Visa Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended September 30, 2023. This is an annual report; it does not provide a clear standalone fiscal fourth-quarter income statement or cash flow summary.
Business context
Visa operates a global payments technology network, VisaNet, facilitating payments and money movement across more than 200 countries and territories. Visa reported 14,500 financial institution clients, 4.3 billion payment credentials and $15 trillion of payments and cash volume for FY2023. It processed 213 billion transactions during the year. Visa does not issue cards, extend credit or bear cardholder credit risk.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Net revenues | $32.653 billion | $29.310 billion | +11% |
| Operating expenses | $11.653 billion | $10.497 billion | +11% |
| Operating income | $21.000 billion | $18.813 billion | +12% |
| Net income | $17.273 billion | $14.957 billion | +15% |
| Diluted Class A EPS | $8.28 | $7.00 | +18% |
| Operating margin | 64.3% | 64.2% | +0.1 percentage point |
| Net margin | 52.9% | 51.0% | +1.9 percentage points |
| Operating cash flow | $20.755 billion | $18.849 billion | +10% |
Non-GAAP net income was $18.280 billion and non-GAAP diluted EPS was $8.77, increases of 14% and 17%, respectively. These measures exclude specified items, including the interchange litigation provision; they are not substitutes for GAAP results.
- Revenue by category: service $14.826 billion (+11%); data processing $16.007 billion (+11%); international transactions $11.638 billion (+19%); other $2.479 billion (+24%); client incentives were a $12.297 billion reduction to revenue (+19% year over year).
- International revenue was $18.515 billion, or approximately 57% of total revenue. Currency movements reduced revenue growth by approximately 1.5 percentage points.
- Payments volume for the 12 months ended June 30, 2023 was $12.074 trillion, up 5% nominally and 9% on a constant-dollar basis. Visa-processed transactions were 212.6 billion, up 10% for FY2023.
- Cash, cash equivalents and investments included $16.3 billion of cash and cash equivalents and $5.4 billion of available-for-sale debt securities. A $7.0 billion revolving credit facility and $3.0 billion commercial paper program had no amounts outstanding.
- Debt had a $20.5 billion carrying value and $20.9 billion aggregate principal outstanding at year-end. Visa repaid $2.25 billion of notes at maturity; interest expense rose 20% to $644 million.
- Financing activities used $17.772 billion, including $12.1 billion of share repurchases and $3.8 billion of dividends. The board authorized a further $25 billion repurchase program in October 2023.
Changes, outlook and material items
- Revenue growth reflected higher cross-border volume, processed transactions and payments volume, partly offset by higher client incentives. Personnel expense rose 17%, primarily due to increased headcount and compensation and investment in growth.
- Visa recorded a $906 million FY2023 provision for U.S. interchange multidistrict litigation. Year-end accrued litigation was $1.751 billion, including $1.621 billion related to U.S. covered litigation. The company deposited $1.0 billion into its litigation escrow during the year; the escrow balance was $1.764 billion.
- Visa suspended operations in Russia in March 2022 and reported no ongoing Russian domestic or cross-border revenue. Russia had represented approximately 2% of consolidated revenue in FY2022.
- Visa agreed to acquire Pismo, a cloud-native issuer processing and core banking platform, for $1.0 billion in cash, subject to customary closing conditions and regulatory approvals.
- Management believes projected liquidity is sufficient for needs beyond the next 12 months. The filing provides no specific forward revenue, earnings or margin guidance.
- Material risks include extensive and changing regulation of fees, routing, data and payment systems; competition from real-time payment networks, digital wallets and alternative providers; cybersecurity and service disruption; macroeconomic and cross-border spending weakness; client concentration; settlement guarantees; and litigation and tax disputes.
- The U.S. interchange litigation remains uncertain; Visa states that a potential loss or range at trial cannot be estimated. Other significant proceedings include European merchant interchange claims and ATM access-fee litigation. The auditor identified estimation of the opt-out merchant litigation accrual as a critical audit matter. Visa reports effective internal controls and received an unqualified audit opinion.
Investor facts to verify
- Track whether payments and cross-border volumes continue to support revenue growth, and how foreign exchange and client incentives affect reported results.
- Review developments in U.S. and European interchange litigation, including accrual changes, settlements, escrow funding and potential effects on operating rules or pricing.
- Check the status, final cost and regulatory approvals for the Pismo acquisition, and the terms and approval status of the proposed Class B share exchange program.
- Assess the effects of proposed fee, routing, data-localization and real-time-payment regulations on Visa’s volumes, pricing and competitive position.
- Monitor capital allocation and balance-sheet trends, including debt maturities, repurchases, dividends, client incentive obligations and settlement exposure.
- Review tax examinations and unrecognized tax benefits; the filing reports $3.5 billion of gross unrecognized tax benefits and says approximately $400 million could decrease in the next 12 months.