareholder in Poland expired on January 1, 2024, and the redeemable noncontrolling interest was reclassified to nonredeemable noncontrolling interest in the consolidated balance sheet as of January 1, 2024.
NOTE 10—SHAREHOLDERS’ EQUITY
We repurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase programs. During the three months ended June 30, 2024 and 2023, we repurchased and retired 910,980 and 2,006,016 shares of our common stock, respectively, at a cost, including commissions and applicable excise taxes, of $100.9 million and $207.5 million, or $110.73 and $103.44 per share, respectively. During the six months ended June 30, 2024 and 2023, we repurchased and retired 6,972,979 and 4,064,918 shares of our common stock, respectively, at a cost, including commissions and applicable excise taxes, of $909.2 million and $414.0 million, or $130.39 and $101.86 per share, respectively. The share repurchase activity for the six months ended June 30, 2024 included the repurchase of 1,414,759 shares using a portion of the net proceeds from our offering of 1.500 % convertible unsecured senior notes due March 2031 through privately negotiated transactions with purchasers of notes in the offering, or one of their respective affiliates. The purchase price per share of the common stock repurchased in such transactions equaled the closing price of the common stock on February 20, 2024, which was $130.80 per share. As of June 30, 2024, the remaining amount available under our share repurchase program was $1,371.9 million.
On July 31, 2024, our board of directors declared a dividend of $0.25 per share payable on September 27, 2024 to common shareholders of record as of September 13, 2024.
NOTE 11—SHARE-BASED AWARDS AND STOCK OPTIONS
The following table summarizes share-based compensation expense and the related income tax benefit recognized for our share-based awards and stock options:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Share-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
| Income tax benefit | $ | $ | $ | $ | |||||||||||||||||||
Share-Based Awards
The following table summarizes the changes in unvested restricted stock and performance awards for the six months ended June 30, 2024:
| Shares | Weighted-Average Grant-Date Fair Value | ||||||||||
| (in thousands) | |||||||||||
| Unvested at December 31, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
| Unvested at June 30, 2024 | $ | ||||||||||
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The total fair value of restricted stock and performance awards vested during the six months ended June 30, 2024 and 2023 was $137.5 million and $151.1 million, respectively.
For restricted stock and performance awards, we recognized compensation expense of $40.6 million and $44.7 million during the three months ended June 30, 2024 and 2023, respectively, and $76.2 million and $119.9 million during the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, there was $220.9 million of unrecognized compensation expense related to unvested restricted stock and performance awards that we expect to recognize over a weighted-average period of 2.0 years.
Stock Options
The following table summarizes stock option activity for the six months ended June 30, 2024:
| Options | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
| (in thousands) | (years) | (in millions) | |||||||||||||||||||||
| Outstanding at December 31, 2023 | $ | $ | |||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Forfeited | ( | ||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Outstanding at June 30, 2024 | $ | $ | |||||||||||||||||||||
| Options vested and exercisable at June 30, 2024 | $ | $ | |||||||||||||||||||||
We recognized compensation expense for stock options of $1.3 million and $1.1 million during the three months ended June 30, 2024 and 2023, respectively, and $4.2 million and $13.9 million during the six months ended June 30, 2024 and 2023, respectively. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2024 and 2023 was $14.6 million and $0.9 million, respectively. As of June 30, 2024, we had $9.8 million of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of 2.1 years.
The weighted-average grant-date fair value of stock options granted, including replacement awards granted in connection with the EVO acquisition, during the six months ended June 30, 2024 and 2023 was $54.42 and $46.17 , respectively. Fair value was estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:
| Six Months Ended | |||||||||||
| June 30, 2024 | June 30, 2023 | ||||||||||
| Risk-free interest rate | |||||||||||
| Expected volatility | |||||||||||
| Dividend yield | |||||||||||
| Expected term (years) | |||||||||||
The risk-free interest rate was based on the yield of a zero coupon U.S. Treasury security with a maturity equal to the expected life of the option from the date of the grant. Our assumption on expected volatility was based on our historical volatility. The dividend yield assumption was determined using our average stock price over the preceding year and the annualized amount of our most current quarterly dividend per share. We based our assumptions on the expected term of the options on our analysis of the historical exercise patterns of the options and our assumption on the future exercise pattern of options.
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NOTE 12—EARNINGS PER SHARE
Basic earnings per share ("EPS") was computed by dividing net income attributable to Global Payments by the weighted-average number of shares outstanding during the period. Earnings available to common shareholders is the same as reported net income attributable to Global Payments for all periods presented.
Diluted EPS is computed by dividing net income attributable to Global Payments by the weighted-average number of shares outstanding during the period, including the effect of share-based awards, convertible notes or other potential securities that would have a dilutive effect on EPS. All stock options with an exercise price lower than the average market share price of our common stock for the period are assumed to have a dilutive effect on EPS. The dilutive share base for the three and six months ended June 30, 2024 excluded approximately 0.7 0.9
The effect of the potential shares needed to settle the conversion spread on our convertible notes is included in diluted EPS if the effect is dilutive. The effect depends on the market share price of our common stock at the time of conversion and would be dilutive if the average market share price of our common stock for the period exceeds the conversion price. For the three and six months ended June 30, 2024, the convertible notes were not included in the computation of diluted EPS as the effect would have been anti-dilutive. Further, the effect of the related capped call transactions is not included in the computation of diluted EPS as it is always anti-dilutive.
The following table sets forth the computation of diluted weighted-average number of shares outstanding for the three and six months ended June 30, 2024 and 2023:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Basic weighted-average number of shares outstanding | |||||||||||||||||||||||
| Plus: Dilutive effect of stock options and other share-based awards | |||||||||||||||||||||||
| Diluted weighted-average number of shares outstanding | |||||||||||||||||||||||
NOTE 13—SUPPLEMENTAL BALANCE SHEET INFORMATION
Cash, cash equivalents and restricted cash
Cash and cash equivalents include cash on hand and all liquid investments with a maturity of three months or less when purchased. We regularly maintain cash balances with financial institutions in excess of the Federal Deposit Insurance Corporation insurance limit or the equivalent outside the U.S. As of June 30, 2024, approximately 75 % of our total balance of cash and cash equivalents was held within a small group of financial institutions, primarily large money center banks. Although we currently believe that the financial institutions with whom we do business will be able to fulfill their commitments to us, there is no assurance that those institutions will be able to continue to do so. We have not experienced any losses associated with our balances in such accounts for the three and six months ended June 30, 2024 and 2023.
Restricted cash includes amounts that cannot be withdrawn or used for general operating activities under legal or regulatory restrictions. Restricted cash consists of amounts deposited by customers for prepaid card transactions and funds held as a liquidity reserve that are subject to local regulatory restrictions requiring appropriate segregation and restriction in their use. Restricted cash is included in prepaid expenses and other current assets in the consolidated balance sheets with a corresponding liability in accounts payable and accrued liabilities.
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A reconciliation of the amounts of cash and cash equivalents and restricted cash in the consolidated balance sheets to the amount in the consolidated statements of cash flows is as follows:
| June 30, 2024 | December 31, 2023 | ||||||||||
| (in thousands) | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Cash included in assets held for sale | |||||||||||
| Cash, cash equivalents and restricted cash shown in the statements of cash flows | $ | $ | |||||||||
Long-lived assets
NOTE 14—ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in the accumulated balances for each component of other comprehensive income (loss) were as follows for the three and six months ended June 30, 2024 and 2023:
| Foreign Currency Translation Gains (Losses) | Unrealized Gains (Losses) on Hedging Activities | Other | Accumulated Other Comprehensive Loss | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Balance at March 31, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Balance at June 30, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Balance at March 31, 2023 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss) | ( | ||||||||||||||||||||||
| Balance at June 30, 2023 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Other comprehensive income (loss) attributable to noncontrolling interests, which relates only to foreign currency translation, was $(7.1 ) million and $1.8 million for the three months ended June 30, 2024 and 2023, respectively.
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| Foreign Currency Translation Gains (Losses) | Unrealized Gains (Losses) on Hedging Activities | Other | Accumulated Other Comprehensive Loss | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Balance at December 31, 2023 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Balance at June 30, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Balance at December 31, 2022 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Balance at June 30, 2023 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Other comprehensive income (loss) attributable to noncontrolling interests, which relates only to foreign currency translation, was $(30.2 ) million and $8.2 million for the six months ended June 30, 2024 and 2023, respectively.
NOTE 15—SEGMENT INFORMATION
We operate in two reportable segments: Merchant Solutions and Issuer Solutions. As described in "Note 3 - Business Dispositions," during the second quarter of 2023, we completed the sale of the consumer portion of our Netspend business, which comprised our former Consumer Solutions segment. Our former Consumer Solutions segment is presented below for periods prior to disposition.
We evaluate performance and allocate resources based on the operating income of each operating segment. The operating income of each operating segment includes the revenues of the segment less expenses that are directly related to those revenues. Operating overhead, shared costs and share-based compensation costs are included in Corporate. Impairment of goodwill and gains or losses on business dispositions are not included in determining segment operating income. Interest and other income, interest and other expense, income tax expense and equity in income of equity method investments are not allocated to the individual segments. We do not evaluate the performance of or allocate resources to our operating segments using asset data. The accounting policies of the reportable operating segments are the same as those described in our Annual Report on Form 10-K for the year ended December 31, 2023 and our summary of significant accounting policies in "Note 1—Basis of Presentation and Summary of Significant Accounting Policies."
27
Information on segments and reconciliations to consolidated revenues, consolidated operating income and consolidated depreciation and amortization were as follows for the three and six months ended June 30, 2024 and 2023:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
Revenues(1): | |||||||||||||||||||||||
| Merchant Solutions | $ | $ | $ | $ | |||||||||||||||||||
| Issuer Solutions | |||||||||||||||||||||||
| Consumer Solutions | |||||||||||||||||||||||
| Intersegment eliminations | ( | ( | ( | ( | |||||||||||||||||||
| Consolidated revenues | $ | $ | $ | $ | |||||||||||||||||||
Operating income (loss)(1): | |||||||||||||||||||||||
| Merchant Solutions | $ | $ | $ | $ | |||||||||||||||||||
| Issuer Solutions | |||||||||||||||||||||||
| Consumer Solutions | ( | ||||||||||||||||||||||
| Corporate | ( | ( | ( | ( | |||||||||||||||||||
| Net gain (loss) on business dispositions | ( | ||||||||||||||||||||||
| Consolidated operating income | $ | $ | $ | $ | |||||||||||||||||||
Depreciation and amortization(1): | |||||||||||||||||||||||
| Merchant Solutions | $ | $ | $ | $ | |||||||||||||||||||
| Issuer Solutions | |||||||||||||||||||||||
| Corporate | |||||||||||||||||||||||
| Consolidated depreciation and amortization | $ | $ | $ | $ | |||||||||||||||||||
NOTE 16—COMMITMENTS AND CONTINGENCIES
Legal Matters
We are party to a number of claims and lawsuits incidental to our business. In our opinion, the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, are not expected to have a material adverse effect on our financial position, liquidity, results of operations or cash flows.
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ITEM 2—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with 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, 2023. 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, and continue to invest in new technology solutions, infrastructure to support our growing business and the ongoing consolidation and enhancement of our operating platforms. These investments include new product development and innovation to further enhance and differentiate our suite of technology and cloud-based solutions available to customers, along with migration of certain underlying technology platforms to cloud environments to enhance performance, improve speed to market and drive cost efficiencies. We also continue to execute on integration and other business transformation activities, such as combining business operations, streamlining technology infrastructure, eliminating duplicative corporate and operational support structures and realizing scale efficiencies.
Highlights related to our financial condition at June 30, 2024, and results of operations for the three and six months then ended, include the following:
•Consolidated revenues for the three and six months ended June 30, 2024 increased to $2,568.8 million and $4,989.0 million, respectively, compared to $2,452.5 million and $4,744.9 million, respectively, for the prior year. The increase in consolidated revenues was primarily due to an increase in transaction volumes. The change for the three months ended June 30, 2024 included the unfavorable effect on revenues of the consumer business divested in April 2023. For the six months ended June 30, 2024, the effect on revenues from the EVO business acquired in March 2023 was offset by the effect on revenue of the businesses divested in April 2023.
•Merchant Solutions and Issuer Solutions segment operating income and operating margin for the three and six months ended June 30, 2024 increased compared to the prior year primarily due to the favorable effect of increases in revenues, since certain fixed costs do not vary with revenues, and continued expense management.
•Consolidated operating income for the three and six months ended June 30, 2024 included the favorable effects of the increase in revenues as compared to the prior year and lower share-based compensation and acquisition and integration expenses, partially offset by an increase in amortization of acquired intangibles, primarily related to the acquisition of EVO. Consolidated operating income for the three and six months ended June 30, 2023 included the effects of the gain on the sale of our gaming business and the loss on the sale of our consumer business.
•On February 23, 2024, we issued $2.0 billion in aggregate principal amount of 1.500% convertible unsecured senior notes due March 2031 through a private placement. In connection with the issuance of the notes, we entered into privately negotiated capped call transactions to hedge the potential dilutive effect upon conversion of the notes, or offset our cash obligation if the cash settlement option were to be elected, for amounts in excess of the principal amount of converted notes up to a cap price.
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Risks Related to Macroeconomic Effects and Other Global Conditions
We are exposed to general economic conditions, including currency fluctuations, inflation, rising interest rates and other conditions that affect the overall level of consumer, business and government spending, which could negatively affect our financial performance.
Certain of our operations are conducted in foreign currencies. Consequently, a portion of our revenues and expenses has been and may continue to be affected by fluctuations in foreign currency exchange rates. A strengthening of the U.S. dollar or other significant fluctuations in foreign currency exchange rates could result in an adverse effect on our future financial results; however, we are unable to predict the extent of the potential effect on our financial results.
We have sought to reduce our interest rate risk through the issuance of fixed rate debt in place of variable rate debt, including the effect of interest rate swap hedging arrangements to convert a significant portion of the eligible variable rate borrowings under our revolving credit facility to a fixed rate. However, inflationary pressure or interest rate fluctuations could adversely affect our business and financial performance as a result of higher costs and/or lower consumer spending. In addition, continued inflation or a rise in interest rates could have an adverse effect on our future financial results and the recoverability of assets. However, as the future magnitude, duration and effects of these conditions are difficult to predict at this time, we are unable to predict the extent of the potential effect on our financial results.
We regularly maintain cash balances with financial institutions in excess of the Federal Deposit Insurance Corporation insurance limit or the equivalent outside the U.S. A disruption in financial markets could impair our banking partners, which could affect our ability to access our cash or cash equivalents, our ability to provide settlement services or our customers' ability to access their existing cash to fulfill their payment obligations to us. The occurrence of these events could negatively affect our business, financial condition and results of operations.
We also continue to evaluate the potential effects on our business from heightened geopolitical and economic instability or increased difficulty of conducting business in a country or region due to actual or potential political or military conflict or action, such as those arising from recent global events, which have increased the level of economic and political uncertainty in various regions of the world. Although we have not experienced significant exposure or adverse effects on our business and financial results to date, the extent to which these events could affect the global economy and our operations is difficult to predict at this time. However, a significant escalation, expansion of the scope or continuation of the related economic disruptions could have an adverse effect on our business and financial results.
Our financial condition and results of operations may be adversely affected by a downturn in macroeconomic conditions. When adverse macroeconomic conditions arise, we evaluate where we may be able to implement cost-saving measures, including those related to headcount and discretionary expenses.
For a further discussion of trends, uncertainties and other factors that could affect our future operating results, see the section entitled “Risk Factors” in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2023 and subsequent filings we make with the SEC.
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Results of Operations
We operate in two reportable segments: Merchant Solutions and Issuer Solutions. As described in “Note 3 – Business Dispositions” in the notes to the accompanying unaudited consolidated financial statements, during the second quarter of 2023, we completed the sale of the consumer portion of our Netspend business, which comprised our former Consumer Solutions segment. Our former Consumer Solutions segment is presented below for periods prior to disposition. 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, 2023, incorporated herein by reference, and “Note 15—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 June 30, 2024 and 2023, this data as a percentage of total revenues and the changes between periods in dollars and as a percentage of the prior-period amount. The income statement data for the three months ended June 30, 2024 and 2023 is derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 — Financial Statements.
| Three Months Ended June 30, 2024 | % of Revenues(1) | Three Months Ended June 30, 2023 | % of Revenues(1) | $ Change | % Change | ||||||||||||||||||||||||||||||
| (dollar amounts in thousands) | |||||||||||||||||||||||||||||||||||
Revenues(2): | |||||||||||||||||||||||||||||||||||
| Merchant Solutions | $ | 1,971,025 | 76.7 | % | $ | 1,842,293 | 75.1 | % | $ | 128,732 | 7.0 | % | |||||||||||||||||||||||
| Issuer Solutions | 613,508 | 23.9 | % | 590,441 | 24.1 | % | 23,067 | 3.9 | % | ||||||||||||||||||||||||||
| Consumer Solutions | — | — | % | 39,031 | 1.6 | % | (39,031) | NM | |||||||||||||||||||||||||||
| Intersegment eliminations | (15,765) | (0.6) | % | (19,296) | (0.8) | % | 3,531 | (18.3) | % | ||||||||||||||||||||||||||
| Consolidated revenues | $ | 2,568,768 | 100.0 | % | $ | 2,452,469 | 100.0 | % | $ | 116,299 | 4.7 | % | |||||||||||||||||||||||
Consolidated operating expenses(2): | |||||||||||||||||||||||||||||||||||
| Cost of service | $ | 938,484 | 36.5 | % | $ | 941,952 | 38.4 | % | $ | (3,468) | (0.4) | % | |||||||||||||||||||||||
| Selling, general and administrative | 1,057,661 | 41.2 | % | 1,013,514 | 41.3 | % | 44,147 | 4.4 | % | ||||||||||||||||||||||||||
| Gain on business dispositions | — | — | % | (105,738) | (4.3) | % | 105,738 | NM | |||||||||||||||||||||||||||
| Operating expenses | $ | 1,996,145 | 77.7 | % | $ | 1,849,728 | 75.4 | % | $ | 146,417 | 7.9 | % | |||||||||||||||||||||||
Operating income (loss)(2): | |||||||||||||||||||||||||||||||||||
| Merchant Solutions | $ | 672,525 | 26.2 | % | $ | 603,548 | 24.6 | % | $ | 68,977 | 11.4 | % | |||||||||||||||||||||||
| Issuer Solutions | 110,375 | 4.3 | % | 95,701 | 3.9 | % | 14,674 | 15.3 | % | ||||||||||||||||||||||||||
| Consumer Solutions | — | — | % | 1,890 | 0.1 | % | (1,890) | NM | |||||||||||||||||||||||||||
| Corporate | (210,277) | (8.2) | % | (204,136) | (8.3) | % | (6,141) | 3.0 | % | ||||||||||||||||||||||||||
| Gain on business dispositions | — | — | % | 105,738 | 4.3 | % | (105,738) | NM | |||||||||||||||||||||||||||
| Operating income | $ | 572,623 | 22.3 | % | $ | 602,741 | 24.6 | % | $ | (30,118) | (5.0) | % | |||||||||||||||||||||||
Operating margin(2): | |||||||||||||||||||||||||||||||||||
| Merchant Solutions | 34.1 | % | 32.8 | % | 1.3 | % | |||||||||||||||||||||||||||||
| Issuer Solutions | 18.0 | % | 16.2 | % | 1.8 | % | |||||||||||||||||||||||||||||
| Consumer Solutions | — | % | 4.8 | % | NM | ||||||||||||||||||||||||||||||
NM = Not meaningful
(1) Percentage amounts may not sum to the total due to rounding.
31
(2) Revenues, consolidated operating expenses, operating income and operating margin reflect the effects of acquired businesses from the respective acquisition dates and the effects of divested businesses through the respective disposal dates. See “Note 2—Acquisition” and “Note 3—Business Dispositions” for further discussion.
Operating income included acquisition and integration expenses of $55.7 million and $67.5 million for the three months ended June 30, 2024 and 2023, respectively, which were primarily included within Corporate expenses.
The following table sets forth key selected financial data for the six months ended June 30, 2024 and 2023, this data as a percentage of total revenues and the changes between periods in dollars and as a percentage of the prior-period amount. The income statement data for the six months ended June 30, 2024 and 2023 is derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 — Financial Statements.
| Six Months Ended June 30, 2024 | % of Revenues(1) | Six Months Ended June 30, 2023 | % of Revenues(1) | $ Change | % Change | ||||||||||||||||||||||||||||||
| (dollar amounts in thousands) | |||||||||||||||||||||||||||||||||||
Revenues(2): | |||||||||||||||||||||||||||||||||||
| Merchant Solutions | $ | 3,805,119 | 76.3 | % | $ | 3,447,903 | 72.7 | % | $ | 357,216 | 10.4 | % | |||||||||||||||||||||||
| Issuer Solutions | 1,216,243 | 24.4 | % | 1,161,349 | 24.5 | % | 54,894 | 4.7 | % | ||||||||||||||||||||||||||
| Consumer Solutions | — | — | % | 182,740 | 3.9 | % | (182,740) | NM | |||||||||||||||||||||||||||
| Intersegment eliminations | (32,407) | (0.6) | % | (47,076) | (1.0) | % | 14,669 | (31.2) | % | ||||||||||||||||||||||||||
| Consolidated revenues | $ | 4,988,955 | 100.0 | % | $ | 4,744,916 | 100.0 | % | $ | 244,039 | 5.1 | % | |||||||||||||||||||||||
Consolidated operating expenses(2): | |||||||||||||||||||||||||||||||||||
| Cost of service | $ | 1,860,874 | 37.3 | % | $ | 1,889,705 | 39.8 | % | $ | (28,831) | (1.5) | % | |||||||||||||||||||||||
| Selling, general and administrative | 2,103,206 | 42.2 | % | 2,056,641 | 43.3 | % | 46,565 | 2.3 | % | ||||||||||||||||||||||||||
| Net loss on business dispositions | — | — | % | 139,095 | 2.9 | % | (139,095) | NM | |||||||||||||||||||||||||||
| Operating expenses | $ | 3,964,080 | 79.5 | % | $ | 4,085,441 | 86.1 | % | $ | (121,361) | (3.0) | % | |||||||||||||||||||||||
Operating income (loss)(2): | |||||||||||||||||||||||||||||||||||
| Merchant Solutions | $ | 1,252,962 | 25.1 | % | $ | 1,110,757 | 23.4 | % | $ | 142,205 | 12.8 | % | |||||||||||||||||||||||
| Issuer Solutions | 216,472 | 4.3 | % | 178,511 | 3.8 | % | 37,961 | 21.3 | % | ||||||||||||||||||||||||||
| Consumer Solutions | — | — | % | (3,908) | (0.1) | % | 3,908 | NM | |||||||||||||||||||||||||||
Corporate(3) | (444,559) | (8.9) | % | (486,790) | (10.3) | % | 42,231 | (8.7) | % | ||||||||||||||||||||||||||
| Net loss on business dispositions | — | — | % | (139,095) | (2.9) | % | 139,095 | NM | |||||||||||||||||||||||||||
| Operating income | $ | 1,024,875 | 20.5 | % | $ | 659,475 | 13.9 | % | $ | 365,400 | 55.4 | % | |||||||||||||||||||||||
Operating margin(2): | |||||||||||||||||||||||||||||||||||
| Merchant Solutions | 32.9 | % | 32.2 | % | 0.7 | % | |||||||||||||||||||||||||||||
| Issuer Solutions | 17.8 | % | 15.4 | % | 2.4 | % | |||||||||||||||||||||||||||||
| Consumer Solutions | — | % | (2.1) | % | NM | ||||||||||||||||||||||||||||||
NM = Not meaningful
(1) Percentage amounts may not sum to the total due to rounding.
(2) Revenues, consolidated operating expenses, operating income and operating margin reflect the effects of acquired businesses from the respective acquisition dates and the effects of divested businesses through the respective disposal dates. See “Note 2—Acquisition” and “Note 3—Business Dispositions” for further discussion.
32
Operating income included acquisition and integration expenses of $134.6 million and $169.3 million for the six months ended June 30, 2024 and 2023, respectively, which were primarily included within Corporate expenses.
Revenues
Consolidated revenues for the three and six months ended June 30, 2024 increased by 4.7% and 5.1%, respectively, to $2,568.8 million and $4,989.0 million, respectively, compared to $2,452.5 million and $4,744.9 million, respectively, for the prior year. The increase in revenues was primarily due to an increase in transaction volumes. The change for the three months ended June 30, 2024 included the unfavorable effect on revenues of the consumer business divested in April 2023. For the six months ended June 30, 2024, the effect on revenues from the EVO business acquired in March 2023 was offset by the effect on revenue of the businesses divested in April 2023.
Merchant Solutions Segment. Revenues from our Merchant Solutions segment for the three and six months ended June 30, 2024 increased by 7.0% and 10.4%, respectively, to $1,971.0 million and $3,805.1 million, respectively, compared to $1,842.3 million and $3,447.9 million, respectively, for the prior year. The increase in revenues was primarily due to an increase in transaction volumes and growth in subscription and software revenue. The increase in transaction volumes for the six months ended June 30, 2024 also included the effect of the EVO business acquired in March 2023.
Issuer Solutions Segment. Revenues from our Issuer Solutions segment for the three and six months ended June 30, 2024 increased by 3.9% and 4.7%, respectively, to $613.5 million and $1,216.2 million, respectively, compared to $590.4 million and $1,161.3 million, respectively, for the prior year. The increase in revenues was primarily due to an increase in transaction volumes.
Operating Expenses
Cost of Service. Cost of service for the three and six months ended June 30, 2024 was $938.5 million and $1,860.9 million, respectively, compared to $942.0 million and $1,889.7 million, respectively, for the prior year. Cost of service as a percentage of revenues decreased to 36.5% and 37.3%, respectively, for the three and six months ended June 30, 2024, compared to 38.4% and 39.8%, respectively, for the prior year. The decrease in cost of service was primarily due to the elimination of costs related to the businesses divested in 2023. These favorable effects were partially offset by the inclusion of costs for the EVO business, including the related amortization of acquired intangibles. Cost of service included amortization of acquired intangibles of $345.9 million and $344.4 million for the three months ended June 30, 2024 and 2023, respectively. Cost of service included amortization of acquired intangibles of $689.2 million and $645.7 million for the six months ended June 30, 2024 and 2023, respectively. The decrease in cost of service as a percentage of revenues also reflects the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues.
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three and six months ended June 30, 2024 were $1,057.7 million and $2,103.2 million, respectively, compared to $1,013.5 million and $2,056.6 million, respectively, for the prior year. Selling, general and administrative expenses as a percentage of revenues was 41.2% and 42.2%, respectively, for the three and six months ended June 30, 2024, compared to 41.3% and 43.3%, respectively, for the prior year. Higher variable selling and other costs related to the increase in revenues and the inclusion of costs for the EVO business were partially offset by the elimination of costs related to the businesses divested in 2023 and lower share-based compensation and acquisition and integration expenses in the current year. The decrease in selling, general and administrative expenses as a percentage of revenues also reflects the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues.
Selling, general and administrative expenses included acquisition and integration expenses of $55.7 million and $67.5 million for the three months ended June 30, 2024 and 2023, respectively, and $134.6 million and $169.3 million for the six months ended June 30, 2024 and 2023, respectively. Share-based compensation expense was $43.2 million and $47.1 million for the three months ended June 30, 2024 and 2023, respectively, and $83.4 million and $136.7 million for the six months ended June 30, 2024 and 2023, respectively.
Corporate. Corporate expenses for the three and six months ended June 30, 2024 were $210.3 million and $444.6 million, respectively, compared to $204.1 million and $486.8 million, respectively, for the prior year. For the three and six months
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ended June 30, 2024, corporate expenses were favorably affected by the decrease in acquisition and integration and share-based compensation expenses as described above. Corporate expenses for the three months ended June 30, 2024 also included higher professional services costs as compared to the prior year.
Operating Income and Operating Margin
Consolidated operating income for the three and six months ended June 30, 2024 was $572.6 million and $1,024.9 million, respectively, compared to $602.7 million and $659.5 million, respectively, for the prior year. Operating margin for the three and six months ended June 30, 2024 was 22.3% and 20.5%, respectively, compared to 24.6% and 13.9%, respectively, for the prior year. Consolidated operating income and operating margin for the three and six months ended June 30, 2024 compared to the prior year included the favorable effects of the increase in revenues, since certain fixed costs do not vary with revenues, prudent expense management and lower acquisition and integration and share-based compensation expenses as described above. These effects were partially offset by higher amortization of acquired intangibles as described above.
Consolidated operating income and operating margin for the three months ended June 30, 2023 included the effects of the $104.1 million gain on the sale of our gaming business. Consolidated operating income for the six months ended June 30, 2023 also included the effects of the $243.2 million net loss on the sale of our consumer business.
Segment Operating Income and Operating Margin
In our Merchant Solutions segment, operating income and operating margin for the three and six months ended June 30, 2024 increased compared to the prior year primarily due to the favorable effects of the increase in revenues, since certain fixed costs do not vary with revenues, and continued expense management. These favorable effects were partially offset by incremental expenses related to continued investment in products, innovation and our technology environments.
In our Issuer Solutions segment, operating income and operating margin for the three and six months ended June 30, 2024 increased compared to the prior year primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues, and continued expense management.
Other Income/Expense, Net
Interest and other income for the three and six months ended June 30, 2024 increased to $35.3 million and $71.2 million, respectively, compared to $27.9 million and $39.1 million, respectively, for the prior year, primarily due to interest income associated with the seller financing notes that were issued in connection with the sale of our consumer and gaming businesses in the second quarter of 2023.
Interest and other expense for the three and six months ended June 30, 2024 was $159.2 million and $321.3 million, respectively, compared to $191.4 million and $314.4 million, respectively, for the prior year. For the three months ended June 30, 2024, the decrease in interest and other expense was primarily due to lower average interest rates on outstanding borrowings. For the six months ended June 30, 2024, the increase in interest and other expense was primarily due to an increase in our average outstanding borrowings. In addition, interest and other expense for the three and six months ended June 30, 2023 included a noncash charge of $18.2 million for the estimated future credit losses on the new seller financing notes receivable.
Income Tax Expense
For the three and six months ended June 30, 2024, our effective income tax rates of 17.3% and 12.5%, respectively, included the favorable effects of foreign interest income not subject to tax, tax credits and the foreign-derived intangible income deduction. In addition, for the six months ended June 30, 2024, our effective income tax rate included the favorable effect of a change in the assessment of the need for a valuation allowance related to certain foreign tax credit carryforwards.
For the three and six months ended June 30, 2023, we reported a tax expense of 39.2% and 36.7%, respectively, of the reported income before taxes. During the three and six months ended June 30, 2023, we recognized a gain on the dispositions of our consumer and gaming businesses for income tax reporting purposes, while a net loss on the dispositions was recognized for financial reporting purposes. These effects were partially offset by the favorable effect on the rate of foreign interest income not subject to tax, tax credits and the foreign-derived intangible income deduction.
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In December 2022, the EU Member States formally adopted the Pillar Two Directive, which generally provides for a global minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development Pillar Two Framework. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are expected to also implement similar legislation with varying effective dates in the future. We do not expect the Pillar Two Directive to have any significant effect on our financial statements.
Net Income Attributable to Global Payments
Net income attributable to Global Payments was $374.8 million and $688.1 million, respectively, for the three and six months ended June 30, 2024 compared to $274.1 million and $263.1 million, respectively, for the prior year, reflecting the changes noted above.
Diluted Earnings per Share
Diluted earnings per share was $1.47 and $2.68, respectively, for the three and six months ended June 30, 2024 compared to $1.05 and $1.00, respectively, for the prior year. Diluted earnings per share for the three and six months ended June 30, 2024 reflects the changes in net income.
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 revolving credit facility.
Our capital allocation priorities are to make planned capital investments in our business, to pursue acquisitions that meet our corporate objectives, to pay dividends, to pay principal and interest on our outstanding debt and to repurchase shares of our common stock. Our 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 6—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 7—Leases" and “Note 19—Commitments and Contingencies” in our Annual Report on Form 10-K for the year ended December 31, 2023.
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, commercial paper program and senior note issuances, for general corporate purposes and to fund acquisitions. Our commercial paper program provides a cost effective means of addressing our short-term liquidity needs and is backstopped by our revolving credit agreement, in that the amount of commercial paper notes outstanding cannot exceed the undrawn portion of our revolving credit facility. Finally, specialized lines of credit are also used in certain of our markets to fund merchant settlement prior to receipt of funds from the card networks.
We regularly evaluate our liquidity and capital position relative to cash requirements, and we may elect to raise additional funds in the future through the issuance of debt or equity or by other means. Accumulated cash balances are invested in high-quality, marketable short-term instruments. We believe that our current and projected sources of liquidity will be sufficient to meet our projected liquidity requirements associated with our operations for the near and long term.
At June 30, 2024, we had cash and cash equivalents totaling $2,097.2 million. Of this amount, we considered $751.8 million to be available for general purposes, of which $62.9 million is undistributed foreign earnings considered to be indefinitely reinvested outside the United States. The available cash of $751.8 million does not include the following: (i) settlement-related cash balances, (ii) funds held as collateral for merchant losses ("Merchant Reserves") and (iii) certain funds held for customers. Settlement-related cash balances represent funds that we hold when the incoming amount from the card networks precedes the funding obligation to the merchant. 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
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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 $190.0 million as of June 30, 2024, representing amounts deposited by customers for prepaid card transactions and funds held as a liquidity reserve. These balances are subject to local regulatory restrictions requiring appropriate segregation and restriction in their use.
Operating activities provided net cash of $1,153.2 million and $1,164.5 million for the six months ended June 30, 2024 and 2023, respectively, which reflect net income adjusted for noncash items, including depreciation, amortization, the provision for credit losses and charges associated with the net loss on business dispositions, and changes in operating assets and liabilities. The decrease in cash flows from operating activities from the prior year was due to assets and liabilities that are affected primarily by timing of month-end and transaction volume, including changes in settlement processing assets and obligations and accounts payable and other liability balances.
We used net cash in investing activities of $697.3 million and $4,001.5 million during the six months ended June 30, 2024 and 2023, respectively. Cash used for investing activities primarily represents cash used to fund acquisitions, net of cash and restricted cash acquired, and capital expenditures. During the six months ended June 30, 2024 and 2023, we used cash of $372.7 million and $4,101.4 million, respectively, for acquisitions. We made capital expenditures of $324.7 million and $331.0 million during the six months ended June 30, 2024 and 2023, 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 grow at a similar rate as our revenue growth during the year ending December 31, 2024. Additionally, investing cash flows for the six months ended June 30, 2023 includes the net effect on cash from the sale of our consumer and gaming businesses and the issuance of a $50 million secured revolving credit facility available from the date of the sale to the purchasers of the consumer business, which was subsequently repaid in the third quarter of 2023.
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 6—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 $372.0 million during the six months ended June 30, 2024, and financing activities provided net cash of $2,701.3 million during the six months ended June 30, 2024.
Proceeds from long-term debt were $6,289.0 million and $7,359.2 million for the six months ended June 30, 2024 and 2023, respectively. Repayments of long-term debt were $4,430.1 million and $5,673.7 million for the six months ended June 30, 2024 and 2023, respectively. Proceeds from and repayments of long-term debt consist of borrowings and repayments that we make with available cash, from time-to-time, under our revolving credit facility, as well as scheduled principal repayments we make on our senior notes, finance leases and other vendor financing arrangements. During the six months ended June 30, 2024 and 2023, we had net repayments of $936.5 million and net borrowings of $1,841.7 million, respectively, under our commercial paper program. Furthermore, in connection with the issuance of convertible notes in February 2024, we paid $256.3 million to purchase privately negotiated capped call transactions to hedge the potential dilutive effect upon conversion of the notes, or offset our cash obligation if the cash settlement option were to be elected. See section "Long-Term Debt and Lines of Credit" below for further discussion of our recent debt transactions.
Activity under our settlement lines of credit is affected primarily by timing of month-end and transaction volume. During the six months ended June 30, 2024 and 2023, we had net borrowings of $55.4 million and net repayments of $233.1 million, respectively, under our settlement lines of credit.
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We repurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase programs. During the six months ended June 30, 2024 and 2023, we used $900.0 million and $418.3 million, respectively, to repurchase shares of our common stock. The share repurchase activity for the six months ended June 30, 2024 included the repurchase of 1,414,759 shares using a portion of the net proceeds from our offering of 1.500% convertible unsecured senior notes due March 2031 through privately negotiated transactions with purchasers of notes in the offering, or one of their respective affiliates. The purchase price per share of the common stock repurchased in such transactions equaled the closing price of the common stock on February 20, 2024, which was $130.80 per share. As of June 30, 2024, the remaining amount available under our share repurchase program was $1,371.9 million.
We paid dividends to our common shareholders in the amounts of $127.0 million and $130.6 million during the six months ended June 30, 2024 and 2023, respectively. We made distributions to noncontrolling interests in the amount of $10.9 million and $17.3 million during the six months ended June 30, 2024 and 2023, respectively.
Long-Term Debt and Lines of Credit
Senior Notes
We have $10.8 billion in aggregate principal amount of senior unsecured notes, which mature at various dates ranging from November 2024 to August 2052. Interest on the senior notes is payable annually or 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.
Convertible Notes
On February 23, 2024, we issued $2.0 billion in aggregate principal amount of 1.500% convertible unsecured senior notes due March 2031 through a private placement. The net proceeds from this offering were approximately $1.97 billion reflecting debt issuance costs of $33.5 million, which were capitalized and reflected as a reduction of the related carrying amount of the convertible notes in our consolidated balance sheet. Interest on the convertible notes is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2024, to the holders of record on the preceding February 15 and August 15, respectively.
Prior to December 1, 2030, the notes are convertible at the option of the holders only under certain conditions, including: (i) if the last reported sale price of our common stock has been at least 130% of the conversion price for at least 20 trading days within the last 30 consecutive trading days of the immediately preceding calendar quarter; (ii) for a five business day period following a ten-day consecutive trading period where the trading price of the notes is less than 98% of the product of the last reported sale price of our common stock and the conversion rate; (iii) if we call any or all of the notes for redemption; or (iv) upon the occurrence of certain corporate events. On or after December 1, 2030, the notes are convertible at the option of the holders at any time until the second scheduled trading day prior to the maturity date. The conversion rate for the notes is initially 6.371 shares of common stock per $1,000 in principal amount of the notes (which is equal to an initial conversion price of approximately $156.96 per share), subject to customary adjustments upon the occurrence of certain events. Upon conversion, the principal amount of, and interest due on, the convertible notes are required to be settled in cash and any other amounts may be settled in shares, cash or a combination of shares and cash at our election.
We may not redeem the notes prior to March 6, 2028. On or after March 6, 2028, we have the option to redeem all or any portion of the notes for cash if the last reported sale price of our common stock has been at least 130% of the conversion price for at least 20 trading days within the last 30 consecutive trading day period at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. If certain corporate events that constitute a fundamental change (as defined in the indenture governing the notes) occur, any holder of the notes may require that we repurchase all or a portion of their notes for cash at a purchase price equal to 100% of the principal amount of the notes to be repurchased plus accrued and unpaid interest. In addition, if certain corporate events that constitute a make-whole fundamental change (as defined in the indenture governing the notes) occur, then the conversion rate will in certain circumstances be increased. The notes include customary covenants for notes of this type, as well as customary events of default, which may result in the acceleration of the maturity of the convertible notes.
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In connection with the issuance of the notes, we entered into privately negotiated capped call transactions with certain of the initial purchasers of the notes and other financial institutions to cover, subject to customary adjustments, the number of shares of common stock initially underlying the notes. The economic effect of the capped call transactions is to hedge the potential dilutive effect upon the conversion of the notes, or offset our cash obligation if the cash settlement option is elected, for amounts in excess of the principal amount of converted notes subject to a cap. The initial cap price of the capped call transactions is $228.90 per share. The capped call transactions meet the accounting criteria to be reflected in stockholders’ equity and not accounted for as derivatives. The cost of $256.3 million incurred in connection with the capped call transactions was reflected as a reduction to paid-in-capital in our consolidated balance sheet as of June 30, 2024, net of applicable income taxes.
We also have $1.5 billion in aggregate principal amount of 1.000% convertible notes due August 2029, which were issued during 2022 in a private placement pursuant to an investment agreement with Silver Lake Partners. Interest on the convertible notes is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2023, to the holders of record on the preceding February 1 and August 1, respectively. The convertible notes mature on August 15, 2029, subject to earlier conversion or repurchase. The notes, which are currently convertible, are presented within long-term debt in our consolidated balance sheet based on our intent and ability to refinance on a long-term basis should a conversion event occur.
Revolving Credit Facility
Our revolving credit agreement with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents, provides for an unsubordinated unsecured $5.75 billion revolving credit facility that matures in August 2027.
We may issue standby letters of credit of up to $250.0 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 June 30, 2024, there were borrowings of $1.5 billion outstanding under the revolving credit facility with an interest rate of 6.80%, and the total available commitments under the revolving credit facility were $3.6 billion.
Commercial Paper
We have a $2.0 billion commercial paper program under which we may issue senior unsecured commercial paper notes with maturities of up to 397 days from the date of issue. The program is backstopped by our revolving credit agreement, in that the amount of commercial paper notes outstanding cannot exceed the undrawn portion of our revolving credit facility. As such, we could draw on the revolving credit facility to repay commercial paper notes that cannot be rolled over or refinanced with similar debt.
Commercial paper notes are expected to be issued at a discount from par, or they may bear interest, each at commercial paper market rates dictated by market conditions at the time of their issuance. The proceeds from issuances of commercial paper notes will be used primarily for general corporate purposes but may also be used for acquisitions, to pay dividends, for debt refinancing or for other purposes.
As of June 30, 2024, we had net borrowings under our commercial paper program of $431.6 million outstanding with a weighted average annual interest rate of 6.03%.
Compliance with Covenants
The convertible notes include customary covenants and events of default for convertible notes of this type. The revolving credit agreement contains customary affirmative covenants and restrictive covenants, including, among others, financial covenants based on net leverage and interest coverage ratios, and customary events of default. The required leverage ratio was increased as a result of the acquisition of EVO, and will gradually step-down over eight quarters to the original required ratio of 3.75 to 1.00. As of June 30, 2024, the required leverage ratio was 4.25 to 1.00, and the required interest coverage ratio was 3.00 to 1.00. We were in compliance with all applicable covenants as of June 30, 2024.
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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 June 30, 2024, a total of $79.9 million of cash on deposit was used to determine the available credit.
As of June 30, 2024, we had $1,010.0 million outstanding under these lines of credit with additional capacity to fund settlement of $2,245.0 million. During the three months ended June 30, 2024, the maximum and average outstanding balances under these lines of credit were $1,283.4 million and $506.9 million, respectively. The weighted-average interest rate on these borrowings was 5.82% at June 30, 2024.
See "Note 6—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; statements we make regarding guidance and projected financial results for the year 2024; the effects of general economic conditions on our business; statements about the benefits of our acquisitions or divestitures, including future financial and operating results and the completion and expected timing of our acquisitions or completion of anticipated benefits or strategic or operational initiatives; our success and timing in developing and introducing new services and expanding our business; and other statements regarding our future financial performance and the company's plans, objectives, expectations and intentions. 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. Accordingly, we cannot guarantee that our plans and expectations will be achieved. Our actual revenues, revenue growth rates and margins, and other results of operations 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 that may otherwise cause actual events or results to differ materially from those anticipated by such forward-looking statements or historical performance include, among others, the effects of global economic, political, market, health and social events or other conditions; foreign currency exchange, inflation and rising interest rate risks; difficulties, delays and higher than anticipated costs related to integrating the businesses of acquired companies, 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 our 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
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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; 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, 2023 and subsequent filings we make with the SEC, 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.
ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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, 2023.
ITEM 4—CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of June 30, 2024, 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). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2024, 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 June 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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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, that 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 16—Commitments and Contingencies" in the notes to the accompanying unaudited consolidated financial statements for information about certain legal matters.
ITEM 1A—RISK FACTORS
For a discussion of our risk factors, see Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023.
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 June 30, 2024 is set forth below:
| Period | Total Number of Shares Purchased (1) | Approximate Average Price Paid per Share, excluding commission | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2) | |||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| April 1-30, 2024 | 6,136 | $ | 129.30 | — | $ | — | |||||||||||||||||
| May 1-31, 2024 | 915,645 | 109.73 | 910,980 | — | |||||||||||||||||||
| June 1-30, 2024 | 1,090 | 95.66 | — | — | |||||||||||||||||||
| Total | 922,871 | $ | 110.79 | 910,980 | $ | 1,371.9 | |||||||||||||||||
(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 June 30, 2024, pursuant to our employee incentive plans, we withheld 11,891 shares at an average price per share of $116.40 in order to satisfy employees' tax withholding and payment obligations in connection with the vesting of awards of restricted stock.
(2)As of June 30, 2024, the remaining amount available under our share repurchase program was $1,371.9 million. The authorization by our board of directors 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.
ITEM 5—OTHER INFORMATION
(c) Director and Officer Trading Plans and Arrangements
During the quarter ended June 30, 2024, none of our directors or officers notified us that they adopted terminated
41
ITEM 6—EXHIBITS
List of Exhibits
| 2.1 | ||||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 3.3 | ||||||||
| 10.1*+ | ||||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 32.1* | ||||||||
| 101* | The following information from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, formatted in Inline XBRL (eXtensible Business Reporting Language) and filed electronically herewith: (i) the Unaudited Consolidated Statements of Income; (ii) the Unaudited Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Unaudited Consolidated Statements of Cash Flows; (v) the Unaudited Consolidated Statements of Changes in Equity; (vi) the Notes to Unaudited Consolidated Financial Statements; and (vii) the information included in Part II, Item 5(c). The instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | |||||||
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
______________________
| * | Filed herewith. | |||||||
| † | Pursuant to Item 601(b)(2) of Regulation S-K, certain schedules have been omitted. The registrant hereby agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request. | |||||||
| + | Management contract or compensatory plan or arrangement. | |||||||
42
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.
| Global Payments Inc. | |||||||||||
| (Registrant) | |||||||||||
| Date: August 7, 2024 | /s/ Joshua J. Whipple | ||||||||||
| Joshua J. Whipple | |||||||||||
| Chief Financial Officer | |||||||||||
| (Principal Financial Officer) | |||||||||||
43
Exhibit 10.1
____________________________________________________________
GLOBAL PAYMENTS INC.
EIGHTH AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
____________________________________________________________
Exhibit 10.1
TABLE OF CONTENTS
| ARTICLE 1 | PURPOSE | 2 | ||||||
| 1.1 | Background | 2 | ||||||
| 1.2 | Purpose | 2 | ||||||
| 1.3 | Eligibility | 2 | ||||||
| ARTICLE 2 | DEFINITIONS | 2 | ||||||
| 2.1 | Definitions | 2 | ||||||
| ARTICLE 3 | ADMINISTRATION | 4 | ||||||
| 3.1 | Administration | 4 | ||||||
| 3.2 | Reliance | 4 | ||||||
| ARTICLE 4 | SHARES | 4 | ||||||
| 4.1 | Source of Shares for the Plan | 4 | ||||||
| ARTICLE 5 | CASH COMPENSATION | 4 | ||||||
| 5.1 | Basic Cash Retainer | 4 | ||||||
| 5.2 | Supplemental Cash Retainer | 5 | ||||||
| 5.3 | Expense Reimbursement | 5 | ||||||
| ARTICLE 6 | EQUITY COMPENSATION | 5 | ||||||
| 6.1 | Stock Awards | 5 | ||||||
| 6.2 | Adjustments | 6 | ||||||
| 6.3 | Award Certificates | 6 | ||||||
| ARTICLE 7 | AMENDMENT, MODIFICATION AND TERMINATION | 6 | ||||||
| 7.1 | Amendment, Modification and Termination | 6 | ||||||
| ARTICLE 8 | GENERAL PROVISIONS | 6 | ||||||
| 8.1 | Duration of the Plan | 6 | ||||||
| 8.2 | Expenses of the Plan | 6 | ||||||
SCHEDULE I – DIRECTOR COMPENSATION SCHEDULE
Exhibit 10.1
GLOBAL PAYMENTS INC.
EIGHTH AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
ARTICLE 1
PURPOSE
1.1. BACKGROUND. This plan is adopted to aggregate and formalize the Company’s compensation policies for non-employee directors of the Company, including all cash and equity-based compensation. This Eighth Amended and Restated Non-Employee Director Compensation Plan (the “Plan”) amends and restates the Seventh Amended and Restated Non-Employee Director Compensation Plan that became effective on April 28, 2022. The Plan operates as a subplan of the 2011 Incentive Plan pursuant to Section 4.3 of the 2011 Incentive Plan.
1.2. PURPOSE. The purpose of the Plan is to attract, retain and compensate highly-qualified individuals who are not employees of the Company or any of its Subsidiaries or Affiliates for service as members of the Board by providing them with competitive compensation and an equity interest in the Company. The Company intends that the Plan will benefit the Company and its shareholders by allowing Non-Employee Directors to have a personal financial stake in the Company through an ownership interest in the Company’s Stock and will closely associate the interests of Non-Employee Directors with that of the Company’s shareholders.
1.3. ELIGIBILITY. Non-Employee Directors of the Company who are Eligible Participants, as defined below, shall automatically be participants in the Plan.
ARTICLE 2
DEFINITIONS
2.1 DEFINITIONS. Capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the 2011 Incentive Plan. Unless the context clearly indicates otherwise, the following terms shall have the following meanings:
(a)“Annual Stock Retainer” means with respect to each Non-Employee Director for each Plan Year, the dollar value to be delivered in the form of annual Stock awards under the Plan, as recommended from time to time by the Committee and approved by the Board and set forth in Schedule I hereto.
(b)“Basic Cash Retainer” means the annual cash retainer (excluding any Supplemental Cash Retainer and expenses) payable by the Company to a Non-Employee Director pursuant to Section 5.1 hereof for service as a director of the Company; as recommended from time to time by the Committee and approved by the Board and set forth in Schedule I hereto.
(c)“Board” means the Board of Directors of the Company.
(d)“Chairperson” means the Chairperson of the Board.
Exhibit 10.1
(e)“Committee” means the Compensation Committee of the Board.
(f)“Company” means Global Payments Inc., a Georgia corporation, or any successor corporation.
(g)“Effective Date” of the Plan means April 25, 2024.
(h)“Eligible Participant” means any person who is a Non-Employee Director on the Effective Date or becomes a Non-Employee Director while this Plan is in effect; except that any director who is a former employee shall not be an Eligible Participant for a period of one year following the date of termination of employment.
(i)“Equity Award” means stock options, stock awards, restricted stock, restricted stock units, stock appreciation rights, or other awards based on or derived from the Stock which are authorized under the 2011 Incentive Plan for award to Non-Employee Directors.
(j)“Grant Date” of an Equity Award has the meaning given such term in Sections 6.1 hereof.
(k)“2011 Incentive Plan” means the Global Payments Inc. 2011 Incentive Plan, as may be amended from time to time, and any subsequent equity compensation plan approved by the shareholders and designated by the Board as the Incentive Plan for purposes of this Plan.
(l)“Non-Employee Chairperson” means the Non-Employee Director, if any, who has been designated by the Board as the Chairperson under the Board’s Corporate Governance Guidelines.
(m)“Lead Director” means the Non-Employee Director, if any, who has been designated by the Board as the Lead Director under the Board’s Corporate Governance Guidelines. The Lead Director shall have such duties as shall be assigned to him or her by the Board in such Corporate Governance Guidelines.
(n)“Non-Employee Director” means a director of the Company who is not an employee of the Company or any of its Subsidiaries or Affiliates and who had not been appointed or elected to the Board solely by reason of his or her affiliation with a shareholder of the Company.
(o)“Plan” means this Eighth Amended and Restated Non-Employee Director Compensation Plan, as amended from time to time.
(p)“Plan Year(s)” means the approximate twelve-month periods between annual meetings of the shareholders of the Company, which, for purposes of the Plan, are the periods for which annual retainers are earned.
2
Exhibit 10.1
(q)“Supplemental Cash Retainer” means the supplemental annual cash retainer (excluding Basic Cash Retainer and expenses) payable by the Company to a Non-Employee Director pursuant to Section 5.2 hereof for service as Lead Director, Non-Employee Chairperson or chair of a committee of the Board; as recommended from time to time by the Committee and approved by the Board and set forth in Schedule I hereto.
(r)“Stock” means the common stock, no par value per share, of the Company.
ARTICLE 3
ADMINISTRATION
3.1. ADMINISTRATION. The Plan shall be administered by the Committee. Subject to the provisions of the Plan, the Committee shall be authorized to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The Committee’s interpretation of the Plan, and all actions taken and determinations made by the Committee pursuant to the powers vested in it hereunder, shall be conclusive and binding upon all parties concerned including the Company, its shareholders and persons granted awards under the Plan. The Committee may appoint a plan administrator to carry out the ministerial functions of the Plan, but the administrator shall have no other authority or powers of the Committee.
3.2. RELIANCE. In administering the Plan, the Committee may rely upon any information furnished by the Company, its public accountants and other experts. No individual will have personal liability by reason of anything done or omitted to be done by the Company or the Committee in connection with the Plan. This limitation of liability shall not be exclusive of any other limitation of liability to which any such person may be entitled under the Company’s articles of incorporation or otherwise.
ARTICLE 4
SHARES
4.1. SOURCE OF SHARES FOR THE PLAN. Equity Awards that may be issued pursuant to the Plan shall be issued under the 2011 Incentive Plan, subject to all of the terms and conditions of the 2011 Incentive Plan. The terms contained in the 2011 Incentive Plan are incorporated into and made a part of this Plan with respect to Equity Awards granted pursuant hereto, and any such awards shall be governed by and construed in accordance with the 2011 Incentive Plan. In the event of any actual or alleged conflict between the provisions of the 2011 Incentive Plan and the provisions of this Plan, the provisions of the 2011 Incentive Plan shall be controlling and determinative. This Plan does not constitute a separate source of shares for the grant of the Equity Awards described herein.
ARTICLE 5
CASH COMPENSATION
5.1. BASIC CASH RETAINER. Each Eligible Participant shall be paid a Basic Cash Retainer for service as a director during each Plan Year, payable in advance, on the first business day following each annual meeting of shareholders. The amount of the Basic Cash Retainer is set
3
Exhibit 10.1
forth in Schedule I, as may be amended from time to time. Each person who first becomes an Eligible Participant on a date other than an annual meeting date shall be paid a pro rata amount of the Basic Cash Retainer for that Plan Year to reflect the actual number of days served in the Plan Year.
5.2. SUPPLEMENTAL CASH RETAINER. The Lead Director and/or Non-Employee Chairperson, as applicable, and the chairs of each committee of the Board may be paid a Supplemental Cash Retainer during a Plan Year, payable at the same times as installments of the Basic Cash Retainer are paid. The amount of the Supplemental Cash Retainers shall be set forth in Schedule I, as amended from time to time. A prorata Supplemental Cash Retainer will be paid to any Eligible Participant who is elected by the Board to a position eligible for a Supplemental Cash Retainer on a date other than the beginning of a Plan Year, to reflect the actual number of days served in such eligible capacity during the Plan Year.
5.3. EXPENSE REIMBURSEMENT. All Eligible Participants shall be reimbursed for reasonable travel and out-of-pocket expenses in connection with attendance at meetings of the Board and its committees, or other Company functions at which the Chairperson, the Chief Executive Officer or the Lead Director requests the director to participate.
ARTICLE 6
EQUITY COMPENSATION
6.1. STOCK AWARDS. Subject to share availability under the 2011 Incentive Plan, each Eligible Participant shall be granted an award of fully-vested Stock on the day that he or she first becomes an Eligible Participant (“Initial Stock Grant”). In addition, subject to share availability under the 2011 Incentive Plan, each Eligible Participant in service on the day following an annual shareholders meeting will receive an award of fully-vested Stock (“Annual Stock Grant” and collectively with the Initial Stock Grant, the “Stock Grants”). Each such day that such awards are to be granted under the Plan is referred to hereinafter as a “Grant Date.” The Stock Grants shall have the following terms and conditions:
(a) Number of Initial Stock Grants. The number of shares in the Initial Stock Grant to an Eligible Participant shall be determined by multiplying the Proration Factor (as defined below) by the amount determined by (A) dividing the Annual Stock Retainer as in effect for that Plan Year, by the Fair Market Value of the Stock on the Grant Date, and (B) rounding to the nearest whole number. The Proration Factor is a fraction, the numerator of which is the number of full months of service as a Non-Employee Director between the Grant Date and the next annual shareholders’ meeting date, and the denominator of which is 12.
(b) Number of Annual Stock Grants. The number of shares in the Annual Stock Grant to an Eligible Participant shall be determined by (A) dividing the Annual Stock Retainer as in effect for that Plan Year, by the Fair Market Value of the Stock on the Grant Date, and (B) rounding to the nearest whole number.
(c) Other Plan Conditions. To the extent not specified herein, the Stock Grants shall be subject to the terms and conditions of the 2011 Incentive Plan.
4
Exhibit 10.1
6.2. ADJUSTMENTS. For the avoidance of doubt, the adjustment provisions of the 2011 Incentive Plan (along with all of the other provisions of the 2011 Incentive Plan) shall apply with respect to all Equity Awards granted pursuant to this Plan.
6.3. AWARD CERTIFICATES. All unvested Equity Awards granted pursuant to this Plan shall be evidenced by a written award certificate, which shall include such provisions, not inconsistent with the Plan or the 2011 Incentive Plan, as may be specified by the Committee. The form of applicable award certificates (if any) shall be approved by the Committee.
ARTICLE 7
AMENDMENT, MODIFICATION AND TERMINATION
7.1. AMENDMENT, MODIFICATION AND TERMINATION. The Committee may, at any time and from time to time, amend, modify or terminate the Plan without shareholder approval; provided, however, that if an amendment to the Plan would, in the reasonable opinion of the Committee, require shareholder approval under applicable laws, policies or regulations or the applicable listing or other requirements of a securities exchange on which the Stock is listed or traded, then such amendment shall be subject to shareholder approval; and provided further, that the Committee may condition any other amendment or modification on the approval of shareholders of the Company for any reason. Modification of Equity Awards granted under this Plan shall be subject to the provisions of the 2011 Incentive Plan.
ARTICLE 8
GENERAL PROVISIONS
8.1. DURATION OF THE PLAN. The Plan shall remain in effect until terminated by the Committee or the earlier termination or expiration of the 2011 Incentive Plan, including any successor plans.
8.2. EXPENSES OF THE PLAN . The expenses of administering the Plan shall be borne by the Company.
The foregoing is hereby acknowledged as being the Global Payments Inc. Eighth Amended and Restated Non-Employee Director Compensation Plan, adopted by the Board on April 25, 2024.
GLOBAL PAYMENTS INC.
By: /s/ David Green
David L. Green
Senior Executive Vice President, Chief
Administrative and Legal Officer
5
Exhibit 10.1
SCHEDULE I
DIRECTOR COMPENSATION SCHEDULE
The following shall remain in effect until modified by the Board
| Position Held | Annual Basic Cash Retainer | Annual Supplemental Cash Retainer | Annual Stock Retainer (FMV) | ||||||||
| Non-Employee Chairperson | $ 125,000 | $ 100,000 | $ 285,000 | ||||||||
| Lead Director | $ 125,000 | $ 50,000 | $ 230,000 | ||||||||
| Audit Committee Chair | $ 125,000 | $ 40,000 | $ 230,000 | ||||||||
| Compensation Committee Chair | $ 125,000 | $ 30,000 | $ 230,000 | ||||||||
| Other Committee Chairs | $ 125,000 | $ 30,000 | $ 230,000 | ||||||||
| Other Non-Employee Directors | $ 125,000 | n/a | $ 230,000 | ||||||||
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Cameron M. Bready, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Global Payments Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
Exhibit 31.1
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
By: /s/ Cameron M. Bready | ||||||||
Date: | August 7, 2024 | |||||||
Cameron M. Bready | ||||||||
Principal Executive Officer | ||||||||
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joshua J. Whipple, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Global Payments Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
Exhibit 31.2
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
By: /s/ Joshua J. Whipple | ||||||||
Date: | August 7, 2024 | |||||||
| Joshua J. Whipple | ||||||||
Principal Financial Officer | ||||||||
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
§ 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Global Payments Inc. on Form 10-Q for the period ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Cameron M. Bready and Joshua J. Whipple certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Global Payments Inc.
| /s/ Cameron M. Bready | /s/ Joshua J. Whipple | ||||||||||||||||
Cameron M. Bready Principal Executive Officer Global Payments Inc. | Joshua J. Whipple Chief Financial Officer Global Payments Inc. | ||||||||||||||||
August 7, 2024 | August 7, 2024 | ||||||||||||||||
A signed original of this written statement required by Section 906 has been provided to Global Payments Inc. and will be retained by Global Payments Inc. and furnished to the Securities and Exchange Commission upon request.