Visa Inc. — Form 10-Q Summary
Business and period: Visa operates a global payments technology network, VisaNet, across more than 200 countries and territories; it does not issue cards or extend credit. This unaudited report covers the fiscal quarter and nine months ended June 30, 2021. Dollar figures are in U.S. dollars.
Financial performance
| Metric | Three months ended June 30 | Nine months ended June 30 |
|---|---|---|
| Net revenue | $6.13 billion, up 27% year over year | $17.55 billion, up 5% |
| Operating income | $4.06 billion | $11.49 billion |
| Net income, GAAP | $2.58 billion, up 9% | $8.73 billion, essentially flat |
| Diluted Class A EPS, GAAP | $1.18, up 10% | $3.98, up 2% |
| Net income, non-GAAP | $3.26 billion, up 39% | $9.41 billion, up 8% |
| Diluted Class A EPS, non-GAAP | $1.49, up 41% | $4.29, up 10% |
| Operating expenses | $2.07 billion, up 12% | $6.06 billion, up 4% |
| Operating margin | Approximately 66.3%, versus 62.0% | Approximately 65.5%, versus 65.3% |
Quarterly revenue growth reflected higher payments volume, processed transactions and cross-border activity as pandemic restrictions eased, partly offset by higher client incentives. Data processing revenue rose 32% for the quarter; international transaction revenue rose 54%. For the nine-month period, international transaction revenue fell 6%, reflecting lower cross-border volumes. Client incentives were $2.13 billion for the quarter and $5.98 billion for the nine months.
Quarterly GAAP net income included a $1.0 billion non-cash tax expense from remeasuring UK deferred tax liabilities after the UK enacted a future tax-rate increase. Equity-investment gains also lifted reported non-operating income. Non-GAAP measures exclude specified items, including investment gains, acquired-intangible amortization and, for the nine months, a $152 million pre-tax indirect-tax charge.
Cash flow, balance sheet and capital returns
- Operating cash flow for the nine months was $11.26 billion, versus $8.34 billion a year earlier. Capital spending on property, equipment and technology was $497 million; operating cash flow less this spending was approximately $10.76 billion.
- Cash and cash equivalents were $18.03 billion at June 30; total cash, cash equivalents and restricted cash were $21.27 billion. Total assets were $82.67 billion and total equity was $37.79 billion.
- Debt carrying value was $21.00 billion, down from $24.07 billion at September 30, 2020, after repayment of $3.0 billion of notes at maturity. The filing estimates debt fair value at $22.9 billion.
- Current assets were $28.04 billion and current liabilities were $14.02 billion. Restricted cash and customer collateral include funds that are not freely available for general corporate use.
- Visa repurchased 27 million Class A shares for $5.71 billion and paid $2.10 billion in dividends during the nine months. A quarterly dividend of $0.32 per Class A share was declared for payment September 1, 2021. Repurchase authorization remaining at June 30 was approximately $7.8 billion.
Material changes, outlook and risks
Visa said payments volume, processed transactions and cross-border volume improved at varying rates during the quarter as the business moved beyond the initial pandemic shock. For the quarter ended March 31, the latest volume data presented, nominal payments volume grew 14% and processed transactions for the June quarter increased 39% year over year. Management cautioned that COVID-19’s continuing effects and the pace of recovery remain uncertain. The filing provides no specific financial guidance for future periods.
Visa believes available liquidity and projected sources will meet liquidity needs for more than the next 12 months. It expects to continue quarterly cash dividends, subject to board approval. It agreed to acquire European open-banking platform Tink for €1.8 billion, subject to customary conditions. On July 22, after quarter-end, it agreed to acquire Currencycloud for £700 million, with consideration reduced by Visa’s existing equity stake; that deal is also subject to customary conditions. Visa and Plaid terminated their acquisition agreement in January 2021.
Material legal and regulatory matters include ongoing U.S. interchange litigation and more than 550 outstanding European merchant claims. The U.S. Department of Justice issued investigative demands concerning U.S. debit and competition with other payment methods and networks; Visa said it is cooperating. A new foreign-currency-rate class action was filed after quarter-end. The company stated that some proceedings involve uncertain outcomes and that future judgments, fines or settlements could materially affect financial results. Settlement guarantees expose Visa to client funding failures; maximum daily settlement exposure during the nine months was $104.1 billion, partly managed through collateral. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Key facts for investors to verify
- How much of the strong quarterly revenue and transaction growth persists as pandemic comparisons normalize, and whether cross-border recovery offsets the nine-month decline.
- The sustainability of earnings excluding the $1.0 billion UK deferred-tax remeasurement and substantial equity-investment gains; compare GAAP and non-GAAP results and their reconciliations.
- Potential financial exposure, timing and developments in U.S. interchange, European merchant, DOJ and foreign-currency litigation or investigations.
- Closing conditions, final consideration and strategic returns for the Tink and Currencycloud acquisitions.
- Use of remaining buyback authorization, ongoing dividend commitments and liquidity available after restricted cash, debt service and acquisition spending.