FISERV INC (FISV) FY 2021 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition and results of operations is provided as a supplement to our consolidated financial statements and accompanying notes to help provide an understanding of our financial condition, the changes in our financial condition and our results of operations. Our discussion is organized as follows:

•Overview. This section contains background information on our company and the services and products that we provide, acquisitions and dispositions, our enterprise priorities, and the trends affecting our industry in order to provide context for management’s discussion and analysis of our financial condition and results of operations.

•Critical accounting policies and estimates. This section contains a discussion of the accounting policies that we believe are important to our financial condition and results of operations and that require judgment and estimates on the part of management in their application. In addition, all of our significant accounting policies, including critical accounting policies, are summarized in Note 1 to the accompanying consolidated financial statements.

•Results of operations. This section contains an analysis of our results of operations presented in the accompanying consolidated statements of income by comparing the results for the year ended December 31, 2021 to the results for the year ended December 31, 2020. Discussion of results for the year ended December 31, 2020 compared to the results for the year ended December 31, 2019 not included herein can be found in Part II, “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for fiscal year 2020, filed with the Securities and Exchange Commission on February 26, 2021.

•Liquidity and capital resources. This section provides an analysis of our cash flows and a discussion of our outstanding debt and commitments at December 31, 2021.

Overview

Company Background

We are a leading global provider of payments and financial services technology solutions. We serve clients around the globe, including merchants, banks, credit unions, other financial institutions, and corporate clients. We provide account processing and digital banking solutions; card issuer processing and network services; payments; e-commerce; merchant acquiring and processing; and the Clover® cloud-based point-of-sale (“POS”) and business management platform. Our operations are comprised of the Merchant Acceptance (“Acceptance”) segment, the Financial Technology (“Fintech”) segment and the Payments and Network (“Payments”) segment. The consolidated financial statements include the financial results of First Data from the date of acquisition.

The Acceptance segment provides a wide range of commerce-enabling solutions to merchants of all sizes and types around the world. These solutions include POS merchant acquiring and digital commerce services; mobile payment services; security and fraud protection products and services; CaratSM, our omnichannel commerce solution; Clover, our cloud-based POS and business management platform, which includes a marketplace for proprietary and third-party business applications; and Clover Connect, our independent software vendor (“ISV”) platform. The businesses in the Acceptance segment are subject to a modest level of seasonality, with the first quarter generally experiencing the lowest level of revenue and the fourth quarter experiencing the highest level of revenue.

The Fintech segment provides financial institutions around the world with technology solutions that enable them to process customer deposit and loan accounts and manage general ledger and central information files, as well as other products and services that support numerous types of financial transactions such as digital banking, financial and risk management, professional services and consulting, and item processing and source capture services. Our businesses in this segment also provide products and services to corporate clients to facilitate the management of financial processes and transactions.

The Payments segment primarily provides financial institutions and corporate clients with the products and services required to process digital payment transactions, including card transactions such as debit, credit and prepaid card processing and services, a range of network services, security and fraud protection products, card production and print services. In addition, our businesses in this segment offer non-card digital payment software and services, including bill payment, account-to-account transfers, person-to-person payments, electronic billing, and security and fraud protection products.

The majority of our revenue is generated from recurring account- and transaction-based fees under multi-year contracts with high renewal rates. Most of the services we provide within our segments are necessary for our clients to operate their businesses and are, therefore, non-discretionary in nature.

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Corporate and Other supports the reportable segments described above, and consists of amortization of acquisition-related intangible assets, unallocated corporate expenses and other activities that are not considered when we evaluate segment performance, such as gains or losses on sales of businesses or investments, costs associated with acquisition and divestiture activity, and our Output Solutions postage reimbursements. Corporate and Other also includes the historical results of our Investment Services business prior to the disposition of our controlling financial interest in February 2020, as well as certain transition services revenue associated with various dispositions.

Acquisitions and Dispositions

We frequently review our portfolio to ensure we have the necessary business assets to execute our strategy. We expect to acquire businesses when we identify: a compelling strategic need, such as a product, service or technology that helps meet client demand; an opportunity to change industry dynamics; a way to achieve business scale; or similar considerations. We expect to divest businesses that are not in line with our market, product or financial strategies.

Acquisitions

On November 22, 2021, we acquired BentoBox CMS, Inc. (“BentoBox”), a digital marketing and commerce platform that helps restaurants connect with their guests. BentoBox is included within the Acceptance segment and expands our Clover dining solutions and commerce and business management capabilities. On November 15, 2021, we acquired a remaining ownership interest in NetPay Solutions Group (“NetPay”), a multi-channel payment service provider offering a range of capabilities around onboarding, customer lifecycle, risk management, and settlement to businesses of all sizes. We previously held a noncontrolling equity interest in NetPay, which was accounted for under the equity method. NetPay is included within the Acceptance segment and further expands our ability to develop and deliver a wide range of customer-focused solutions and seamless payments experiences for our clients. On October 1, 2021, we acquired Integrity Payments, LLC (“AIP”), a business that promotes payment processing services for merchants and is included within the Acceptance segment. On June 14, 2021, we acquired Spend Labs Inc. (“SpendLabs”), a mobile-native, cloud-based software provider of commercial card payment solutions. SpendLabs is included within the Payments segment and further expands our digital capabilities across mobile and desktop devices for small and mid-sized businesses. On May 4, 2021, we acquired Pineapple Payments Holdings, LLC (“Pineapple Payments”), an independent sales organization (“ISO”) that provides payment processing, proprietary technology, and payment acceptance solutions for merchants. Pineapple Payments is included within the Acceptance segment and expands the reach of our payment solutions through its technology- and relationship-led distribution channels. On March 1, 2021, we acquired Radius8, Inc. (“Radius8”), a provider of a platform that uses consumer location and other information to drive incremental merchant transactions. Radius8 is included within the Acceptance segment and enhances our ability to help merchants increase sales, expand mobile application registration and improve one-to-one target marketing. On January 22, 2021, we acquired a remaining ownership interest in Ondot Systems, Inc. (“Ondot”), a digital experience platform provider for financial institutions. We previously held a noncontrolling equity interest in Ondot, which was accounted for at cost. Ondot is included within the Payments segment and further expands our digital capabilities, enhancing our suite of integrated payments, banking and merchant solutions. We acquired these businesses for an aggregate purchase price of approximately $882 million, net of $43 million of acquired cash and the fair value of our previously held equity interests of $36 million, and including earn-out provisions estimated at an aggregate fair value of $34 million. The results of operations for these acquired businesses are included in our consolidated results from the respective dates of acquisition.

On March 2, 2020, we acquired MerchantPro Express LLC (“MerchantPro”), an ISO that provides processing services, POS equipment and merchant cash advances to businesses across the United States. MerchantPro is included within the Acceptance segment and further expands our merchant services business. On March 18, 2020, we acquired Bypass Mobile, LLC (“Bypass”), an independent software vendor and innovator in enterprise POS systems for sports and entertainment venues, food service management providers and national restaurant chains. Bypass is included within the Acceptance segment and further enhances our ability to help businesses deliver seamless physical and digital customer experiences. On May 11, 2020, we acquired Inlet, LLC (“Inlet”), a provider of secure digital delivery solutions for enterprise and middle-market billers’ invoices and statements. Inlet is included within the Payments segment and further enhances our digital bill payment strategy. We acquired these businesses for an aggregate purchase price of $167 million, net of $2 million of acquired cash, and including earn-out provisions estimated at a fair value of $45 million. The results of operations for these acquired businesses are included in our consolidated results from the respective dates of acquisition.

On July 29, 2019, we acquired First Data for a total purchase price of $46.5 billion by acquiring 100% of the First Data stock that was issued and outstanding as of the date of acquisition. As a result of the acquisition, First Data stockholders received 286 million shares of common stock of Fiserv, Inc., at an exchange ratio of 0.303 shares of Fiserv, Inc. for each share of First Data common stock, with cash paid in lieu of fractional shares. We also converted 15 million outstanding First Data equity awards into corresponding equity awards relating to common stock of Fiserv, Inc. in accordance with the exchange ratio. In addition, concurrent with the closing of the acquisition, we made a cash payment of $16.4 billion to repay existing First Data debt. We

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funded the transaction-related expenses and the repayment of First Data debt through a combination of available cash on-hand, proceeds from the issuance of senior notes, and term loan and revolving credit facility borrowings. The acquisition of First Data, included within the Acceptance and Payments segments, increases our footprint as a global payments and financial technology provider by expanding the portfolio of services provided to financial institutions, corporate and merchant clients and consumers.

In February 2022, we entered into a definitive agreement to acquire the remaining ownership interest in Finxact, Inc. (“Finxact”), a developer of cloud-native banking solutions powering digital transformation throughout financial services, for approximately $650 million. We expect the acquisition to close in 2022, subject to customary approvals and closing conditions. Upon closing of the acquisition, Finxact will be included within the Fintech segment. We expect to recognize a gain on the remeasurement of our previously held equity interest to its fair value at the acquisition date.

Dispositions

Effective July 1, 2020, we and Bank of America (“BANA”) dissolved the Banc of America Merchant Services joint venture (“BAMS” or the “joint venture”), of which we maintained a 51% controlling ownership interest. Upon dissolution of the joint venture’s operations, the joint venture transferred a proportionate share of value, primarily the client contracts, to each party via an agreed upon contractual separation. The transfer of value to BANA was accounted for at fair value, resulting in the recognition of a pre-tax gain of $36 million, with a related tax expense of $13 million. The remaining activities of the joint venture consist primarily of an orderly wind down of remaining BAMS assets and liabilities. The revenues and expenses of the BAMS joint venture were consolidated into our financial results though the date of dissolution. The business transferred to us continues to be operated and managed within our Acceptance segment.

We will continue to provide merchant processing and related services to former BAMS clients allocated to BANA, at BAMS pricing, through June 2023. We will also provide processing and other support services to new BANA merchant clients pursuant to a five-year non-exclusive agreement which, after June 2023, will also apply to the former BAMS clients allocated to BANA. In addition, both companies are entitled to certain transition services, at fair value, from each other through June 2023.

On February 18, 2020, we sold a 60% controlling interest of our Investment Services business, subsequently renamed as Tegra118, LLC (“Tegra118”), which is reported within Corporate and Other. We received pre-tax proceeds of $578 million, net of related expenses, resulting in a pre-tax gain on the sale of $428 million, with a related tax expense of $112 million. The revenues, expenses and cash flows of the Investment Services business were consolidated into our financial results through the date of the sale transaction, and is reported within Corporate and Other. On February 2, 2021, Tegra118 completed a merger with a third party, resulting in a dilution of our ownership interest in the combined new entity, Wealthtech Holdings, LLC, which was subsequently renamed as InvestCloud Holdings, LLC (“InvestCloud”). In connection with the transaction, we made an additional capital contribution of $200 million into the combined entity and recognized a pre-tax gain of $28 million, with a related tax expense of $6 million. On June 30, 2021, we sold our entire ownership interest in InvestCloud for $466 million, resulting in a pre-tax gain of $33 million, with a related tax expense of $8 million. We will continue to provide various technical and data center related services for defined periods under the terms of a pre-existing transition services agreement.

Enterprise Priorities

We aspire to move money and information in a way that moves the world by delivering superior value for our clients through leading technology, targeted innovation and excellence in everything we do. We achieve this through active portfolio management of our business, enhancing the overall value of our existing client relationships, improving operational effectiveness, being disciplined in our allocation of capital, and differentiating our products and services through innovation. Our long-term priorities are to (i) continue to build high-quality revenue while meeting our earnings goals; (ii) enhance client relationships with an emphasis on digital and payment solutions; (iii) deliver innovation and integration which enables differentiated value for our clients; and (iv) deliver integration value from acquisitions.

Industry Trends

The global payments landscape continues to evolve, with rapidly advancing technologies and a steady expansion of digital payments, e-commerce and innovation in real-time payments infrastructure. Because of this growth, competition also continues to evolve. Business and consumer expectations continue to rise, with a focus on convenience and security. To meet these expectations, payments companies are focused on modernizing their technology, expanding the use of data and enhancing the customer experience.

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Merchants

The rapid growth in and globalization of mobile and e-commerce, driven by consumers’ desire for convenient and efficient shopping experiences, has created an opportunity for merchants to reach consumers in high-growth online and mobile settings, which often requires a merchant acquiring provider to enable and optimize the acceptance of payments. Merchants are demanding simple, integrated and modern POS systems to help manage their everyday business operations. When combined with the ever-increasing ways a consumer can pay for goods and services, merchants have sought modern POS systems to streamline this complexity. Furthermore, merchants can now search, discover, compare, purchase and even install a new POS system through direct, digital-only experiences. This direct, digital-only channel is quickly becoming a source of new merchant acquisition opportunities, especially with respect to smaller merchants.

In addition, there are numerous software-as-a-service (“SaaS”) solutions in the industry, many of which have chosen to integrate merchant acquiring within their software as a way to further monetize their client relationships. SaaS solutions that integrate payments are often referred to as ISVs, and we believe there are thousands of these potential distribution partnership opportunities available to us.

We believe that our merchant acquiring products and solutions create compelling value propositions for merchant clients of all sizes, from small and mid-sized businesses (or “SMBs”) to medium-sized regional businesses to global enterprise merchants, and across all verticals. Furthermore, we believe that our sizable and diverse client base, combined with valued partnerships with merchant acquiring businesses of small, medium and large financial institutions, and non-financial institutions, gives us a solid foundation for growth.

Financial Institutions

Financial service providers regularly introduce and implement new payment, deposit, risk management, lending and investment products, and the distinctions among the products and services traditionally offered by different types of financial institutions continue to narrow as they seek to serve the same customers. At the same time, the evolving global regulatory and cybersecurity landscape has continued to create a challenging operating environment for financial institutions. These conditions are driving heightened interest in solutions that help financial institutions win and retain customers, generate incremental revenue, comply with regulations and enhance operating efficiency. Examples of these solutions include electronic payments and delivery methods such as internet, mobile and tablet banking, sometimes referred to as “digital channels,” which enable financial institutions to offer their customers an industry-leading digital banking experience.

The focus on digital channels by both financial institutions and their customers, as well as the growing volume and types of payment transactions in the marketplace, continues to elevate the data and transaction processing needs of financial institutions. We expect that financial institutions will continue to invest significant capital and human resources to process transactions, manage information, maintain regulatory compliance and offer innovative new services to their customers in this rapidly evolving and competitive environment. We anticipate that we will benefit over the long term from the trend of financial institutions moving from in-house technology to outsourced solutions as they seek to remain current on technology changes in an evolving marketplace. We believe that economies of scale in developing and maintaining the infrastructure, technology, products, services and networks necessary to be competitive in such an environment are essential to justify these investments, and we anticipate that demand for products that facilitate customer interaction with financial institutions, including a unified, seamless customer experience across mobile and online channels, will continue to increase, which we expect to create revenue opportunities for us.

In addition to the trends described above, during the past 25 years, the number of financial institutions in the United States has declined at a relatively steady rate of approximately 3% per year, primarily as a result of voluntary mergers and acquisitions. Rather than reducing the overall market, these consolidations have transferred accounts among financial institutions. If a client loss occurs due to merger or acquisition, we typically receive a contract termination fee based on the size of the client and how early in the contract term the contract is terminated. These fees can vary from period to period with the variance depending on the quantum of financial institution merger activity in a given period and whether or not our clients are involved in the activity. Our focus on long-term client relationships and recurring, transaction-oriented products and services has also reduced the impact that consolidation in the financial services industry has had on us. We believe that the integration of our products and services creates a compelling value proposition for our clients by providing, among other things, new sources of revenue and opportunities to reduce their costs. Furthermore, we believe that our sizable and diverse client base, combined with our position as a leading provider of non-discretionary, recurring revenue-based products and services, gives us a solid foundation for growth.

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Recent Market Conditions

Since early 2020, the world has been, and continues to be, impacted by the coronavirus (“COVID-19”) pandemic. The COVID-19 pandemic, and various measures imposed by the governments of many countries, states, cities and other geographic regions to prevent its spread, have, among other matters, negatively impacted consumer and business spending and, as a result, our operating performance, primarily within our merchant acquiring and payment-related businesses, which earn transaction-based fees.

We experienced a significant decrease in payments volume and transactions beginning in late March 2020 that negatively impacted our merchant acquiring and payment-related businesses as well as modest declines in other businesses. Merchant acquiring transaction and payment volumes began to partially recover throughout the remainder of 2020 and have continued to grow throughout 2021. Accordingly, our merchant acquiring and payment-related businesses were less impacted by the COVID-19 pandemic during 2021 than they were throughout most of fiscal 2020. While this current business trend is positive, the extent of the adverse impact of the pandemic on our business, results of operations, liquidity and financial condition will depend on, among other matters, the duration and intensity of the pandemic; the level of success of global vaccination efforts; governmental and private sector responses to the pandemic and the impact of such responses on us; and the impact of the pandemic on our employees, clients, vendors, supply chain, operations and sales, all of which are uncertain, difficult to predict and may remain prevalent for a significant period of time even after the pandemic subsides, including due to a continued or prolonged recession in the U.S. or other major economies.

In 2021, we began observing increasing shortages and delays in the global supply chain for components and inputs necessary to our businesses, such as semiconductors, paper and plastic, and may experience difficulty procuring those components and inputs in the future on a timely basis or at historical prices.

The COVID-19 pandemic has also caused us to modify our business practices, including restricting travel, limiting non-essential visitors to our facilities, disinfecting facilities, providing onsite testing and personal protective equipment to employees, establishing a variety of safety protocols at facilities, and requiring U.S. employees to be fully vaccinated unless they have an approved medical, religious, or state exemption.

Critical Accounting Policies and Estimates

Our consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States, which require management to make estimates, judgments and assumptions that affect the reported amount of assets, liabilities, revenue and expenses. We continually evaluate the accounting policies and estimates that we use to prepare our consolidated financial statements, including for recently adopted accounting pronouncements, and base our estimates on historical experience and assumptions that we believe are reasonable in light of current circumstances. Actual amounts and results could differ materially from these estimates.

Acquisitions

From time to time, we make strategic acquisitions that may have a material impact on our consolidated results of operations or financial position. We allocate the purchase price of acquired businesses to the assets acquired and liabilities assumed in the transaction at their estimated fair values. The estimates used to determine the fair value of long-lived assets, such as intangible assets, can be complex and require significant judgments. We use information available to us to make fair value determinations and engage independent valuation specialists, when necessary, to assist in the fair value determination of significant acquired long-lived assets. The determination of fair value requires estimates about discount rates, growth and retention rates, royalty rates, expected future cash flows and other future events that are judgmental in nature. While we use our best estimates and assumptions as a part of the purchase price allocation process, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of income. We are also required to estimate the useful lives of intangible assets to determine the amount of acquisition-related intangible asset amortization expense to record in future periods. We periodically review the estimated useful lives assigned to our intangible assets to determine whether such estimated useful lives continue to be appropriate. Additional information regarding our acquisitions is included in Note 4 to the consolidated financial statements.

Goodwill and Intangible Assets

We review the carrying value of goodwill for impairment annually, or more frequently if events or circumstances indicate the carrying value may not be recoverable. Goodwill is tested for impairment at a reporting unit level, which is one level below our

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reportable segments. When reviewing goodwill for impairment, we consider the prior test’s amount of excess fair value over the carrying value of each reporting unit, the period of time since a reporting unit’s last quantitative test, the extent a reorganization or disposition changes the composition of one or more of our reporting units, and other factors to determine whether or not to first perform a qualitative test. When performing a qualitative test, we assess numerous factors to determine whether it is more likely than not that the fair value of our reporting units are less than their respective carrying values. Examples of qualitative factors that we assess include our share price, our financial performance, market and competitive factors in our industry and other events specific to our reporting units. If we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative impairment test.

The quantitative impairment test compares the estimated fair value of the reporting unit to its carrying value, and recognizes an impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. We determine the fair value of a reporting unit using both a discounted cash flow analysis and a market approach. Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions, which include assumptions regarding the revenue growth rates and operating margins used to calculate estimated future cash flows, risk-adjusted discount rates and future economic and market conditions.

Our most recent annual impairment assessment of our reporting units in the fourth quarter of 2021 determined that our goodwill of $36.4 billion was not impaired as the estimated fair values of the respective reporting units exceeded the carrying values. However, for three of our reporting units that were acquired as part of the First Data acquisition, with aggregate goodwill of $11.1 billion, the excess of the respective reporting unit’s fair value over carrying value ranged from 8 to 21 percent. If future operating performance is below our expectations or there are changes to forecasted revenue growth rates, risk-adjusted discount rates, effective income tax rates, merchant alliance agreements or some combination thereof, a decline in the fair value of the reporting units could result in, and we may be required to record, a goodwill impairment charge. It is also reasonably possible that future developments related to the interest rate environment or the economic impact of the COVID-19 pandemic on certain of our recently acquired (recorded at fair value) First Data businesses, such as an increased duration and intensity of the pandemic and/or government-imposed restrictions, could have a future material impact on one or more of the estimates and assumptions used to evaluate goodwill impairment. We have no accumulated goodwill impairment through December 31, 2021. Additional information regarding our goodwill is included in Note 8 to the consolidated financial statements.

We review intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. We review capitalized software development costs for impairment at each reporting date. Recoverability of intangible assets is assessed by comparing the carrying amount of the asset to either the undiscounted future cash flows expected to be generated by the asset or the net realizable value of the asset, depending on the type of asset. Determining future cash flows and net realizable values involves judgment and the use of significant estimates and assumptions regarding future economic and market conditions. Measurement of any impairment loss is based on estimated fair value. Given the significance of our goodwill and intangible asset balances, an adverse change in fair value could result in an impairment charge, which could be material to our consolidated financial statements.

Revenue Recognition

Revenue is measured based on consideration specified in a contract with a customer, and excludes any amounts collected on behalf of third parties. As a practical expedient, we do not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less. Contracts with customers are evaluated on a contract-by-contract basis as contracts may include multiple types of goods and services as described below.

Processing and Services

Processing and services revenue is generated from account- and transaction-based fees for data processing, merchant transaction processing and acquiring, electronic billing and payment services, electronic funds transfer and debit/credit processing services; consulting and professional services; and software maintenance for ongoing client support.

We recognize processing and services revenues in the period in which the specific service is performed unless they are not deemed distinct from other goods or services, in which case revenue would then be recognized as control is transferred of the combined goods and services. Our arrangements for processing and services typically consist of an obligation to provide specific services to our customers on a when- and if-needed basis (a stand-ready obligation) and revenue is recognized from the satisfaction of the performance obligations in the amount billable to the customer. These services are typically provided under a fixed or declining (tier-based) price per unit based on volume of service; however, pricing for services may also be based on minimum monthly usage fees. Fees for our processing and services arrangements are typically billed and paid on a monthly basis.

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Product

Product revenue is generated from print and card production sales, as well as software license and hardware (POS devices) sales. For software license agreements that are distinct, we recognize software license revenue upon delivery, assuming a contract is deemed to exist. Revenue for arrangements with customers that include significant customization, modification or production of software such that the software is not distinct is typically recognized over time based upon efforts expended, such as labor hours, to measure progress towards completion. For arrangements involving hosted licensed software for the customer, a software element is considered present to the extent the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty and it is feasible for the customer to either operate the software on their own hardware or contract with another vendor to host the software. We sell or lease hardware (POS devices) and other peripherals as part of our contracts with customers. Hardware typically consists of terminals or Clover devices. We do not manufacture hardware, rather we purchase hardware from third-party vendors and hold such hardware in inventory until purchased by a customer. We account for sales of hardware as a separate performance obligation and recognize the revenue at its standalone selling price when the customer obtains control of the hardware.

Significant Judgments

We use the following methods, inputs and assumptions in determining amounts of revenue to recognize. For multi-element arrangements, we account for individual goods or services as a separate performance obligation if they are distinct, the good or service is separately identifiable from other items in the arrangement, and if a customer can benefit from the good or service on its own or with other resources that are readily available to the customer. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation. Determining whether goods or services are distinct performance obligations that should be accounted for separately may require significant judgment.

Technology or service components from third parties are frequently embedded in or combined with our applications or service offerings. Whether we recognize revenue based on the gross amount billed to a customer or the net amount retained involves judgment that depends on the relevant facts and circumstances including the level of contractual responsibilities and obligations for delivering solutions to end customers to determine whether we obtain control of goods and services prior to their transfer to a customer.

The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring products or services to the customer. We include any fixed charges within our contracts as part of the total transaction price. To the extent that variable consideration is not constrained, we include an estimate of the variable amount, as appropriate, within the total transaction price and update our assumptions over the duration of the contract. We may constrain the estimated transaction price in the event of a high degree of uncertainty as to the final consideration amount owed because of an extended length of time over which the fees may be adjusted. The transaction price (including any discounts or rebates) is allocated between distinct goods and services in a multi-element arrangement based on their relative standalone selling prices. For items that are not sold separately, we estimate the standalone selling prices using available information such as market conditions and internally approved pricing guidelines. Significant judgment may be required to determine standalone selling prices for each performance obligation and whether it depicts the amount we expect to receive in exchange for the related good or service.

Contract modifications occur when we and our customers agree to modify existing customer contracts to change the scope or price (or both) of the contract or when a customer terminates some, or all, of the existing services provided by us. When a contract modification occurs, it requires us to exercise judgment to determine if the modification should be accounted for as (i) a separate contract, (ii) the termination of the original contract and creation of a new contract, or (iii) a cumulative catch up adjustment to the original contract. Further, contract modifications require the identification and evaluation of the performance obligations of the modified contract, including the allocation of revenue to the remaining performance obligations and the period of recognition for each identified performance obligation.

Additional information regarding our revenue recognition policies is included in Note 3 to the consolidated financial statements.

Income Taxes

The determination of our provision for income taxes requires management’s judgment in the use of estimates and the interpretation and application of complex tax laws, sometimes made more complex by our global footprint. Judgment is also required in assessing the timing and amounts of deductible and taxable items. We establish a liability for known tax exposures relating to deductions, transactions and other matters involving some uncertainty as to the proper tax treatment of the item. In establishing a liability for known tax exposures, assumptions are made in determining whether, and the extent to which, a tax position will be sustained. A tax benefit with respect to a tax position is recognized only when it is more likely than not to be sustained upon examination by the relevant taxing authority, based on its technical merits, considering the facts and circumstances available as of the reporting date. The amount of tax benefit recognized reflects the largest benefit that we

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believe is more likely than not to be realized on settlement with the relevant taxing authority. As new information becomes available, we evaluate our tax positions and adjust our liability for known tax exposures as appropriate.

We maintain net operating loss carryforwards in various taxing jurisdictions, resulting in the establishment of deferred tax assets. We establish a valuation allowance against our deferred tax assets when, based upon the weight of all available evidence, we believe it is more likely than not that some portion or all of the deferred tax assets will not be realized. In making this determination, we have considered the relative impact of all of the available positive and negative evidence regarding future sources of taxable income and available tax planning strategies. However, there could be a material impact to our effective tax rate if there is a significant change in our judgment. To the extent our judgment changes, the valuation allowances are then adjusted, generally through the provision for income taxes, in the period in which the change in facts and circumstances occurs. Additional information regarding our income taxes is included in Note 18 to the consolidated financial statements.

Results of Operations

Components of Revenue and Expenses

The following summary describes the components of revenue and expenses as presented in our consolidated statements of income.

Processing and Services

Processing and services revenue, which in 2021 represented 82% of our total revenue, is primarily generated from account- and transaction-based fees under multi-year contracts. Processing and services revenue is most reflective of our business performance as a significant amount of our total operating profit is generated by these services. Cost of processing and services includes costs directly associated with providing services to clients and includes the following: personnel; equipment and data communication; infrastructure costs, including costs to maintain software applications; client support; certain depreciation and amortization; and other operating expenses.

Product

Product revenue, which in 2021 represented 18% of our total revenue, is primarily derived from print and card production sales, as well as software license and hardware (primarily POS devices) sales. Cost of product includes costs directly associated with the products sold and includes the following: costs of materials, postage and software development; hardware costs (primarily POS devices); personnel; infrastructure costs; certain depreciation and amortization; and other costs directly associated with product revenue.

Selling, General and Administrative Expenses

Selling, general and administrative expenses primarily consist of: salaries, wages, commissions and related expenses paid to sales personnel, administrative employees and management; third-party commissions; advertising and promotional costs; certain depreciation and amortization; and other selling and administrative expenses.

Synergies from the First Data Acquisition

Following the acquisition of First Data, we have continued to implement our post-merger integration plans to achieve synergies and future expected economic benefits, including enhanced revenue growth from expanded capabilities and geographic presence as well as substantial cost savings from the elimination of duplicative overhead and enhanced operational efficiency. As of December 31, 2021, we have achieved 80% of our $600 million revenue synergy target and expect to attain the remaining revenue synergies by the end of 2022. In addition, we have completed the integration activities associated with the achievement of cost synergies, having actioned $1.2 billion in cost synergies as of December 31, 2021, and we expect to incur lower acquisition and integration related costs in 2022.

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Financial Results

The following table presents certain amounts included in our consolidated statements of income, the relative percentage that those amounts represent to revenue and the change in those amounts from year to year. This section discusses fiscal year 2021 compared to 2020. Discussions of fiscal year 2020 compared to 2019 can be found in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for fiscal year 2020, filed with the Securities and Exchange Commission on February 26, 2021. This information should be read together with the consolidated financial statements and accompanying notes. The financial results presented below have been affected by acquisitions, dispositions, and foreign currency fluctuations.

(1)Percentage of revenue is calculated as the relevant revenue, expense, income amount divided by total revenue, except for cost of processing and services and cost of product amounts, which are divided by the related component of revenue.

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(1)Represents the basis point growth or decline in operating margin.

Operating margin percentages are calculated using actual, unrounded amounts.

Total Revenue

Total revenue increased $1,374 million, or 9%, in 2021 compared to 2020. The revenue increase was primarily due to improved payment and transaction volumes across all of our business segments, partially offset by the loss of revenue attributable to dispositions that had revenue of $155 million in 2020. In addition, the revenue in our merchant acquiring and payment-related businesses were more adversely affected by the economic impact of the COVID-19 pandemic during 2020 than during 2021.

Revenue in our Acceptance segment increased $957 million, or 17%, in 2021 compared to 2020. The revenue increase was primarily due to growth from improved merchant acquiring payment and transaction volumes, partially offset by a reduction in revenue of 2% from the July 2020 dissolution of the BAMS joint venture.

Revenue in our Fintech segment increased $121 million, or 4%, in 2021 compared to 2020, driven by recurring revenue growth from higher processing revenue across our Fintech businesses.

Revenue in our Payments segment increased $329 million, or 6%, in 2021 compared to 2020. Payments segment revenue growth was driven by revenue contributions of 3% from our debit processing business primarily attributable to increased transaction volumes and favorable pricing. Increased volumes also drove favorable revenue growth across our remaining Payments segment businesses, other than in our bill payment business which partially offset revenue growth by 1% in 2021.

Revenue at Corporate and Other decreased $33 million, or 4%, in 2021 compared to 2020, primarily due to the disposition of a 60% controlling interest of our Investment Services business.

Total Expenses

Total expenses increased $938 million, or 7%, in 2021 compared to 2020. Total expenses in 2020 included a 3% benefit from gains on sale of businesses. Total expenses as a percentage of total revenue decreased by 160 basis points to 85.9% in 2021 compared to 2020. Total expenses as a percentage of total revenue in 2021 decreased primarily as a result of operating efficiencies and cost savings from First Data acquisition-related cost synergies.

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Cost of processing and services as a percentage of processing and services revenue decreased to 45.7% in 2021 compared to 47.8% in 2020. Cost of processing and services as a percentage of processing and services revenue was favorably impacted in 2021 due primarily to strong operating leverage, including cost synergies, across our businesses, partially offset by increased acquisition and integration related expenses of approximately 80 basis points in 2021 as compared to 2020.

Cost of product as a percentage of product revenue decreased to 70.0% in 2021 compared to 74.7% in 2020. The cost of product as a percentage of product revenue improved in 2021 as a result of revenue mix.

Selling, general and administrative expenses as a percentage of total revenue decreased to 35.8% in 2021 compared to 38.1% in 2020. The decrease in selling, general and administrative expenses as a percentage of total revenue in 2021 was primarily due to strong operating leverage and operating efficiencies across our businesses, along with approximately 90 basis points from decreased acquisition and integration related expenses and approximately 20 basis points from lower employee termination costs in 2021.

The gains on sale of businesses in 2020 resulted from a gain of $428 million on the sale of a 60% interest of our Investment Services business in February 2020 and a gain of $36 million on the dissolution of BAMS in July 2020.

Operating Income and Operating Margin

Total operating income increased $436 million, or 24%, in 2021 compared to 2020. Total operating margin increased 160 basis points to 14.1% in 2021 compared to 2020. Total operating income and total operating margin benefited from improved operating leverage accompanying scalable revenue growth in 2021, as well as from operating efficiencies as noted above. Total operating income and total operating margin were also impacted by a $428 million gain on the sale of a 60% interest of our Investment Services business in February 2020 and a $36 million gain on the dissolution of BAMS in July 2020.

Operating income in our Acceptance segment increased $569 million, or 40%, in 2021 compared to 2020. Operating margin increased 490 basis points to 30.8% in 2021 compared to 2020. Operating margin growth in 2021 was primarily due to revenue growth as noted above.

Operating income in our Fintech segment increased $89 million, or 9%, in 2021 compared to 2020. Operating margin increased 160 basis points to 35.8% in 2021 compared to 2020. Operating margin improvement in 2021 was driven by scalable revenue growth discussed above, along with expense management initiatives across the segment, including lower personnel costs of approximately 60 basis points.

Operating income in our Payments segment increased $196 million, or 8%, in 2021 compared to 2020. Operating margin increased 90 basis points to 43.8% in 2021 compared to 2020. Operating margin growth in 2021 was primarily attributable to operating efficiencies and cost synergies.

The operating loss in Corporate and Other increased $418 million in 2021 compared to 2020. Corporate and Other was favorably impacted in the prior year by a $428 million gain on the sale of a 60% interest of our Investment Services business in February 2020 and a $36 million gain on the dissolution of BAMS in July 2020.

Interest Expense, Net

Interest expense, net decreased $16 million, or 2%, in 2021 compared to 2020 due to lower effective interest rates on outstanding borrowings.

Other Income

Other income increased $43 million in 2021 compared to 2020. Other income includes net foreign currency transaction gains and losses, gains or losses from a change in fair value of investments in certain equity securities, and amounts related to debt guarantee arrangements of certain joint ventures. Net foreign currency transaction gains (losses) were $12 million and ($20) million in 2021 and 2020, respectively. Other income in 2021 includes $12 million related to a pre-tax gain on the remeasurement of a previously held investment in Ondot to fair value upon acquiring the remaining ownership interest in the entity and $20 million related to a gain on sale of investments in certain equity securities. Other income in 2020 includes $19 million related to a pre-tax gain on the sale of certain lease receivables.

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Income Tax Provision

Income tax provision as a percentage of income before income from investments in unconsolidated affiliates was 21.8% and 16.7% in 2021 and 2020, respectively. The increase in the effective income tax rate in 2021 compared to 2020 was primarily the result of $134 million of income tax expense attributed to the revaluation of certain net deferred tax liabilities in connection with corporate income tax rate changes enacted in 2021 in the United Kingdom (tax rate increased from 19% to 25% starting in 2023) and Argentina (tax rate increased from 25% to 35%).

Income from Investments in Unconsolidated Affiliates

Our share of net income from affiliates accounted for using the equity method of accounting is reported as income from investments in unconsolidated affiliates and the related tax expense is reported within the income tax provision in the consolidated statements of income. Income from investments in unconsolidated affiliates, including acquired intangible asset amortization from valuations in purchase accounting, was $100 million and $0 million in 2021 and 2020, respectively. Income from investments in unconsolidated affiliates was favorably impacted by improved operating results within the unconsolidated affiliates in 2021. Additionally, income from investments in unconsolidated affiliates in 2021 included a $33 million pre-tax gain resulting from the sale of our remaining ownership interest in InvestCloud and a $28 million pre-tax gain resulting from the dilution of our ownership interest in connection with the Tegra118 merger with a third party.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests and redeemable noncontrolling interests relates to the minority partners’ share of the net income in our consolidated subsidiaries. Net income attributable to noncontrolling interests, including acquired intangible asset amortization from valuations in purchase accounting, was $69 million and $17 million in 2021 and 2020, respectively. Net income attributable to noncontrolling interests increased in 2021 compared to 2020 due to improved operating results within the consolidated subsidiaries.

Net Income Per Share - Diluted

Net income attributable to Fiserv, Inc. per share-diluted was $1.99 and $1.40 in 2021 and 2020, respectively. Net income attributable to Fiserv, Inc. per share-diluted increased in 2021 primarily as a result of the improved operating results discussed above. Net income attributable to Fiserv, Inc. per share-diluted in 2020 included a gain from the sale of a 60% interest of our Investment Services business and a gain on the dissolution of BAMS.

Liquidity and Capital Resources

General

Our primary liquidity needs in the ordinary course of business are to: (i) fund normal operating expenses; (ii) meet the interest and principal requirements of our outstanding indebtedness, including finance leases; and (iii) fund capital expenditures and operating lease payments. We believe these needs will be satisfied in both the short term and the long term using cash flow generated by our operations, along with our cash and cash equivalents of $835 million, proceeds from the issuance of U.S. and Euro commercial paper notes, and available capacity under our revolving credit facility of $1.6 billion (net of outstanding balance and $1.8 billion of capacity designated for outstanding borrowings under our commercial paper notes programs) at December 31, 2021. The following table summarizes our operating cash flow and capital expenditure amounts for the years ended December 31, 2021 and 2020, respectively.

Our net cash provided by operating activities, or operating cash flow, was $4.0 billion in 2021, a decrease of 3% compared with $4.1 billion in 2020. This decrease was primarily attributable to higher working capital use compared to the prior year, including increased accounts receivable corresponding to revenue growth, and higher income tax payments following consumption of certain federal net operating loss carryforwards, partially offset by improved operating results.

Our current policy is to use our operating cash flow to primarily fund capital expenditures, share repurchases, acquisitions and to repay debt rather than to pay dividends. Our capital expenditures were approximately 7% and 6% of our total revenue in 2021 and 2020, respectively.

Cash Requirements

The following table details our future cash requirements under certain contractual obligations at December 31, 2021:

(1)Interest, finance lease, operating lease and purchase obligations are reported on a pre-tax basis.

(2)The calculations assume that only mandatory debt repayments are made, no additional refinancing or lending occurs, except for our receivable securitized loan due in July 2022, 3.50% notes due in October 2022, and U.S. and Euro commercial paper notes programs as we have the intent to refinance this debt on a long-term basis and the ability to do so under our revolving credit facility maturing in September 2023, and the variable rate on the revolving credit facility and term loans are priced at the rate in effect at December 31, 2021.

Share Repurchases

We purchased a total of $2.6 billion and $1.6 billion of our common stock in 2021 and 2020, respectively. At December 31, 2021, we had approximately 42.3 million shares remaining under our current repurchase authorizations. Shares repurchased are generally held for issuance in connection with our equity plans.

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Acquisitions and Dispositions

Acquisitions

In November 2021 we acquired BentoBox, in October 2021 we acquired AIP, in June 2021 we acquired SpendLabs, in May 2021 we acquired Pineapple Payments, and in March 2021 we acquired Radius8. Additionally, in November 2021, we acquired a remaining ownership interest in NetPay, and in January 2021, we acquired a remaining ownership interest in Ondot, in which we previously held noncontrolling equity interests. We acquired these businesses for an aggregate purchase price of $882 million, net of $43 million of acquired cash and the fair value of our previously held equity interests of $36 million, and including earn-out provisions estimated at an aggregate fair value of $34 million. We funded these acquisitions by utilizing a combination of available cash, commercial paper notes and existing availability under our revolving credit facility. The results of operations for these acquired businesses are included in our consolidated results from the respective dates of acquisition.

In May 2020, we acquired Inlet and, in March 2020, we acquired MerchantPro and Bypass. We acquired these businesses for an aggregate purchase price of $167 million, net of $2 million of acquired cash, and including earn-out provisions estimated at a fair value of $45 million. We funded these acquisitions by utilizing a combination of available cash and existing availability under our revolving credit facility. The results of operations for these acquired businesses are included in our consolidated results from the respective dates of acquisition.

On July 29, 2019, we acquired First Data for a total purchase price of $46.5 billion by acquiring 100% of the First Data stock that was issued and outstanding as of the date of acquisition. As a result of the acquisition, First Data stockholders received 286 million shares of common stock of Fiserv, Inc., at an exchange ratio of 0.303 shares of Fiserv, Inc. for each share of First Data common stock, with cash paid in lieu of fractional shares. We also converted 15 million outstanding First Data equity awards into corresponding equity awards relating to common stock of Fiserv, Inc. in accordance with the exchange ratio. In addition, concurrent with the closing of the acquisition, we made a cash payment of $16.4 billion to repay existing First Data debt. We funded the transaction-related expenses and the repayment of First Data debt through a combination of available cash on-hand, proceeds from the issuance of senior notes, and term loan and revolving credit facility borrowings.

In February 2022, we entered into a definitive agreement to acquire the remaining ownership interest in Finxact for approximately $650 million, which we expect to close later in 2022, subject to customary approvals and closing conditions. We plan to fund this acquisition by utilizing a combination of available cash and available borrowing capacity.

Dispositions

Effective July 1, 2020, we and BANA dissolved the BAMS joint venture, of which we maintained a 51% controlling ownership interest. Upon dissolution of the joint venture’s operations, the joint venture transferred a proportionate share of value, primarily the client contracts, to each party via an agreed upon contractual separation. The remaining activities of the joint venture consist primarily of an orderly wind down of remaining BAMS assets and liabilities. The revenues and expenses of the BAMS joint venture were consolidated into our financial results through the date of dissolution. The business transferred to us is included within our Acceptance segment. We continue to provide merchant processing and related services to former BAMS clients allocated to BANA, at BAMS pricing, through June 2023. We will also provide processing and other support services to new BANA merchant clients pursuant to a five-year non-exclusive agreement which, after June 2023, will also apply to the former BAMS clients allocated to BANA. In addition, both companies are entitled to certain transition services, at fair value, from each other through June 2023.

In February 2020, we sold a 60% controlling interest of our Investment Services business, subsequently renamed as Tegra118. We received pre-tax proceeds of $578 million, net of related expenses, resulting in a pre-tax gain on the sale of $428 million, with the related tax expense of $112 million. The revenues, expenses and cash flows of the Investment Services business were consolidated into our financial results through the date of the sale transaction. The net proceeds from the sale were primarily used to repurchase shares of our common stock. In February 2021, Tegra118 completed a merger with a third party, resulting in a dilution of our ownership interest in the combined new entity, Wealthtech Holdings, LLC, which was subsequently renamed as InvestCloud. In connection with the transaction, we made an additional capital contribution, funded under our revolving credit facility, of $200 million into the combined entity and recognized a pre-tax gain of $28 million, with a related tax expense of $6 million. In June 2021, we sold our entire ownership interest in InvestCloud for $466 million, resulting in a pre-tax gain of $33 million, with a related tax expense of $8 million. The net proceeds from the sale were primarily used to pay down outstanding borrowings on our term loan facility.

We maintain a 45% ownership interest in Sagent M&C, LLC and a 31% ownership interest in defi SOLUTIONS Group, LLC (collectively, the “Lending Joint Ventures”). The Lending Joint Ventures maintain variable-rate term loan facilities with aggregate outstanding borrowings of $365 million in senior unsecured debt and variable-rate revolving credit facilities with an aggregate borrowing capacity of $45 million with a syndicate of banks, which mature in March 2023. Outstanding borrowings

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on the revolving credit facilities at December 31, 2021 were $16 million. We have guaranteed this debt of the Lending Joint Ventures and do not anticipate that the Lending Joint Ventures will fail to fulfill their debt obligations. We maintain a liability for the estimated fair value of our non-contingent obligations to stand ready to perform over the term of the guarantee arrangements. Such guarantees will be amortized in future periods over the contractual term, based upon amounts to be received by us for the respective guarantees. In addition, we maintain a contingent liability representing the current expected credit losses to which we are exposed. This contingent liability is estimated based on certain financial metrics of the Lending Joint Ventures and historical industry data, which is used to develop assumptions of the likelihood the guaranteed parties will default and the level of credit losses in the event a default occurs. We have not made any payments under the guarantees, nor have we been called upon to do so.

Indebtedness

Our debt consisted of the following at December 31:

At December 31, 2021, our debt consisted primarily of $17.7 billion of fixed rate senior notes, $1.8 billion of outstanding borrowings under our U.S. and Euro commercial paper notes programs and $500 million under our receivables securitized loan. Interest on our U.S. dollar-denominated senior notes is paid semi-annually, while interest on our Euro- and British Pound-denominated senior notes is paid annually. Interest on our revolving credit facility and commercial paper notes is paid weekly, or more frequently on occasion, and interest on our term loans is paid monthly. Outstanding borrowings under our 3.50% senior notes due in October 2022, the receivable securitized loan which matures in July 2022, and U.S and Euro commercial paper notes programs are classified in the consolidated balance sheet as long-term, as we have the intent to refinance these notes on a

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long-term basis through the continued issuance of new commercial paper notes upon maturity, and we also have the ability to refinance such notes under our revolving credit facility, which expires in September 2023. Our 4.75% senior notes due in June 2021 were classified in the consolidated balance sheet as long-term at December 31, 2020, as we had the intent and ability to refinance this debt on a long-term basis. These notes were subsequently refinanced in June 2021 through the issuance of U.S. commercial paper notes and proceeds obtained from the sale of our remaining ownership interest in InvestCloud.

We were in compliance with all financial debt covenants during 2021. Our ability to meet future debt covenant requirements will depend on our continued ability to generate earnings and cash flows. We expect to remain in compliance with all terms and conditions associated with our outstanding debt, including financial debt covenants.

Senior Notes

We have outstanding $17.7 billion of various fixed-rate senior notes, as described above. The indentures governing our senior notes contain covenants that, among other matters, limit (i) our ability to consolidate or merge with or into, or convey, transfer or lease all or substantially all of our properties and assets to, another person, (ii) our and certain of our subsidiaries’ ability to create or assume liens, and (iii) our and certain of our subsidiaries’ ability to engage in sale and leaseback transactions. We may, at our option, redeem the senior notes, in whole or from time to time in part, at any time prior to the applicable maturity date. The interest rate applicable to certain of the senior notes is subject to an increase of up to two percent in the event that the credit rating assigned to such notes is downgraded below investment grade.

Commercial Paper

We initiated an unsecured U.S. dollar commercial paper program in May 2021 and an unsecured Euro commercial paper program in November 2021. From time to time, we may issue under these programs U.S. dollar commercial paper with maturities of up to 397 days from the date of issuance and Euro commercial paper with maturities of up to 183 days from the date of issuance. We use the proceeds of commercial paper issued under these programs to pay down other outstanding indebtedness and for general corporate purposes. Outstanding borrowings under the commercial paper programs bear interest at a fixed rate based on the prevailing rates at the time of issuance of the relevant commercial paper. Outstanding borrowings under the U.S. dollar program were $916 million at December 31, 2021, with a weighted average interest rate of 0.295%. Outstanding borrowings under the Euro program were $905 million at December 31, 2021, with a weighted average interest rate of (0.420)%, with maturities generally ranging from one day to four months. We intend to maintain available capacity under our revolving credit facility in an amount at least equal to the outstanding borrowings under our commercial paper programs.

Revolving Credit Facility

We maintain an amended and restated revolving credit facility, which matures in September 2023, with aggregate commitments available for $3.5 billion of total capacity. U.S. dollar borrowings under the amended and restated revolving credit facility bear interest at a variable rate based on LIBOR, typically at the overnight or 1-month rates, or a base rate, plus, in each case, a specified margin based on our long-term debt rating in effect from time to time. Foreign currency borrowings under the amended and restated revolving credit facility bear interest at a variable rate based on a benchmark applicable to the relevant currency, plus, in each case, a specified margin based on our long-term debt rating in effect from time to time. The variable interest rate on the revolving credit facility borrowings was 1.16% at December 31, 2021. There are no significant commitment fees and no compensating balance requirements. The amended and restated revolving credit facility contains various restrictions and covenants that require us, among other things, to (i) limit our consolidated indebtedness as of the end of each fiscal quarter to no more than three and one-half times our consolidated net earnings before interest, taxes, depreciation, amortization, non-cash charges and expenses and certain other adjustments (“EBITDA”) during the period of four fiscal quarters then ended, subject to certain exceptions, and (ii) maintain EBITDA of at least three times our consolidated interest expense as of the end of each fiscal quarter for the period of four fiscal quarters then ended.

Foreign Lines of Credit and Other Arrangements

We maintain certain short-term lines of credit with foreign banks and alliance partners primarily to fund settlement activity. These arrangements are primarily associated with international operations and are in various functional currencies, the most significant of which is the Argentine peso. We had amounts outstanding on these lines of credit totaling $240 million and $144 million at a weighted-average interest rate of 21.01% and 21.98% at December 31, 2021 and 2020, respectively.

Receivable Securitized Loan

We maintain a consolidated wholly-owned subsidiary, First Data Receivables, LLC (“FDR”). FDR is a party to certain receivables financing arrangements, including an agreement (“Receivables Financing Agreement”) with certain financial

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institutions and other persons from time to time party thereto as lenders and group agents, pursuant to which certain of our wholly-owned subsidiaries have agreed to transfer and contribute receivables to FDR, and FDR in turn may obtain borrowings from the financial institutions and other lender parties to the Receivables Financing Agreement secured by liens on those receivables. FDR’s assets are not available to satisfy the obligations of any other of our entities or affiliates, and FDR’s creditors would be entitled, upon its liquidation, to be satisfied out of FDR’s assets prior to any assets or value in FDR becoming available to us. FDR held $1.0 billion and $811 million in receivables as part of the securitization program at December 31, 2021 and 2020, respectively. FDR utilized the receivables as collateral in borrowings of $500 million and $425 million as of December 31, 2021 and 2020, at an average interest rate of 0.95% and 1.00%, respectively. Outstanding borrowings bear interest at a variable rate based on one-month LIBOR plus a specified margin. At December 31, 2021, the collateral capacity under the Receivables Financing Agreement was $747 million, and the maximum borrowing capacity was $500 million. The term of the Receivables Financing Agreement is through July 2022.

Term Loan Facility

We maintain a term loan credit agreement with a syndicate of financial institutions that was funded in conjunction with the acquisition of First Data in an original principal amount of $5.0 billion. Following various amortization payments and prepayments, the aggregate principal amount outstanding under such agreement was $200 million at December 31, 2021. Borrowings under the term loan facility bear interest at variable rates based on one-month LIBOR or on a base rate, plus, in each case, a specified margin based on our long-term debt rating in effect from time to time, and will mature in July 2024. The variable interest rate on the term loan facility borrowings was 1.35% at December 31, 2021. A portion of the net proceeds from our 2021 issuances of commercial paper, as described above, was used to pay down outstanding borrowings under the term loan facility. The term loan credit facility contains affirmative, negative and financial covenants, and events of default, that are substantially the same as those set forth in our existing amended and restated revolving credit facility, as described above.

Other

Access to capital markets impacts our cost of capital, our ability to refinance maturing debt and our ability to fund future acquisitions. Our ability to access capital on favorable terms depends on a number of factors, including general market conditions, interest rates, credit ratings on our debt securities, perception of our potential future earnings and the market price of our common stock. As of December 31, 2021, we had a corporate credit rating of Baa2 with a stable outlook from Moody’s Investors Service, Inc. (“Moody’s”) and BBB with a stable outlook from Standard & Poor’s Ratings Services (“S&P”) on our senior unsecured debt securities. As of December 31, 2021, we had a commercial paper credit rating of P-2 from Moody’s and A-2 from S&P.

The interest rates payable on certain of our senior notes, our term loan, commercial paper notes programs and our revolving credit facility are subject to adjustment from time to time if Moody’s or S&P changes the debt rating applicable to the notes. If the ratings from Moody’s or S&P decrease below investment grade, the per annum interest rates on the senior notes are subject to increase by up to two percent. In no event will the total increase in the per annum interest rates exceed two percent above the original interest rates, nor will the per annum interest rate be reduced below the original interest rate applicable to the senior notes.

Cash and Cash Equivalents

Investments, exclusive of settlement assets, with original maturities of three months or less that are readily convertible to cash are considered to be cash equivalents as reflected within our consolidated balance sheets. At December 31, 2021 and 2020, we held $835 million and $906 million in cash and cash equivalents, respectively.

The table below details the cash and cash equivalents at December 31:

(1)Represents cash held by our joint ventures that is not available to fund operations outside of those entities unless the board of directors for such entities declares a dividend, as well as cash held by certain other entities that are subject to foreign exchange controls in certain countries or regulatory capital requirements.

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Employee Termination Costs

In connection with the acquisition of First Data, we implemented integration plans focused on reducing our overall cost structure, including eliminating duplicate costs. We recorded $95 million and $131 million of employee termination costs related to severance and other separation costs for terminated employees, including those in connection with the acquisition of First Data, during the years ended December 31, 2021 and 2020, respectively. Accrued employee severance and other separation costs of $36 million at December 31, 2021 are expected to be paid within the next twelve months.

Impact of COVID-19 Pandemic

The COVID-19 pandemic has created significant uncertainty as to general global economic and market conditions. We believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business. However, as the impact of the pandemic on the economy and our operations further evolves, we will continue to assess our liquidity needs. The ability to continue to service debt and meet lease and other obligations as they come due depends on our continued ability to generate earnings and cash flows. A lack of continued recovery or further deterioration in economic and market conditions could materially affect our future access to our sources of liquidity, particularly our cash flows from operations.

We engage in regular communication with the banks that participate in our revolving credit facility. During these communications, none of the banks have indicated that they may be unable to perform on their commitments. We periodically review our banking and financing relationships, considering the stability of the institutions, pricing we receive on services and other aspects of the relationships. Based on these communications and our monitoring activities, we believe the likelihood of one of our banks not performing on its commitment is remote. We maintain U.S. and Euro commercial paper notes programs to access funding for general corporate purposes at favorable rates and to provide a source of liquidity. As of December 31, 2021, we had a commercial paper credit rating of P-2 from Moody’s and A-2 from S&P. Any downgrade to our commercial paper credit ratings or instability in the commercial paper markets may adversely impact our ability to access funding through our commercial paper notes programs and require us to rely more heavily on more expensive financing arrangements, including our revolving credit facility. In addition, the long-term debt markets have historically provided us with a source of liquidity.

Although we do not currently anticipate an inability to obtain financing from long-term debt markets in the future, effects of the COVID-19 pandemic could make financing more difficult and/or expensive to obtain. Our ability to access the long-term debt markets on favorable interest rate and other terms also depends on the ratings assigned by the credit rating agencies to our indebtedness. As of December 31, 2021, we had a corporate credit rating of Baa2 with a stable outlook from Moody’s and BBB with a stable outlook from S&P. In the event that the ratings of our outstanding long-term debt securities were substantially lowered or withdrawn for any reason, or if the ratings assigned to any new issue of long-term debt securities were significantly lower than those noted above, particularly if we no longer had investment grade ratings, our ability to access the debt markets could be adversely affected and our interest expense could increase under the terms of certain of our long-term debt securities.