Visa Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and first six months ended March 31, 2021. Visa operates a global electronic payments network across more than 200 countries and territories; it does not issue cards or extend credit.
Financial performance
| Metric | Q2 FY2021 | Q2 FY2020 | Six months FY2021 | Six months FY2020 |
|---|---|---|---|---|
| Net revenue | $5.729B | $5.854B | $11.416B | $11.908B |
| Operating income | $3.581B | $3.924B | $7.425B | $7.940B |
| Net income | $3.026B | $3.084B | $6.152B | $6.356B |
| Diluted Class A EPS | $1.38 | $1.38 | $2.80 | $2.85 |
| Operating cash flow | Not separately stated | Not separately stated | $6.842B | $5.342B |
- Q2 revenue fell 2% year over year; six-month revenue declined 4%. International transaction revenue fell 19% in Q2 and 24% for the half, while service and data-processing revenue grew.
- Q2 operating expenses rose 11% to $2.148B, including higher personnel and general and administrative costs. Six-month operating expenses increased 1% to $3.991B.
- Cash, cash equivalents and restricted cash totaled $19.558B at March 31, 2021. Total debt carrying value was $20.974B, down from $24.070B at September 30, 2020, following repayment of $3.0B of notes at maturity.
- For the six months, investing activities provided $1.474B and financing activities used $7.945B. Visa repurchased $3.509B of shares and paid $1.404B in dividends.
Changes and management commentary
- Payments volume and processed transactions grew, but cross-border activity remained depressed by COVID-19 and weighed on revenue. Visa reported 8% Q2 growth in processed transactions; cross-border volume improved during the quarter, though many borders remained closed.
- Q2 GAAP net income included a $152M pretax charge for estimated additional indirect taxes relating to prior periods ($112M after tax). Visa excluded this charge in its non-GAAP presentation. Investment gains also lifted non-operating income.
- The effective tax rate was 17% versus 19% a year earlier, primarily reflecting tax benefits from concluded audits.
- Management said current and projected liquidity should be sufficient for projected needs for more than 12 months. It expects to continue quarterly cash dividends, subject to board approval; the filing gives no earnings or revenue forecast.
Risks, contingencies and unusual items
- Management said the continuing effects of COVID-19 are difficult to predict, citing uncertainty around the pandemic, variants, vaccination, border reopenings, and effects on clients and operations.
- Visa faces substantial interchange-related litigation in the U.S. and Europe. More than 500 European merchants had outstanding claims; the company stated that some proceedings could materially affect financial position, results or cash flows. Accrued litigation was $886M at March 31.
- The U.S. Department of Justice issued a Civil Investigative Demand on March 26 concerning U.S. debit and competition with other payment methods and networks; Visa said it was cooperating. The filing does not quantify any potential loss.
- Visa and Plaid mutually terminated their merger agreement in January 2021; the related DOJ case was dismissed. The filing does not state a termination fee or other financial impact.
Important facts for investors to verify
- Whether recovery in cross-border payments continues and offsets COVID-related weakness in international transaction revenue.
- How client incentives, personnel investment and the indirect-tax charge affect future expense levels and margins.
- Developments in the DOJ debit investigation and merchant litigation, including potential exposure beyond recorded reserves.
- Future capital returns: $10.0B remained authorized for share repurchases at March 31, and the declared quarterly Class A dividend was $0.32 per share.