# FISERV INC (FISV) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from FISERV INC's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/798354/000079835423000004/fisv-20221231.htm
Accession: 0000798354-23-000004
Filing date: 2023-02-23
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/FISV/
All MD&A years: /company/FISV/mda/
Previous year: /company/FISV/mda/fy2021/ (FY 2021)
Next year: /company/FISV/mda/fy2023/ (FY 2023)

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. This section generally discusses information and results pertaining to the years ended December 31, 2022 and 2021. Information and discussion of results pertaining to the year ended December 31, 2020 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 2021, filed with the Securities and Exchange Commission on February 24, 2022. Our discussion is organized as follows: 

•Overview. This section contains background information on our company and the products and services 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.

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•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, 2022 to the results for the year ended December 31, 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, 2022.

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 businesses in our Acceptance segment provide a wide range of commerce-enabling solutions and serve merchants of all sizes around the world. These solutions include POS merchant acquiring and digital commerce services; mobile payment services; security and fraud protection products; Clover, our cloud-based POS and integrated commerce operating system for small and mid-sized businesses (“SMBs”) and independent software vendors (“ISVs”); and CaratSM, our integrated operating system for large businesses. We distribute the products and services in the Acceptance segment businesses through a variety of channels, including direct sales teams, strategic partnerships with agent sales forces, ISVs, financial institutions, and other strategic partners in the form of joint venture alliances, revenue sharing alliances, and referral agreements. Merchants, financial institutions and distribution partners in the Acceptance segment are frequently clients of our other segments.

The businesses in our Fintech segment provide financial institutions around the world with technology solutions they need to run their operations, including products and services that enable financial institutions to process customer deposit and loan accounts and manage an institution’s general ledger and central information files. As a complement to the core account processing functionality, the Fintech segment businesses also provide digital banking, financial and risk management, professional services and consulting, item processing and source capture, and other products and services that support numerous types of financial transactions. Certain of the businesses in the Fintech segment provide products or services to corporate clients to facilitate the management of financial processes and transactions. Many of the products and services offered in the Fintech segment are integrated with products and services provided by our other segments.

The businesses in the Payments segment provide financial institutions, corporate clients and the public sector with the products and services required to process digital payment transactions. This includes card transactions such as debit, credit and prepaid card processing and services; a range of network services, security and fraud protection products; and card production and print services. In addition, the Payments segment businesses 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. Clients of the Payments segment businesses reflect a wide range of industries around the world, including merchants, distribution partners and financial institution customers in our other segments.

The majority of our revenue is generated from recurring account- and transaction-based fees under multi-year contracts that generally have 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.

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, certain assets or investments; costs associated with acquisition and divestiture activity; certain services revenue associated with various dispositions; and our Output Solutions postage reimbursements.

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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 that enables competition and operational efficiency; or similar considerations. We expect to divest businesses that are not in line with our market, product or financial strategies. The results of operations for the following acquired and divested businesses are included in our consolidated results from the respective dates of acquisition and through the respective dates of disposition.

Acquisitions

On December 29, 2022, we acquired OrangeData S.A. (“Yacaré”), an Argentina-based payment service provider that enables customers to transact at merchant locations using QR codes. Yacaré is included within the Acceptance segment and enhances our instant payment transaction capabilities. On December 20, 2022, we acquired Merchant One, Inc. (“Merchant One”), an independent sales organization (“ISO”) focused on acquiring merchants in the restaurant, retail and e-commerce industries using an innovative mix of direct and digital marketing strategies. Merchant One is included within the Acceptance segment and enhances our merchant distribution and sales force channels. On September 1, 2022, we acquired NexTable, Inc. (“NexTable”), a provider of cloud-based reservation and table management solutions for restaurants. NexTable is included within the Acceptance segment and expands our end-to-end restaurant solutions. On June 1, 2022, we acquired The LR2 Group, LLC (“City POS”), an ISO that promotes payment processing services and facilitates the sale of POS equipment for merchants. City POS is included within the Acceptance segment and expands the reach of our merchant services business. On April 1, 2022, we acquired a remaining ownership interest in Finxact, Inc. (“Finxact”), a developer of cloud-native banking solutions powering digital transformation throughout the financial services sector. Finxact is included within the Fintech segment and advances our digital banking strategy, expanding our account processing, digital and payments solutions. We acquired these businesses in 2022 for an aggregate purchase price of approximately $994 million, net of $28 million of acquired cash, and including earn-out provisions estimated at a fair value of $6 million.

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 onboarding, customer lifecycle, risk management and settlement capabilities to businesses of all sizes. NetPay is included within the Acceptance segment and expands our merchant services business. On October 1, 2021, we acquired Integrity Payments, LLC (“AIP”), an ISO 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 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 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 technology provider 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 provider of card management and digital experience technology. Ondot is included within the Payments segment and expands our digital capabilities, enhancing our suite of integrated payments, banking and merchant solutions. We acquired these businesses in 2021 for an aggregate purchase price of $882 million, net of $43 million of acquired cash, and including earn-out provisions at an aggregate fair value of $34 million.

Dispositions

On October 17, 2022, we sold Fiserv Costa Rica, S.A. and our Systems Integration Services (“SIS”) operations, which provides information technology engineering services in the United States (“U.S.”) and India, to a single buyer. Fiserv Costa Rica, S.A. and SIS were reported primarily within our Fintech segment. On September 30, 2022, we sold our Korea operations, which were reported within our Acceptance segment. We sold these operations for total consideration of $99 million and recognized an aggregate net pre-tax loss on the sales of $83 million. These divestitures were the result of a strategic review of our business portfolio.

We mutually agreed with a minority partner to terminate one of our merchant alliance joint ventures effective March 2022. In conjunction with such termination, the joint venture minority partner elected to exercise its option to purchase certain merchant contracts of the joint venture for $175 million, resulting in the recognition of a pre-tax gain of $137 million.

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Enterprise Priorities

We aspire to move money and information in a way that moves the world. Our purpose is to deliver superior value for our clients through leading technology, targeted innovation and excellence in everything we do. We are focused on driving growth and creating value by assembling a high-performing and diverse team, integrating our solutions, delivering operational excellence, allocating capital in a disciplined manner, including share repurchase and merger and acquisition activity, and delivering breakthrough innovation. Our long-term priorities are to continue to build high-quality revenue while meeting our financial commitments; deepen client relationships with an emphasis on digital channels and payment solutions; deliver innovation and integration enabling differentiated value for our clients; and generate integration value, including cost and revenue synergies 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 real-time payments infrastructure. Because of this growth, competition also continues to intensify. Business and consumer expectations continue to rise, with a focus on speed, convenience, choice and security. To meet these expectations, payments companies are focused on modernizing their technology, expanding the use of data and enhancing the customer experience.

Merchants

The rapid growth in and globalization of mobile and e-commerce, driven by consumers’ desire for simpler, more efficient shopping experiences, has created an opportunity for merchants to reach consumers nearly anywhere, through any device, which often requires a merchant acquiring provider to enable and optimize the acceptance of payments. Merchants are demanding simpler, integrated and flexible systems to accept payments and 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 systems to streamline the complexity. Furthermore, merchants can now search, discover, compare, purchase and even install a new system through direct, digital-only experiences. This direct, digital-only channel is a source of new merchant acquisition opportunities, especially with respect to smaller merchants.

Additionally, there are numerous software-as-a-service (“SaaS”) solution providers in the industry, many of which have chosen to integrate merchant acquiring into their software as a way to further monetize their client relationships. Such providers are typically 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 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 financial and non-financial institutions of all sizes, gives us a solid foundation for growth.

Financial Institutions and Other Financial Technology Providers

Financial services 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 and other financial technology providers 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. In addition, the focus on the customer experience, including through mobile and online engagement, 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 and other financial technology providers 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.

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The number of financial institutions in the United States has declined at a relatively steady rate, primarily as a result of voluntary mergers and acquisitions. Rather than reducing the overall market, these consolidations transfer 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.

Recent Market Conditions

Global macroeconomic conditions, including fluctuations in foreign currency exchange rates, inflation, disruptions in the global supply chain, the effects of the ongoing conflict between Russia and Ukraine, the continuing impact of the coronavirus (“COVID-19”) pandemic, and regulations restricting trade or that impact our ability to offer products or services, could have a material adverse effect on our business, results of operations and financial condition. In addition, since 2021, we have observed increased 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. For discussion of risks related to potential impacts of supply chain, geopolitical and macroeconomic challenges on our business, results of operations and financial condition, see “Item 1A. Risk Factors.”

Critical Accounting Policies and Estimates

Our consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the U.S., 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 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

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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 2022 determined that our goodwill of $36.8 billion was not impaired as the estimated fair values of the respective reporting units exceeded the carrying values. However, for four of our reporting units, with aggregate goodwill of $10.9 billion, the excess of the respective reporting unit’s fair value over carrying value ranged from 7 to 18 percent. If future operating performance is below our expectations or there are material changes to forecasted revenue growth rates or operating margins, risk-adjusted discount rates, foreign currency exchange rates, effective income tax rates, 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. Additionally, a significant change in a merchant alliance business relationship or operating performance could result in a material goodwill impairment charge. It is also reasonably possible that future developments related to the interest rate environment, a shift in strategic initiatives, or significant changes in the composition of certain of our reporting units 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, 2022. Additional information regarding our goodwill is included in Note 7 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. Additional information regarding our intangible assets is included in Note 6 to the consolidated financial statements. 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 revenue in the period in which the specific service is performed unless they are not deemed distinct from other goods or services, which 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 (primarily 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 the sale of hardware as a separate performance obligation and recognize the revenue at the 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, if 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. 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 additional 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 income 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 17 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 represented 82% of our total revenue in 2022, 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 consists of 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 represented 18% of our total revenue in 2022, is derived from print and card production sales, as well as software license and hardware (primarily POS devices) sales. Cost of product consists of costs directly associated with the products sold and includes the following: costs of materials and postage; 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.

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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 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.

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[["(In millions)","","","Percentage of Revenue (1)","","Increase (Decrease)"],["Year Ended December 31,","2022","","2021","","","","2022","","2021","","","","2022 vs. 2021"],["Revenue:"],["Processing and services","$","14,460","","","$","13,307","","","","","81.5","%","","82.0","%","","","","$","1,153","","","9","%"],["Product","3,277","","","2,919","","","","","18.5","%","","18.0","%","","","","358","","","12","%"],["Total revenue","17,737","","","16,226","","","","","100.0","%","","100.0","%","","","","1,511","","","9","%"],["Expenses:"],["Cost of processing and services","5,771","","","6,084","","","","","39.9","%","","45.7","%","","","","(313)","","","(5)","%"],["Cost of product","2,221","","","2,044","","","","","67.8","%","","70.0","%","","","","177","","","9","%"],["Sub-total","7,992","","","8,128","","","","","45.1","%","","50.1","%","","","","(136)","","","(2)","%"],["Selling, general and administrative","6,059","","","5,810","","","","","34.2","%","","35.8","%","","","","249","","","4","%"],["Net gain on sale of businesses and other assets","(54)","","","\u2014","","","","","(0.3)","%","","\u2014","%","","","","54","","","n/m"],["Total expenses","13,997","","","13,938","","","","","78.9","%","","85.9","%","","","","59","","","\u2014","%"],["Operating income","3,740","","","2,288","","","","","21.1","%","","14.1","%","","","","1,452","","","63","%"],["Interest expense, net","(733)","","","(693)","","","","","(4.1)","%","","(4.3)","%","","","","40","","","6","%"],["Other (expense) income","(94)","","","71","","","","","(0.5)","%","","0.4","%","","","","(165)","","","n/m"],["Income before income taxes and income from investments in unconsolidated affiliates","2,913","","","1,666","","","","","16.4","%","","10.3","%","","","","1,247","","","75","%"],["Income tax provision","(551)","","","(363)","","","","","(3.1)","%","","(2.2)","%","","","","188","","","52","%"],["Income from investments in unconsolidated affiliates","220","","","100","","","","","1.2","%","","0.6","%","","","","120","","","120","%"],["Net income","2,582","","","1,403","","","","","14.6","%","","8.6","%","","","","1,179","","","84","%"],["Less: net income attributable to noncontrolling interests and redeemable noncontrolling interests","52","","","69","","","","","0.3","%","","0.4","%","","","","(17)","","","(25)","%"],["Net income attributable to Fiserv, Inc.","$","2,530","","","$","1,334","","","","","14.3","%","","8.2","%","","","","$","1,196","","","90","%"]]
[[/GREPCENT_TABLE]]

(1)Percentage of revenue is calculated as the relevant revenue, expense, or 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.

[[GREPCENT_TABLE]]
[["(In millions)"],["Year Ended December 31,","Acceptance","","Fintech","","Payments","","Corporate and Other","","Total"],["Total revenue:"],["2022","$","7,292","","","","$","3,170","","","","$","6,262","","","","$","1,013","","","","$","17,737"],["2021","6,479","","","","3,022","","","","5,833","","","","892","","","","16,226"],["Revenue growth","$","813","","","","$","148","","","","$","429","","","","$","121","","","","$","1,511"],["Revenue growth percentage","13","%","","","5","%","","","7","%","","","","","","9","%"],["Operating income (loss):"],["2022","$","2,321","","","","$","1,157","","","","$","2,823","","","","$","(2,561)","","","","$","3,740"],["2021","1,996","","","","1,081","","","","2,557","","","","(3,346)","","","","2,288"],["Operating income growth","$","325","","","","$","76","","","","$","266","","","","$","785","","","","$","1,452"],["Operating income growth percentage","16","%","","","7","%","","","10","%","","","","","","63","%"],["Operating margin:"],["2022","31.8","%","","","36.5","%","","","45.1","%","","","","","","21.1","%"],["2021","30.8","%","","","35.8","%","","","43.8","%","","","","","","14.1","%"],["Operating margin growth (1)","100","","bps","","70","","bps","","130","","bps","","","","","700","","bps"]]
[[/GREPCENT_TABLE]]

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

Operating margin percentages are calculated using actual, unrounded amounts.

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Total Revenue

Total revenue increased $1,511 million, or 9%, in 2022 compared to 2021. The revenue increase was driven by higher processing revenue and product sales across all of our business segments, partially offset by a 2% decrease due to foreign currency exchange rate fluctuations.

Revenue in our Acceptance segment increased $813 million, or 13%, in 2022 compared to 2021. The revenue increase was driven by higher global merchant acquiring payment and transaction volumes, an increase in the number of active merchants on our Clover operating system and the expansion of our merchant relationships through value-added services. The revenue growth of our Clover and Carat operating systems were above pre-COVID-19 pandemic levels and contributed 5% and 1%, respectively, to Acceptance segment growth. The remaining revenue growth in our Acceptance segment was attributable to higher merchant acquiring payment and transaction volumes across our other merchant acquiring platforms.

Revenue in our Fintech segment increased $148 million, or 5%, in 2022 compared to 2021. The revenue increase was driven by both higher processing revenue and license and termination fee revenue across our Fintech businesses, with each contributing approximately 2% to Fintech revenue growth.

Revenue in our Payments segment increased $429 million, or 7%, in 2022 compared to 2021. The revenue increase was driven by our debit processing business, which contributed 3% to Payments segment revenue growth through new client wins on our network routing services; our Output Solutions business, which contributed 2%, primarily driven by new client growth; and our credit processing business, which contributed 1%, primarily driven by an increase in active accounts.

Revenue at Corporate and Other increased $121 million, or 14%, in 2022 compared to 2021, primarily due to increased postage revenue.

Total Expenses

Total expenses in 2022 were relatively consistent compared to 2021. Total expenses as a percentage of total revenue decreased 700 basis points to 78.9% in 2022 compared to 2021. Total expenses as a percentage of total revenue were favorably impacted in 2022 by a reduction of approximately 390 basis points in acquisition and integration related expense and approximately 90 basis points in amortization of acquisition-related intangible assets. Total expenses as a percentage of total revenue for 2022 were also favorably impacted by operating leverage, along with a pre-tax gain on the sale of businesses and other assets of $54 million.

Cost of processing and services as a percentage of processing and services revenue decreased to 39.9% in 2022 compared to 45.7% in 2021. Cost of processing and services as a percentage of processing and services revenue was favorably impacted in 2022 by approximately 330 basis points from a reduction in acquisition and integration related expenses, as well as strong operating leverage across our businesses, and partially offset by an increase in severance costs of approximately 50 basis points in 2022.

Cost of product as a percentage of product revenue decreased to 67.8% in 2022 compared to 70.0% in 2021. The cost of product as a percentage of product revenue improved in 2022 as a result of higher margin revenue growth.

Selling, general and administrative expenses as a percentage of total revenue decreased to 34.2% in 2022 compared to 35.8% in 2021. The decrease in selling, general and administrative expenses as a percentage of total revenue in 2022 was primarily due to a reduction in amortization of acquisition-related intangible assets of approximately 100 basis points.

The net gain on sale of businesses and other assets in 2022 included a $137 million pre-tax gain from the sale of certain merchant contracts in conjunction with the mutual termination of one of our merchant alliance joint ventures and a $44 million pre-tax gain from the sale of Fiserv Costa Rica, S.A. and our SIS operations. These gains were partially offset by a $127 million pre-tax loss from the sale of our Korea operations.

Operating Income and Operating Margin

Total operating income increased $1,452 million, or 63%, in 2022 compared to 2021. Total operating margin increased 700 basis points to 21.1% in 2022 compared to 2021. Total operating income and total operating margin benefited from revenue growth in 2022, along with a reduction in acquisition and integration related expenses. Total operating income and total operating margin were also favorably impacted by a $54 million net pre-tax gain on the sale of businesses and other assets in 2022, partially offset by an increase in severance costs of approximately $130 million.

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Operating income in our Acceptance segment increased $325 million, or 16%, in 2022 compared to 2021. Operating margin increased 100 basis points to 31.8% in 2022 compared to 2021. Operating margin growth in 2022 was primarily due to operating leverage and the divestiture of a lower-margin business within the Acceptance segment.

Operating income in our Fintech segment increased $76 million, or 7%, in 2022 compared to 2021. Operating margin increased 70 basis points to 36.5% in 2022 compared to 2021. Fintech segment operating income and margin growth in 2022 was due to an increase in license and termination fee revenue.

Operating income in our Payments segment increased $266 million, or 10%, in 2022 compared to 2021. Operating margin increased 130 basis points to 45.1% in 2022 compared to 2021. Payments segment operating income and margin growth in 2022 was primarily due to scalable revenue growth from our debit and credit processing businesses.

The operating loss in Corporate and Other decreased $785 million in 2022 compared to 2021. Corporate and Other was favorably impacted by a reduction of approximately $850 million in acquisition and integration related costs and amortization of acquisition related intangible assets. The operating loss in 2022 also included a $54 million pre-tax gain on the sale of businesses and other assets and approximately $130 million of increased severance costs.

Interest Expense, Net

Interest expense, net increased $40 million, or 6%, in 2022 compared to 2021 primarily due to higher interest rates on outstanding borrowings.

Other (Expense) Income

Other expense increased $165 million in 2022 compared to 2021. Other (expense) 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 (losses) gains were $(62) million and $12 million in 2022 and 2021, respectively. Other expense in 2022 also includes net pre-tax expense of $48 million associated with joint venture debt guarantees. Other income in 2021 included $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.

Income Tax Provision

Income tax provision as a percentage of income before income taxes and income from investments in unconsolidated affiliates was 18.9% and 21.8% in 2022 and 2021, respectively. The decrease in the effective income tax rate in 2022 compared to 2021 was primarily the result of $134 million of income tax expense in 2021 attributed to the revaluation of certain net deferred tax liabilities, primarily related to intangible assets and investments in joint ventures recognized at fair value in connection with the acquisition of First Data Corporation, reflecting the effect of enacted corporate income tax rate changes in the United Kingdom (tax rate increase from 19% to 25% starting in 2023) and Argentina (tax rate increase from 25% to 35%).

Income from Investments in Unconsolidated Affiliates

Our share of net income from affiliates accounted for using the equity method 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 $220 million and $100 million in 2022 and 2021, respectively. Income from investments in unconsolidated affiliates in 2022 includes pre-tax gains totaling $209 million, primarily related to the acquisition-date fair value remeasurement of our previously held equity interest in Finxact of $110 million, as well as $80 million resulting from the dilution of our ownership interest in conjunction with the Sagent M&C, LLC transaction with a third party. 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 Holdings, LLC (“InvestCloud”), as well as 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 $52 million and $69 million in 2022 and 2021, respectively.

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Net Income Per Share - Diluted

Net income attributable to Fiserv, Inc. per share-diluted was $3.91 and $1.99 in 2022 and 2021, respectively. Net income attributable to Fiserv, Inc. per share-diluted in 2021 included $134 million of certain discrete tax expenses discussed above, as well as higher acquisition and integration related expenses.

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 and long term using cash flow generated by our operations, along with our cash and cash equivalents of $902 million, proceeds from the issuance of U.S. dollar and Euro commercial paper, and available capacity under our revolving credit facility of $870 million (net of outstanding borrowings and $5.1 billion of capacity designated for outstanding borrowings under our commercial paper programs, senior notes due in 2023 and letters of credit) at December 31, 2022.

The following table summarizes our net cash provided by operating activities, or operating cash flow and capital expenditure amounts for the years ended December 31, 2022 and 2021, respectively:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Increase (Decrease)"],["(In millions)","2022","","2021","","$","","%"],["Net income","$","2,582","","","$","1,403","","","$","1,179"],["Depreciation and amortization","3,212","","","3,248","","","(36)"],["Share-based compensation","323","","","239","","","84"],["Deferred income taxes","(558)","","","(262)","","","(296)"],["Net gain on sale of businesses and other assets","(54)","","","\u2014","","","(54)"],["Income from investments in unconsolidated affiliates","(220)","","","(100)","","","(120)"],["Distributions from unconsolidated affiliates","73","","","34","","","39"],["Non-cash impairment charges","14","","","15","","","(1)"],["Net changes in working capital and other","(754)","","","(543)","","","(211)"],["Net cash provided by operating activities","$","4,618","","","$","4,034","","","$","584","","","14","%"],["Capital expenditures, including capitalized software and other intangibles","$","1,479","","","$","1,160","","","$","319","","","28","%"]]
[[/GREPCENT_TABLE]]

Our operating cash flow was $4.6 billion in 2022, an increase of 14% compared with $4.0 billion in 2021. This increase was primarily attributable to improved operating results, partially offset by higher working capital use compared to the prior year, including increased accounts receivable corresponding to revenue growth and slower customer payments, as well as an increase in future credit card receivables purchased under our Clover Capital program.

We maintain investments in various affiliates that are accounted for as equity method investments. Total distributions from unconsolidated affiliates, including those classified as cash flows from investing activities, were $211 million and $149 million during the years ended December 31, 2022 and 2021, respectively.

Our current policy is to use our operating cash flow primarily to fund capital expenditures, share repurchases, acquisitions and to repay debt rather than to pay dividends. Our capital expenditures were approximately 8% and 7% of our total revenue in 2022 and 2021, respectively.

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Cash Requirements

The following table details our future cash requirements under certain contractual obligations at December 31, 2022:

[[GREPCENT_TABLE]]
[["(In millions)","","Total","","Less than 1 year","","1-3 years","","3-5 years","","More than 5 years"],["Long-term debt including interest (1) (2)","","$","26,206","","","$","950","","","$","5,155","","","$","9,705","","","$","10,396"],["Minimum finance lease payments (1)","","576","","","183","","","272","","","120","","","1"],["Minimum operating lease payments (1) (2)","","868","","","141","","","220","","","175","","","332"],["Purchase obligations (1)","","1,727","","","683","","","715","","","209","","","120"],["Income tax obligations","","96","","","10","","","36","","","41","","","9"],["Total","","$","29,473","","","$","1,967","","","$","6,398","","","$","10,250","","","$","10,858"]]
[[/GREPCENT_TABLE]]

(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 0.375% Euro-denominated senior notes due in July 2023, 3.800% senior notes due in October 2023, and U.S. dollar and Euro commercial paper notes programs as we have the intent to refinance this debt on a long-term basis through the issuance of new commercial paper notes upon maturity, and we have the ability to do so under our revolving credit facility maturing in June 2027. The variable rate on the revolving credit facility and term loans are priced at the rate in effect at December 31, 2022.

Share Repurchases

We repurchased $2.5 billion and $2.6 billion (including the repurchase described below) of our common stock in 2022 and 2021, respectively. As of December 31, 2022, we had approximately 16.9 million shares remaining under our then existing repurchase authorization. On February 22, 2023, our board of directors approved a repurchase authorization for an additional 75.0 million shares. Shares repurchased are generally held for issuance in connection with our equity plans.

In 2021, New Omaha Holdings L.P. (“New Omaha”), a shareholder of ours, completed an underwritten secondary public offering of 23.0 million shares of our common stock (the “offering”). We repurchased from the underwriters 5.0 million shares of our common stock that were subject to the offering. The share repurchase totaled $588 million and was funded with cash on hand. The repurchased shares were cancelled and no longer outstanding following the completion of the share repurchase.

Acquisitions and Dispositions

Acquisitions

We acquired Yacaré and Merchant One in December 2022, NexTable in September 2022 and City POS in June 2022. Additionally, we acquired a remaining ownership interest in Finxact in April 2022, in which we previously held a noncontrolling interest. We acquired these businesses for an aggregate purchase price of approximately $994 million, net of $28 million of acquired cash, and including earn-out provisions estimated at a fair value of $6 million. We funded these acquisitions in 2022 by utilizing a combination of available cash and proceeds from the issuance of commercial paper.

We acquired BentoBox in November 2021, AIP in October 2021, SpendLabs in June 2021, Pineapple Payments in May 2021, and Radius8 in March 2021. Additionally, we acquired a remaining ownership interest in NetPay in November 2021 and a remaining ownership interest in Ondot in January 2021, 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 including earn-out provisions at an aggregate fair value of $34 million. We funded these acquisitions in 2021 by utilizing a combination of available cash, proceeds from the issuance of commercial paper 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.

Dispositions

We sold Fiserv Costa Rica, S.A. and our SIS operations in October 2022 and our Korea operations in September 2022 for aggregate net cash proceeds of $77 million, along with a minority noncontrolling equity interest in the buyer of the Korea operations. Effective March 2022, we mutually agreed to terminate a merchant alliance joint venture with a minority partner. In conjunction with such termination, the joint venture minority partner elected to exercise its option to purchase certain additional merchant contracts of the joint venture for cash proceeds of $175 million. The net proceeds from these dispositions were primarily used to pay down indebtedness and repurchase shares of our common stock.

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We previously maintained a noncontrolling interest in Tegra118, LLC (“Tegra118”) which was accounted for under the equity method. 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, in June 2021, we sold our entire ownership interest in InvestCloud for $466 million. The net proceeds from the sale were primarily used to pay down outstanding borrowings on our term loan facility.

Indebtedness

Our debt consisted of the following at December 31:

[[GREPCENT_TABLE]]
[["(In millions)","","2022","","2021"],["Short-term and current maturities of long-term debt:"],["Foreign lines of credit","","$","198","","","$","240"],["Finance lease and other financing obligations","","270","","","268"],["Total short-term and current maturities of long-term debt","","$","468","","","$","508"],["Long-term debt:"],["3.500% senior notes due October 2022","","$","\u2014","","","$","700"],["0.375% senior notes due July 2023 (Euro-denominated)","","531","","","566"],["3.800% senior notes due October 2023","","1,000","","","1,000"],["2.750% senior notes due July 2024","","2,000","","","2,000"],["3.850% senior notes due June 2025","","900","","","900"],["2.250% senior notes due July 2025 (British Pound-denominated)","","632","","","705"],["3.200% senior notes due July 2026","","2,000","","","2,000"],["2.250% senior notes due June 2027","","1,000","","","1,000"],["1.125% senior notes due July 2027 (Euro-denominated)","","531","","","566"],["4.200% senior notes due October 2028","","1,000","","","1,000"],["3.500% senior notes due July 2029","","3,000","","","3,000"],["2.650% senior notes due June 2030","","1,000","","","1,000"],["1.625% senior notes due July 2030 (Euro-denominated)","","531","","","566"],["3.000% senior notes due July 2031 (British Pound-denominated)","","632","","","705"],["4.400% senior notes due July 2049","","2,000","","","2,000"],["U.S. dollar commercial paper notes","","2,329","","","916"],["Euro commercial paper notes","","1,210","","","905"],["Revolving credit facility","","35","","","97"],["Receivable securitized loan","","\u2014","","","500"],["Term loan facility","","200","","","200"],["Unamortized discount and deferred financing costs","","(120)","","","(125)"],["Finance lease and other financing obligations","","539","","","528"],["Total long-term debt","","$","20,950","","","$","20,729"]]
[[/GREPCENT_TABLE]]

At December 31, 2022, our debt consisted primarily of $16.8 billion of fixed-rate senior notes and $3.5 billion of outstanding borrowings under our commercial paper programs. 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 generally paid weekly, or more frequently on occasion, and interest on our term loan is paid monthly. Outstanding borrowings under our 0.375% Euro-denominated senior notes due in July 2023, 3.800% senior notes due in October 2023, and U.S dollar and Euro commercial paper programs are classified in the consolidated balance sheet as long-term, as we have the intent to refinance these borrowings on a long-term basis through the continued issuance of new commercial paper notes upon maturity, and we also have the ability to refinance such borrowings under our revolving credit facility, as further discussed below.

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In July 2022, we redeemed $700 million in aggregate principal amount of our outstanding 3.500% senior notes due in October 2022 at a redemption price equal to 100% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest. We financed the redemption of these notes using proceeds from the issuance of U.S. dollar commercial paper. We also repaid $485 million, representing all amounts outstanding on our receivable securitized loan, in July 2022, using proceeds from the issuance of U.S. dollar commercial paper and terminated the underlying receivables financing agreement.

In June 2022, we entered into a new senior unsecured multicurrency revolving credit facility with substantially the same syndicate of banks that were lenders under our prior amended and restated revolving credit facility, which we voluntarily terminated and replaced. The new credit agreement matures in June 2027 and provides for a maximum aggregate principal amount of availability of $6.0 billion.

Variable Rate Debt

Our variable rate debt consisted of the following at December 31, 2022:

[[GREPCENT_TABLE]]
[["(In millions)","Maturity","","Weighted-Average Interest Rate","","Outstanding Borrowings"],["Foreign lines of credit","n/a","","30.58%","","$","198"],["U.S. dollar commercial paper notes","various","","4.82%","","2,329"],["Euro commercial paper notes","various","","1.92%","","1,210"],["Revolving credit facility","June 2027","","5.44%","","35"],["Term loan facility","July 2024","","5.64%","","200"],["Total variable rate debt","","","5.27%","","$","3,972"]]
[[/GREPCENT_TABLE]]

We maintain certain short-term lines of credit with foreign banks and alliance partners primarily to fund settlement activity associated with international operations in Latin America. We maintain U.S. dollar and Euro unsecured commercial paper programs with various maturities generally ranging from one day to four months. Outstanding borrowings under our commercial paper programs bear interest based on the prevailing rates at the time of issuance. In August 2022, we increased our U.S. commercial paper program borrowing capacity to $6.0 billion to align with the maximum amount of availability under our revolving credit facility.

As discussed above, we maintain a revolving credit facility with aggregate commitments available for $6.0 billion of total capacity. Borrowings under the credit facility bear interest at a variable rate based on a Secured Overnight Financing Rate (“SOFR”) or a base rate in the case of U.S. dollar borrowings, in each case plus a specified margin based on our long-term debt rating in effect from time to time. We are required to pay a facility fee based on the aggregate commitments in effect under the credit agreement from time to time.

We maintain a term loan credit agreement with a syndicate of financial institutions. Outstanding borrowings under the term loan bear interest at a variable rate based on one-month LIBOR or a base rate, in each case plus a specified margin based on our long-term debt rating in effect from time to time.

Debt Covenants and Compliance

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 in part, at any time prior to the applicable maturity date.

The new revolving credit facility contains various restrictions and covenants that require us to, among other things, limit our consolidated indebtedness as of the end of each fiscal quarter to no more than 3.75 times our consolidated net income 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.

The term loan facility contains various restrictions and covenants that require us to, among other things, (i) limit our consolidated indebtedness as of the end of each fiscal quarter to no more than 3.5 times our EBITDA during the period of four fiscal quarters then ended, subject to certain exceptions, and (ii) maintain EBITDA of at least 3.0 times our consolidated interest expense as of the end of each fiscal quarter for the period of four fiscal quarters then ended.

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During the year ended December 31, 2022, we were in compliance with all financial debt covenants. 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.

Debt Guarantees

We maintain noncontrolling ownership interests in Sagent M&C, LLC and defi SOLUTIONS Group, LLC (collectively, the “Lending Joint Ventures”). The Lending Joint Ventures maintain, as amended in April 2022, variable-rate term loan facilities with aggregate outstanding borrowings of $437 million in senior unsecured debt at December 31, 2022 and variable-rate revolving credit facilities with an aggregate borrowing capacity of $83 million with a syndicate of banks, which mature in April 2027. There were no outstanding borrowings on the revolving credit facilities at December 31, 2022. We have guaranteed the debt of the Lending Joint Ventures and do not anticipate that the Lending Joint Ventures will fail to fulfill their debt obligations. We maintained a liability of $40 million at December 31, 2022 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 of the debt. In addition, we maintained a contingent liability of $21 million at December 31, 2022, 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.

Other

Access to capital markets impacts our cost of capital and our ability to refinance maturing debt and 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, 2022, 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, 2022, 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, term loan and commercial paper notes programs 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 certain 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, 2022 and 2021, we held $902 million and $835 million in cash and cash equivalents, respectively.

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

[[GREPCENT_TABLE]]
[["","2022","","2021"],["(In millions)","Domestic","","International","","Total","","Domestic","","International","","Total"],["Available","$","135","","","$","153","","","$","288","","","$","180","","","$","221","","","$","401"],["Unavailable (1)","178","","","436","","","614","","","138","","","296","","","434"],["Total","$","313","","","$","589","","","$","902","","","$","318","","","$","517","","","$","835"]]
[[/GREPCENT_TABLE]]

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

Employee Termination Costs

We recorded $187 million and $95 million of employee termination costs related to cash severance and other separation costs for terminated employees during the years ended December 31, 2022 and 2021, respectively. Employee termination costs include those charges incurred in connection with the acquisition of First Data Corporation during the year ended December 31, 2021. The employee severance and other separation costs accrued balance of $23 million at December 31, 2022 is expected to be paid within the next twelve months.

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