Visa Inc. Form 10-K Summary
Business context and reporting period
This is Visa’s annual report for the fiscal year ended September 30, 2022, not a report limited to calendar 2022 Q4. Visa operates a global payments technology network, processing transactions and providing related services; it does not issue cards or extend credit. It reported one segment, Payment Services.
In FY2022, Visa recorded 258 billion Visa-branded payments and cash transactions, of which 193 billion were processed by Visa. Total payments and cash volume was approximately $14.0 trillion.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Net revenues | $29.310 billion | $24.105 billion | +22% |
| Operating expenses | $10.497 billion | $8.301 billion | +26% |
| Operating income | $18.813 billion | $15.804 billion | +19% |
| Net income | $14.957 billion | $12.311 billion | +21% |
| Diluted EPS | $7.00 | $5.63 | +24% |
| Non-GAAP diluted EPS | $7.50 | $5.91 | +27% |
| Cash from operating activities | $18.849 billion | $15.227 billion | +24% |
Revenue growth reflected higher payment volume, processed transactions and cross-border volume, partly offset by increased client incentives. Service revenue rose 16%, data-processing revenue 13%, international-transaction revenue 50%, and client incentives increased 23% to $10.295 billion. Foreign-exchange movements reduced revenue growth by approximately 2.5 percentage points.
Visa’s nominal payments volume grew 15% and processed transactions increased 17% to 192.5 billion. International transaction revenue benefited from 40% growth in cross-border volume excluding transactions within Europe. GAAP operating expenses included an $861 million litigation provision; non-GAAP operating expenses increased 16%. Net income also reflected $264 million of net losses on equity investments within non-operating results. The effective tax rate was 18%, compared with 23% in FY2021, when a $1.0 billion non-cash UK deferred-tax remeasurement expense was recorded.
At September 30, 2022, cash and cash equivalents were $15.7 billion and available-for-sale debt securities were $4.5 billion. Cash, restricted cash and restricted cash equivalents totaled $20.4 billion, including funds unavailable for general operations. Total debt principal was $22.9 billion ($22.45 billion carrying value); $2.25 billion was due in December 2022. Visa had no commercial paper or revolving-credit-facility borrowings outstanding, and its $5.0 billion revolving facility remained available. Management said projected liquidity was sufficient for needs over the next 12 months.
Material changes and capital allocation
- Visa suspended Russian operations in March 2022 and deconsolidated its Russian subsidiary. Russia represented approximately 2% of FY2022 net revenue, versus 4% in FY2021. The deconsolidation resulted in a $35 million pre-tax loss.
- Visa acquired Currencycloud for total consideration of $893 million and Tink for approximately $1.9 billion in cash, expanding cross-border foreign-exchange and open-banking capabilities.
- Visa issued €3.0 billion of senior notes and repaid $1.0 billion of maturing debt. It repurchased 56 million shares for $11.6 billion and paid $3.2 billion in dividends.
- Operating cash flow increased, while investing cash outflow rose to $4.3 billion, chiefly reflecting acquisitions and investment activity. Financing cash outflow was $12.7 billion.
Outlook, risks and contingencies
The filing provides no specific numerical revenue or earnings guidance. Management expects continued investment in technology and payments infrastructure, and said liquidity should cover projected needs for more than 12 months. The board authorized a new $12.0 billion share-repurchase program in October 2022 and declared a quarterly dividend of $0.45 per share.
Key risks include extensive regulation of interchange, routing, data and payment processing; competition from global and domestic networks, digital wallets, fintechs and real-time payment systems; economic weakness, inflation, currency movements and reduced cross-border travel; and cybersecurity or service disruptions. Visa also cautioned that the war in Ukraine and the continuing effects of COVID-19 could affect operations and spending.
Legal exposure is significant and uncertain. Visa accrued $1.441 billion for U.S. covered litigation, including claims by merchants opting out of an interchange settlement; the total accrued litigation liability was $1.456 billion. Visa deposited $850 million into its U.S. litigation escrow during FY2022, bringing that restricted balance to $1.449 billion. The company stated that trial outcomes and possible losses beyond recorded accruals could not be estimated clearly. The U.S. litigation reserve and retrospective responsibility arrangements do not eliminate all litigation exposure.
The financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting as of September 30, 2022.
Important facts for investors to verify
- Whether payment volumes and cross-border activity continue to support revenue growth, particularly after the loss of Russian business and amid currency headwinds.
- How client incentives, litigation provisions and other unusual items affect reported versus non-GAAP expense and earnings trends.
- Developments in U.S. merchant litigation and European interchange cases, including the adequacy and limitations of the related responsibility plans and escrow.
- Debt maturities, cash available for operations versus restricted cash, and the pace of buybacks and dividends.
- The financial contribution and integration progress of Tink and Currencycloud, and competitive or regulatory developments affecting new payment flows.