Visa Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended September 30, 2021. Although the request references 2021 Q4, the supplied filing is an annual report; it does not provide a clear standalone fourth-quarter financial summary.
Business context
Visa operates a global payments technology network across more than 200 countries and territories. It facilitates transaction authorization, clearing and settlement, and earns revenue from payment volume, processed transactions, cross-border activity and related services. Visa says it does not issue cards, extend credit or bear cardholder credit risk. It reports one segment: Payment Services.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net revenue | $24.105 billion | $21.846 billion | +10% |
| Operating income | $15.804 billion | $14.081 billion | +12% |
| Net income | $12.311 billion | $10.866 billion | +13% |
| Diluted EPS, Class A | $5.63 | $4.89 | +15% |
| Operating expenses | $8.301 billion | $7.765 billion | +7% |
| Operating cash flow | $15.227 billion | $10.440 billion | +46% |
- Approximate operating margin was 65.6%, versus 64.5% in FY2020; approximate net margin was 51.1%, versus 49.7% (calculated from reported figures).
- Non-GAAP net income was $12.933 billion and non-GAAP diluted EPS was $5.91, up 16% and 17%, respectively. These measures exclude specified items and are not GAAP results.
- Revenue components: service revenue $11.475 billion (+17%); data processing $12.792 billion (+17%); international transaction revenue $6.530 billion (+4%); other revenue $1.675 billion (+17%). Client incentives, recorded as a reduction to revenue, rose 26% to $8.367 billion.
- Visa processed 164.733 billion transactions, up 17%. Nominal payments volume was $9.968 trillion for the 12 months ended June 30, 2021, up 14%; total volume including cash was $12.529 trillion, up 11%.
- Cash and cash equivalents were $16.487 billion at year-end; available-for-sale debt securities were $3.2 billion. Visa said projected liquidity sources were sufficient for needs beyond 12 months and had no borrowings under its $5 billion revolving facility or $3 billion commercial paper program.
- Debt carrying value was $20.977 billion, including $999 million current maturities. Visa repaid $3 billion of notes during the year. Operating cash flow funded substantial shareholder returns: $8.676 billion of repurchases and $2.798 billion of dividends.
Changes, outlook and notable items
- Revenue and transaction growth reflected higher payments volume, processed transactions and cross-border volume as COVID-19 restrictions eased; higher client incentives partly offset revenue growth. International transaction revenue remained below FY2019’s $7.804 billion.
- Operating expenses increased mainly from personnel and marketing costs; lower general and administrative expense partly offset those increases. Management cited investment in future growth and marketing activity, including the Tokyo 2020 Olympic Games.
- FY2021 GAAP results included a $1.007 billion non-cash tax expense from remeasurement of UK deferred tax liabilities following legislation raising the UK tax rate to 25% from April 2023. Visa also recorded a $152 million pre-tax estimate for probable additional indirect taxes relating to prior periods. Tax benefits from concluded audits were $255 million.
- Investment income benefited from equity investment gains; non-GAAP adjustments excluded $712 million of net equity investment gains. The filing’s reported GAAP net income includes those gains.
- COVID-19 and the pace of recovery, particularly border reopening and international travel, remained uncertain. The filing gives no quantified revenue or earnings guidance.
- Visa signed agreements to acquire Tink for €1.8 billion and Currencycloud for £700 million, subject to approvals and other conditions. The Plaid merger agreement was terminated in January 2021.
Risks, contingencies and controls
- Material risks include evolving regulation of interchange, routing and data; domestic payment networks and market-access restrictions; competition and disintermediation; cyberattacks or network outages; macroeconomic and pandemic effects; and dependence on large clients and partners.
- Visa faces significant interchange-related litigation in the U.S. and Europe. The accrued liability for U.S. covered litigation was $881 million; total accrued litigation was $983 million. A U.S. merchant injunctive-relief class was certified in September 2021. More than 550 European merchant claims remained outstanding, with claims issued, served or preserved seeking several billion dollars, although the full exposure was uncertain.
- Visa indemnifies clients for settlement losses if another client fails to meet settlement obligations. Maximum daily settlement exposure was $105.0 billion in FY2021; collateral held to manage this risk totaled $4.790 billion at year-end.
- Management and the auditor concluded internal control over financial reporting was effective as of September 30, 2021. The auditor issued an unqualified opinion and identified estimation of the accrued liability for U.S. merchant opt-out litigation as a critical audit matter.
Key facts for investors to verify
- How quickly international travel and cross-border volumes recover, and whether revenue growth persists after the easing of pandemic restrictions.
- The effect of rising client incentives, which reached $8.367 billion, on future net revenue and margins.
- Developments and potential financial or business-practice effects of U.S. and European interchange litigation, regulatory reviews and investigations.
- Completion, regulatory approval, consideration and integration costs for the Tink and Currencycloud acquisitions.
- Cash requirements for litigation, settlement guarantees, debt maturities, repurchases and dividends; also review the non-GAAP reconciliations and the $1.007 billion tax remeasurement item.