VISA, INC. This management's discussion and analysis provides a review of the results of operations, financial condition and the liquidity and capital resources ofVisa Inc. and its subsidiaries ("Visa ," "we," "us," "our" or the "Company") on a historical basis and outlines the factors that have affected recent earnings, as well as those factors that may affect future earnings. The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes included elsewhere in this report. Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of theU.S. Private Securities Litigation Reform Act of 1995 that relate to, among other things, the impact on our future financial position, results of operations and cash flows as a result of the coronavirus ("COVID-19"); our future operations, prospects, developments, strategies and growth of our business; anticipated expansion of our products in certain countries; industry developments; anticipated benefits of our acquisitions; expectations regarding litigation matters, investigations and proceedings; timing and amount of stock repurchases; sufficiency of sources of liquidity and funding; effectiveness of our risk management programs; and expectations regarding the impact of recent accounting pronouncements on our consolidated financial statements. Forward-looking statements generally are identified by words such as "believes," "estimates," "expects," "intends," "may," "projects," "could," "should," "will," "continue" and other similar expressions. All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict. We describe risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, any of these forward-looking statements in ourSEC filings, including our Annual Report on Form 10-K, for the year endedSeptember 30, 2019 and our subsequent reports on Forms 10-Q and 8-K. Except as required by law, we do not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise. 30 -------------------------------------------------------------------------------- Table of Contents OverviewVisa is a global payments technology company that enables fast, secure and reliable electronic payments across more than 200 countries and territories. We facilitate global commerce through the transfer of value and information among a global network of consumers, merchants, financial institutions, businesses, strategic partners and government entities. Our advanced transaction processing network, VisaNet, enables authorization, clearing and settlement of payment transactions and allows us to provide our financial institution and merchant clients a wide range of products, platforms and value-added services. Financial overview. Our as-reportedU.S. GAAP and non-GAAP net income and diluted earnings per share are as follows: Three Months Ended Nine Months Ended June 30, 2020 vs. 2019 June 30, 2020 vs. 2019 % % 2020 2019 Change(1) 2020 2019 Change(1) (in millions, except percentages and per share data) Net income, as reported$ 2,373 $ 3,101 (23) %$ 8,729 $ 9,055 (4) % Diluted earnings per share, as reported$ 1.07 $ 1.37 (22) %$ 3.92 $ 3.97 (1) % Non-GAAP net income(2)$ 2,347 $ 3,099 (24) %$ 8,717 $ 8,991 (3) % Non-GAAP diluted earnings per share(2)$ 1.06 $ 1.37 (23) %$ 3.91 $ 3.95 (1) % (1)Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers. (2)For a full reconciliation of our non-GAAP financial results, see tables in Non-GAAP financial results below. Coronavirus. COVID-19 continues to have an impact globally. While we have been actively monitoring the worldwide spread of COVID-19, the extent to which COVID-19 will ultimately impact our business remains difficult to predict. Our priority remains the safety of our employees, clients and the communities in which we live and operate. We are taking a measured approach in bringing our employees back in the office and will continue to have most of our employees work remotely for the rest of 2020. We continue to remain in close and regular contact with our employees, clients, partners and governments globally to help them navigate these challenging times. Revenues in the third quarter of fiscal 2020 were impacted by declines in volumes and transactions as a result of social distancing, shelter-in-place or total lock-down orders imposed by countries that began in the second quarter of fiscal 2020. In the quarter, we saw spending improve each month as most countries began to relax these restrictions. Cross-border volume however, continued to be heavily impacted by the decline in travel, which only improved moderately through the quarter. While we have taken measures to modify our business practices and reduce operating expenses, including scaling back hiring plans, restricting travel, lowering marketing spend and the use of external resources, the impact that COVID-19 will have on our business remains difficult to predict due to numerous uncertainties, including the transmissibility, severity and duration of the outbreak, the effectiveness of social distancing measures or actions that are voluntarily adopted by the public or required by governments or public health authorities, the development and availability of effective treatments or vaccines, the impact to our employees and our operations, the business of our clients, supplier and business partners and other factors identified in Part II, Item 1A "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2020 , filed with theSEC onMay 4, 2020 . We will continue to evaluate the nature and extent of the impact to our business. Highlights for the first nine months of fiscal 2020. Net revenues for the three and nine months endedJune 30, 2020 were$4.8 billion and$16.7 billion , respectively, and decreased 17% and 1%, respectively, over the prior-year comparable periods, driven by the year-over-year changes in nominal payments volume, nominal cross-border volume and processed transactions, which were impacted by the spread of COVID-19 globally starting in the latter part ofMarch 2020 . Exchange rate movements in the three and nine months endedJune 30, 2020 , as partially mitigated by our hedging program, negatively impacted our net revenues by approximately one half of a percentage point and one percentage point, respectively. 31 -------------------------------------------------------------------------------- Table of Contents Total operating expenses for the three months endedJune 30, 2020 were$1.8 billion , and decreased 5% over the prior-year comparable period, on both a GAAP and non-GAAP basis, driven by our overall cost reduction strategy. Total operating expenses for the nine months endedJune 30, 2020 were$5.8 billion , on both a GAAP and non-GAAP basis, and increased 4% and 3%, respectively, over the prior-year comparable period, primarily due to higher depreciation and amortization from our ongoing investments and personnel in support of our strategy for future growth. Non-GAAP financial results. We use non-GAAP financial measures of our performance which exclude certain items which we believe are not representative of our continuing operations and may distort our longer-term operating trends. We consider non-GAAP measures useful to investors because they provide greater transparency into management's view and assessment of our ongoing operating performance. Starting in fiscal 2020, we revised our non-GAAP methodology to exclude the impact of gains and losses on our equity investments, amortization of acquired intangible assets and acquisition-related costs for acquisitions that closed in fiscal 2019 and subsequent periods. Prior year amounts have been restated to conform to our current presentation. •Gains and losses on equity investments. Gains and losses on equity investments include periodic non-cash fair value adjustments and gains and losses upon sale of an investment. These long-term investments are strategic in nature and are primarily private company investments. Gains and losses and the related tax impacts associated with these investments are tied to the performance of the companies that we invest in and therefore do not correlate to the underlying performance of our business. During the three and nine months endedJune 30, 2020 , we recorded net realized and unrealized gains of$51 million and$62 million , respectively, and related tax expense of$11 million and$14 million , respectively. For the same prior-year comparable periods, we recorded net realized and unrealized gains of$9 million and$89 million , respectively, and related tax expense of$3 million and$21 million , respectively. •Amortization of acquired intangible assets. Amortization of acquired intangible assets consists of amortization of intangible assets such as developed technology, customer relationships and brands acquired in connection with business combinations executed beginning in fiscal 2019. Amortization charges for our acquired intangible assets are non-cash and are significantly affected by the timing, frequency and size of our acquisitions, rather than our core operations. As such, we have excluded this amount and the related tax impact to facilitate an evaluation of our current operating performance and comparison to our past operating performance. During the three and nine months endedJune 30, 2020 , we recorded amortization of acquired intangible assets of$13 million and$35 million , respectively, and related tax benefit of$3 million and$8 million , respectively. For the same prior-year comparable periods, we recorded amortization of acquired intangible assets of$2 million . •Acquisition-related costs. Acquisition-related costs consist primarily of one-time transaction and integration costs associated with our business combinations. These costs include professional fees, technology integration fees, restructuring activities and other direct costs related to the purchase and integration of acquired entities. It also includes retention equity and deferred equity compensation when they are agreed upon as part of the purchase price of the transaction but are required to be recognized as expense post-combination. We have excluded these amounts and the related tax impacts as the expenses are recognized for a limited duration and do not reflect the underlying performance of our business. During the three months endedJune 30, 2020 , we recorded acquisition-related costs of$4 million . During the nine months endedJune 30, 2020 , we recorded acquisition-related costs of$11 million and related tax benefit of$2 million . For the same prior-year comparable periods, we recorded acquisition-related costs of$3 million and related tax benefit of$1 million . Non-GAAP operating expense, non-operating income (expense), income tax provision, effective income tax rate, net income and diluted earnings per share should not be relied upon as substitutes for, or considered in isolation from, measures calculated in accordance withU.S. GAAP. The following tables reconcile our as-reported financial measures, calculated in accordance withU.S. GAAP, to our respective non-GAAP financial measures for the three and nine months endedJune 30, 2020 and 2019. 32
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Three Months Ended
Effective
Operating Non-operating Income Income Tax Income Tax Diluted Earnings
Expenses (Expense) Provision Rate(1) Net Income Per Share(1)
(in millions, except percentages and per share data)
As reported $ 1,838 $ (67) $ 559 19.1 % $ 2,373 $ 1.07
(Gains) Losses on equity investments, net - (51) (11) (40) (0.02)
Amortization of acquired intangible assets (13) - 3 10 -
Acquisition-related costs (4) - - 4 -
Non-GAAP $ 1,821 $ (118) $ 551 19.0 % $2,347$ 1.06
Nine Months Ended
Effective
Operating Non-operating Income Income Tax Income Tax Diluted Earnings
Expenses (Expense) Provision Rate(1) Net Income Per Share(1)
(in millions, except percentages and per share data)
As reported $ 5,806 $ (204) $ 2,006 18.7 % $ 8,729 $ 3.92
(Gains) Losses on equity investments, net - (62) (14) (48) (0.02)
Amortization of acquired intangible assets (35) - 8 27 0.01
Acquisition-related costs (11) - 2 9 -
Non-GAAP $ 5,760 $ (266) $ 2,002 18.7 % $ 8,717 $ 3.91 Three Months Ended
Effective
Operating Non-operating Income Income Tax Income Tax Diluted Earnings
Expenses (Expense) Provision Rate(1) Net Income Per Share(1)
(in millions, except percentages and per share data)
As reported $ 1,932 $ (42) $ 765 19.8 % $
3,101
(Gains) Losses on equity investments, net - (9) (3) (6) - Amortization of acquired intangible assets (2) - - 2 - Acquisition-related costs (3) - 1 2 - Non-GAAP$ 1,927 $ (51)$ 763 19.8 %$ 3,099 $ 1.37
Nine Months Ended
Effective
Operating Non-operating Income Income Tax Income Tax Diluted Earnings
Expenses (Expense) Provision Rate(1) Net Income Per Share(1)
(in millions, except percentages and per share data)
As reported $ 5,574 $ (93) $ 2,118 19.0 % $
9,055
(Gains) Losses on equity investments, net - (89) (21) (68) (0.03) Amortization of acquired intangible assets (2) - - 2 - Acquisition-related costs (3) - 1 2 - Non-GAAP$ 5,569 $ (182)$ 2,098 18.9 %$ 8,991 $ 3.95 (1)Figures in the table may not recalculate exactly due to rounding. Effective income tax rate, diluted earnings per share and their respective totals are calculated based on unrounded numbers. Common stock repurchases. InJanuary 2020 , our board of directors authorized a$9.5 billion share repurchase program (the "January 2020 Program"). During the three months endedJune 30, 2020 , we repurchased 6 million shares of our class A common stock in the open market for$1.1 billion . As ofJune 30, 2020 , ourJanuary 2020 Program had remaining authorized funds of$7.0 billion for share repurchase. See Note 10-Stockholders' Equity to our unaudited consolidated financial statements. 33 -------------------------------------------------------------------------------- Table of Contents Acquisition. OnJanuary 13, 2020 , we entered into a definitive agreement to acquirePlaid, Inc. for$5.3 billion . We will pay approximately$4.9 billion of cash and$0.4 billion of retention equity and deferred equity consideration. This acquisition is subject to customary closing conditions, including ongoing regulatory reviews and approvals, which are expected to be completed by the end of 2020. Senior notes. InApril 2020 , we issued fixed-rate senior notes in an aggregate principal amount of$4.0 billion , with maturities ranging between 7 and 20 years. See Note 8-Debt to our unaudited consolidated financial statements. Payments volume and transaction counts. Payments volume is the primary driver for our service revenues, and the number of processed transactions is the primary driver for our data processing revenues. Nominal payments volume inthe United States posted mid to high single-digit growth for the three and nine months endedMarch 31, 2020 (1), respectively, driven mainly by consumer debit and commercial, partially offset by decreased spending beginning in the latter part ofMarch 2020 as countries imposed social distancing, shelter-in-place or total lock-down orders. Nominal international payments volume declined as a result of decreased spending related to social distancing, shelter-in-place or total lock-down orders and unfavorable movements inU.S. dollar exchange rates. On a constant-dollar basis, which excludes the impact of exchange rate movements, our international payments volume growth rate for the three and nine months endedMarch 31, 2020 was 3% and 7%, respectively. Processed transactions declined 13% for the three months endedJune 30, 2020 as a result of social distancing, shelter-in-place or total lock-down orders. Processed transactions grew 1% for the nine months endedJune 30, 2020 , reflecting the ongoing worldwide shift to electronic payments, partially offset by the impact of social distancing, shelter-in-place or total lock-down orders. The following table presents nominal payments and cash volume:United States InternationalVisa Inc. Three Months Ended March 31,(1) Three Months Ended March 31,(1) Three Months Ended March 31,(1) 2020 2019 % Change(2) 2020 2019 % Change(2) 2020 2019 % Change(2) (in billions, except percentages) Nominal payments volume Consumer credit $ 371$ 358 4 %$ 566 $ 606 (7) %$ 937 $ 964 (3) % Consumer debit(3) 452 420 8 % 490 454 8 % 942 874 8 % Commercial(4) 160 153 5 % 91 92 (2) % 251 245 2 % Total nominal payments volume(2) $ 983$ 930 6 %$ 1,147 $ 1,153 (1) %$ 2,130 $ 2,083 2 % Cash volume 139 141 (1) % 504 537 (6) % 643 678 (5) % Total nominal volume(2),(5)$ 1,123 $ 1,071 5 %$ 1,651 $ 1,690 (2) %$ 2,773 $ 2,760 0 %United States InternationalVisa Inc. Nine Months Ended March 31,(1) Nine Months Ended March 31,(1) Nine Months Ended March 31,(1) 2020 2019 % Change(2) 2020 2019 % Change(2) 2020 2019 % Change(2) (in billions, except percentages) Nominal payments volume Consumer credit$ 1,200 $ 1,139 5 %$ 1,875 $ 1,857 1 %$ 3,074 $ 2,996 3 % Consumer debit(3) 1,358 1,249 9 % 1,526 1,392 10 % 2,883 2,641 9 % Commercial(4) 502 466 8 % 299 284 5 % 800 749 7 % Total nominal payments volume(2)$ 3,059 $ 2,854 7 %$ 3,699 $ 3,533 5 %$ 6,758 $ 6,386 6 % Cash volume 432 427 1 % 1,645 1,703 (3) % 2,077 2,129 (2) % Total nominal volume(2),(5)$ 3,491 $ 3,280 6 %$ 5,344 $ 5,236 2 %$ 8,835 $ 8,516 4 % 34
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The following table presents nominal and constant payments and cash volume
growth:
International Visa Inc. International Visa Inc.
Three Months Three Months Nine Months Nine Months
Ended March 31 , Ended March 31 , Ended March 31 , Ended March 31,
2020 vs. 2019(1),(2) 2020 vs. 2019(1),(2) 2020 vs. 2019(1),(2) 2020 vs. 2019(1),(2)
Nominal Constant(6) Nominal Constant(6) Nominal Constant(6) Nominal Constant(6)
Payments volume growth
Consumer credit growth (7) % (4) % (3) % (1) % 1 % 3 % 3 % 4 %
Consumer debit growth(3) 8 % 11 % 8 % 9 % 10 % 12 % 9 % 11 %
Commercial growth(4) (2) % 2 % 2 % 4 % 5 % 8 % 7 % 8 %
Total payments volume growth(2) (1) % 3 % 2 % 4 % 5 % 7 % 6 % 7 %
Cash volume growth (6) % (3) % (5) % (2) % (3) % (1) % (2) % (1) %
Total volume growth(2) (2) % 1 % 0 % 3 % 2 % 4 % 4 % 5 %
(1)Service revenues in a given quarter are assessed based on nominal payments
volume in the prior quarter. Therefore, service revenues reported for the three
and nine months ended June 30, 2020 and 2019 were based on nominal payments
volume reported by our financial institution clients for the three and nine
months ended March 31, 2020 and 2019, respectively.
(2)Figures in the table may not recalculate exactly due to rounding. Percentage
changes and totals are calculated based on unrounded numbers.
(3)Includes consumer prepaid volume and Interlink volume.
(4)Includes large, medium and small business credit and debit, as well as
commercial prepaid volume.
(5)Total nominal volume is the sum of total nominal payments volume and cash
volume. Total nominal payments volume is the total monetary value of
transactions for goods and services that are purchased on cards and other form
factors carrying the Visa , Visa Electron, Interlink and V PAY brands. Cash
volume generally consists of cash access transactions, balance access
transactions, balance transfers and convenience checks. Total nominal volume is
provided by our financial institution clients, subject to review by Visa . On
occasion, previously presented volume information may be updated. Prior-period
updates, other than the change to the payments volume definition, are not
material.
(6)Growth on a constant-dollar basis excludes the impact of foreign currency
fluctuations against the U.S. dollar.
The following table provides the number of transactions involving cards and
other form factors carrying the Visa , Visa Electron, Interlink, V PAY and PLUS
cards processed on Visa's networks during the periods presented:
Three Months Ended June 30, Nine Months Ended June 30,
% %
2020 2019 Change(1) 2020 2019 Change(1)
(in millions, except percentages)Visa processed transactions 30,676 35,428 (13) % 103,391 101,904 1 %
(1)Figures in the table may not recalculate exactly due to rounding. Percentage change is calculated based on unrounded numbers.
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Results of Operations
Net Revenues
The following table sets forth our net revenues earned in the U.S. and
internationally:
Three Months Ended Nine Months Ended
June 30, 2020 vs. 2019 June 30, 2020 vs. 2019
$ % $ %
2020 2019 Change Change(1) 2020 2019 Change Change(1)
(in millions, except percentages)
U.S. $ 2,380 $ 2,587 $ (207) (8) % $ 7,747 $ 7,573 $ 174 2 %
International 2,457 3,253 (796) (24) % 8,998 9,267 (269) (3) %
Net revenues $ 4,837 $ 5,840 $ (1,003) (17) % $ 16,745 $ 16,840 $ (95) (1) %
(1)Figures in the table may not recalculate exactly due to rounding. Percentage
changes are calculated based on unrounded numbers.
Net revenues decreased primarily due to the year-over-year changes in payments
volume, cross-border volume and processed transactions, which were impacted by
COVID-19 starting in the latter part of March 2020 .
Our net revenues are impacted by the overall strengthening or weakening of the
U.S. dollar as payments volume and related revenues denominated in local
currencies are converted to U.S. dollars. Exchange rate movements in the three
and nine months ended June 30, 2020 , as partially mitigated by our hedging
program, negatively impacted our net revenues by approximately one half of a
percentage point and one percentage point, respectively.
The following table sets forth the components of our net revenues:
Three Months Ended Nine Months Ended
June 30, 2020 vs. 2019June 30, 2020 vs. 2019 $ % $ % 2020 2019 Change Change(1) 2020 2019 Change Change(1) (in millions, except percentages) Service revenues$ 2,409 $ 2,405 $ 4 - %$ 7,587 $ 7,164 $ 423 6 % Data processing revenues 2,525 2,662 (137) (5) % 8,100 7,564 536 7 % International transaction revenues 1,102 1,977 (875) (44) % 4,953 5,624 (671) (12) % Other revenues 314 342 (28) (8) % 1,071 968 103 11 % Client incentives (1,513) (1,546) 33 (2) % (4,966) (4,480) (486) 11 % Net revenues$ 4,837 $ 5,840 $ (1,003) (17) %$ 16,745 $ 16,840 $ (95) (1) % (1)Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers. •Service revenues were flat in the third quarter of fiscal 2020 as COVID-19 spread globally starting in the latter part ofMarch 2020 with a 2% growth in nominal payments volume during the three-month comparable period. Service revenues grew 6% during the nine-month comparable period, in line with nominal payments volume growth of 6%. •Data processing revenues were impacted by a decline in processed transactions of 13% and growth of 1% during the three-month and nine-month comparable periods, respectively, as a result of the spread of COVID-19 globally starting in the latter part ofMarch 2020 . Data processing revenues benefited from value-added services, acquisition-related revenues and favorable business mix. For the nine-month comparable period, data processing revenues also benefited from select pricing modifications effective in 2019. •International transaction revenues driven by nominal cross-border volumes, excluding transactions withinEurope , declined 48% and 16% during the three-month and nine-month comparable periods, respectively, as COVID-19 spread globally starting in the latter part ofMarch 2020 . For the three-month comparable period, international transaction revenues were also impacted by fluctuations in the volatility of a broad range of currencies and favorable business mix. For the nine-month comparable period, international transaction revenues benefited from select pricing modifications effective in 2019. 36 -------------------------------------------------------------------------------- Table of Contents •Other revenues decreased in the third quarter of fiscal 2020 primarily due to lower marketing services revenues, lower value-added services revenues tied to travel-related card benefits and non-recurring revenues in the prior year three-month comparable period. For the nine-month comparable period, other revenues increased primarily due to consulting and marketing services related fees and other value-added services. •Client incentives decreased during the three-month comparable period in correlation with the decline in payments volumes and revenues. In the nine-month comparable period, client incentives increased mainly due to incentives recognized on long-term customer contracts that were initiated or renewed in the past 12 months partially offset by the recent decline in global payments volume. The amount of client incentives we record in future periods will vary based on changes in performance expectations, actual client performance, amendments to existing contracts or execution of new contracts. Operating Expenses The following table sets forth components of our total operating expenses: Three Months Ended Nine Months EndedJune 30, 2020 vs. 2019June 30, 2020 vs. 2019 $ % $ % 2020 2019 Change Change(1) 2020 2019 Change Change(1) (in millions, except percentages) Personnel$ 941 $ 872 $ 69 8 %$ 2,863 $ 2,573 $ 290 11 % Marketing 174 282 (108) (38) % 683 799 (116) (15) % Network and processing 172 184 (12) (7) % 536 528 8 1 % Professional fees 95 113 (18) (16) % 304 305 (1) - % Depreciation and amortization 197 165 32 19 % 571 484 87 18 % General and administrative 258 315 (57) (18) % 840 855 (15) (2) % Litigation provision 1 1 - (40) % 9 30 (21) (72) % Total operating expenses$ 1,838 $ 1,932 $ (94) (5) %$ 5,806 $ 5,574 $ 232 4 % (1)Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers. •Personnel expenses increased primarily due to continued increase in headcount in support of our investment strategy for future growth, offset by lower incentive compensation. •Marketing expenses decreased reflecting our overall cost reduction strategy, the absence of FIFA Women'sWorld Cup in fiscal 2020 and the delay of theTokyo Olympics to fiscal 2021. The decrease is offset by an increase in client marketing spend during the nine-month comparable period. •Professional fees decreased reflecting our overall cost reduction strategy. •Depreciation and amortization expenses increased primarily due to additional depreciation and amortization from our on-going investments, including acquisitions. •General and administrative expenses decreased primarily due to travel restrictions and our overall cost reduction strategy, offset by acquisition related expenses during the nine-months comparable period. •Litigation provision decreased primarily due to lower accruals for uncovered litigation. 37 -------------------------------------------------------------------------------- Table of Contents Non-operating Income (Expense) The following table sets forth the components of our non-operating income (expense): Three Months Ended Nine Months EndedJune 30, 2020 vs. 2019June 30, 2020 vs. 2019 $ % $ % 2020 2019 Change Change(1) 2020 2019 Change Change(1) (in millions, except percentages) Interest expense, net$ (142) $ (128) $ (14) 11 %$ (371) $ (413) $ 42 (10) % Investment income and other 75 86 (11) (12) % 167 320 (153) (48) % Total non-operating income (expense)$ (67) $ (42) $ (25) 59 %$ (204) $ (93) $ (111) 120 % (1)Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers. •Interest expense, net increased during the three-month comparable period primarily as a result of the issuance of debt in the third quarter of fiscal 2020, offset by derivative instruments that lowered the cost of borrowing on a portion of our outstanding debt. Interest expense, net decreased during the nine-month comparable period primarily due to derivative instruments that lowered the cost of borrowing on a portion of our outstanding debt, offset by the issuance of debt in the third quarter of fiscal 2020. •Investment income and other decreased primarily due to lower gains on our equity investments and lower interest income on our cash and investments. Effective Income Tax Rate The effective income tax rates were 19% for the three and nine months endedJune 30, 2020 , and 20% and 19% for the three and nine months endedJune 30, 2019 , respectively. The difference in the effective tax rates between the three-month periods was primarily due to the change in geographic mix of income. OnJuly 22, 2020 ,UK enacted a legislation that repealed the previous tax rate reduction from 19% to 17% that was effective onApril 1, 2020 . The repeal of theUK tax rate reduction is not expected to significantly increase our ongoing effective tax rate, however, it will result in a one-time non-cash tax expense in the fourth quarter of fiscal 2020, due to the re-measurement of deferred taxes which are primarily related to intangibles recorded in purchase accounting upon the acquisition of Visa Europe in fiscal 2016. Liquidity and Capital Resources Cash Flow Data The following table summarizes our cash flow activity for the periods presented: Nine Months Ended June 30, 2020 2019 (in millions) Total cash provided by (used in): Operating activities$ 8,344 $ 8,742 Investing activities 2,308 413 Financing activities (4,723) (9,401)
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents
173 (62)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents
$
6,102
Operating activities. Cash provided by operating activities for the nine months endedJune 30, 2020 was lower than the prior-year comparable period due to higher client incentives and timing of settlement. Partially offset by lower cash paid for taxes and the receipt of the$467 million takedown payment associated with the Interchange Multidistrict Litigation. See Note 14-Legal Matters to our unaudited consolidated financial statements. 38 -------------------------------------------------------------------------------- Table of Contents Investing activities. Cash provided by investing activities for the nine months endedJune 30, 2020 increased primarily due to fewer purchases of investment securities as compared to the prior-year period. Financing activities. Cash used in financing activities for the nine months endedJune 30, 2020 was lower than the prior-year comparable period primarily due to proceeds received from the issuance of senior notes and the absence of the deferred purchase consideration payment, made in the prior year. Partially offset by higher share repurchase and higher dividends paid. See Note 8-Debt and Note 10-Stockholders' Equity to our unaudited consolidated financial statements. Sources of Liquidity Our primary sources of liquidity are cash on hand, cash flow from operations, our investment portfolio and access to various equity and borrowing arrangements. Funds from operations are maintained in cash and cash equivalents and short-term or long-term available-for-sale investment securities based upon our funding requirements, access to liquidity from these holdings and the returns that these holdings provide. Based on our current cash flow forecasts of our short-term and long-term liquidity needs, we believe that our current and projected sources of liquidity will be sufficient to meet our projected liquidity needs for more than the next 12 months. Our ability to access cost-effective capital could be impacted by global credit market conditions. We will continue to assess our liquidity position and potential sources of supplemental liquidity in view of our operating performance, current economic and capital market conditions and other relevant circumstances. Commercial paper program. We maintain a commercial paper program to support our working capital requirements and for other general corporate purposes. During the three months endedJune 30, 2020 , we repaid$1.0 billion of commercial paper that was issued during the three months endedMarch 31, 2020 . We had no obligations outstanding under the program atJune 30, 2020 . Senior notes. InApril 2020 , we issued fixed-rate senior notes in an aggregate principal amount of$4.0 billion , with maturities ranging between 7 and 20 years. See Note 8-Debt to our unaudited consolidated financial statements. Uses of Liquidity There has been no significant change to our primary uses of liquidity sinceSeptember 30, 2019 , except as discussed below. Common stock repurchases. During the nine months endedJune 30, 2020 , we repurchased 37 million shares of our class A common stock for$6.6 billion . As ofJune 30, 2020 , ourJanuary 2020 Program had remaining authorized funds of$7.0 billion for share repurchase. See Note 10-Stockholders' Equity to our unaudited consolidated financial statements. Dividends. During the nine months endedJune 30, 2020 , we declared and paid$2.0 billion in dividends to holders of our common and preferred stock. OnJuly 20, 2020 , our board of directors declared a cash dividend in the amount of$0.30 per share of class A common stock (determined in the case of class B and C common stock and UK&I andEurope preferred stock on an as-converted basis), which will be paid onSeptember 1, 2020 , to all holders of record as ofAugust 14, 2020 . See Note 10-Stockholders' Equity to our unaudited consolidated financial statements. We expect to continue paying quarterly dividends in cash, subject to approval by the board of directors. All three series of preferred stock and class B and C common stock will share ratably on an as-converted basis in such future dividends. Senior notes. A principal payment of$3.0 billion is due onDecember 14, 2020 on our fixed-rate senior notes issued inDecember 2015 , for which we have sufficient liquidity. See Note 8-Debt to our unaudited consolidated financial statements. Acquisition. OnJanuary 13, 2020 , we entered into a definitive agreement to acquirePlaid, Inc. for$5.3 billion . We will pay approximately$4.9 billion of cash and$0.4 billion of retention equity and deferred equity consideration. This acquisition is subject to customary closing conditions, including ongoing regulatory reviews and approvals, which are expected to be completed by the end of 2020. We intend to fund the acquisition with cash, cash equivalents and investments, as well as through the issuance of new indebtedness. 39
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