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 in Item 1-Financial Statements of 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 ongoing effects of the coronavirus ("COVID-19") pandemic, the measures taken in response, as well as the speed and strength of an economic recovery, including the reopening of borders and resumption of international travel; prospects, developments, strategies and growth of our business; anticipated expansion of our products in certain countries; industry developments; anticipated timing and 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 "anticipates," "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, 2021 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. 23 -------------------------------------------------------------------------------- Table of Contents OverviewVisa is a global payments technology company that facilitates global commerce and money movement across more than 200 countries and territories among a global network of consumers, merchants, financial institutions and government entities through innovative technologies. We provide transaction processing services (primarily authorization, clearing and settlement) to our financial institutions and merchants through VisaNet, our advanced transaction processing network. We offer products and solutions that facilitate secure, reliable and efficient money movement for all participants in the ecosystem. Financial overview. A summary of our as-reportedU.S. GAAP and non-GAAP operating results is as follows: Three Months Ended December 31, % 2021 2020 Change(1) (in millions, except percentages and per share data) Net revenues$ 7,059 $ 5,687 24 % Operating expenses$ 2,283 $ 1,843 24 % Net income$ 3,959 $ 3,126 27 % Diluted earnings per share$ 1.83 $ 1.42 29 % Non-GAAP operating expenses(2)$ 2,115 $ 1,828 16 % Non-GAAP net income(2)$ 3,901 $ 3,125 25 % Non-GAAP diluted earnings per share(2)$ 1.81 $ 1.42 27 % (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 GAAP to non-GAAP financial results, see tables in Non-GAAP financial results below. Coronavirus. As the effects of the evolving coronavirus ("COVID-19") pandemic continue, much remains uncertain. Our priority remains the safety of our employees, clients and the communities in which we live and operate. We are taking a phased approach to reopening our offices, with most of our employees currently working remotely. We continue to remain in close and regular contact with our employees, clients, partners and governments globally to help them navigate these challenging times. The ongoing effects of COVID-19 remain difficult to predict due to numerous uncertainties, including the transmissibility, severity, duration and resurgence of the outbreak, new variants of the virus, the uptake and effectiveness of health and safety measures or actions that are voluntarily adopted by the public or required by governments or public health authorities, including vaccines and treatments, the speed and strength of an economic recovery, including the reopening of borders and the resumption of international travel, and the impact to our employees and our operations, the business of our clients, suppliers and business partners, and other factors identified in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended September 30 2021. We will continue to evaluate the nature and extent of the impact to our business. Highlights for the first quarter of fiscal 2022. For the three months endedDecember 31, 2021 , net revenues were$7.1 billion , an increase of 24% over the prior-year comparable period, primarily due to the growth in nominal payments volume, processed transactions and nominal cross-border volume, partially offset by higher client incentives. During the three months endedDecember 31, 2021 , exchange rate movements and our hedging program negatively impacted our net revenues growth by approximately one percentage point. For the three months endedDecember 31, 2021 , GAAP operating expenses were$2.3 billion , an increase of 24% over the prior-year comparable period, primarily driven by higher litigation provision, higher personnel expenses reflecting our strategy to invest in future growth and higher marketing expenses as we lapped planned reductions in spending in the prior year. For the three months endedDecember 31, 2021 , non-GAAP operating expenses were$2.1 billion , an increase of 16% over the prior-year comparable period, primarily due to higher personnel expenses reflecting our strategy to invest in future growth and higher marketing expenses as we lapped planned reductions in spending in the prior year. 24 -------------------------------------------------------------------------------- Table of Contents Closed acquisition. OnDecember 20, 2021 , we acquiredThe Currency Cloud Group Limited ("Currencycloud"), aUK -based global platform that enables banks and fintechs to provide innovative foreign exchange solutions for cross-border payments, for a total purchase consideration of$893 million (which includes the fair value of our previously held equity interest in Currencycloud). See Note 2-Acquisitions to our unaudited consolidated financial statements. Pending acquisition. OnJune 24, 2021 , we entered into a definitive agreement to acquireTink AB ("Tink") for €1.8 billion, inclusive of cash and retention incentives. Tink is a European open banking platform that enables financial institutions, fintechs and merchants to build tailored financial management tools, products and services for European consumers and businesses based on their financial data. This acquisition is subject to customary closing conditions, including regulatory reviews and approvals. Interchange multidistrict litigation. During the three months endedDecember 31, 2021 , we recorded an additional accrual of$145 million to address claims associated with the interchange multidistrict litigation. We also deposited$250 million into theU.S. litigation escrow account. See Note 5-U.S. andEurope Retrospective Responsibility Plans and Note 13-Legal Matters to our unaudited consolidated financial statements. Common stock repurchases. InDecember 2021 , our board of directors authorized a new$12.0 billion share repurchase program. Previously, inJanuary 2021 , our board of directors authorized an$8.0 billion share repurchase program. During the three months endedDecember 31, 2021 , we repurchased 19 million shares of our class A common stock in the open market for$4.1 billion . As ofDecember 31, 2021 , our repurchase programs had remaining authorized funds of$12.7 billion . See Note 9-Stockholders' Equity to our unaudited consolidated financial statements. 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, as they may be non-recurring or have no cash impact, 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. •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. •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. •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. •Litigation provision. During the three months endedDecember 31, 2021 , we recorded an additional accrual to address claims associated with the interchange multidistrict litigation of$145 million , and related tax benefit of$32 million determined by applying applicable tax rates. Under theU.S. retrospective responsibility plan, we recover the monetary liabilities related to theU.S. covered litigation through a downward adjustment to the conversion rate of our class B common stock to shares of class A common stock. See Note 5-U.S. and Europe Retrospective Responsibility Plans and Note 13-Legal Matters to our unaudited consolidated financial statements. 25 -------------------------------------------------------------------------------- Table of Contents Non-GAAP operating expenses, 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: Three
Months Ended
Diluted
Operating Non-operating Income Tax Effective Income Net Earnings Per
Expenses Income (Expense) Provision Tax Rate(1) Income Share(1)
(in millions, except percentages and per share data)
As reported $ 2,283 $ 121 $ 938 19.1 % $ 3,959 $ 1.83
(Gains) losses on equity investments,
net - (231) (42) (189) (0.09)
Amortization of acquired intangible
assets (13) - 3 10 -
Acquisition-related costs (10) - 2 8 -
Litigation provision (145) - 32 113 0.05
Non-GAAP $ 2,115 $ (110) $ 933 19.3 % $ 3,901 $ 1.81
Three
Months Ended
Diluted
Operating Non-operating Income Tax Effective Income Net Earnings Per
Expenses Income (Expense) Provision Tax Rate(1) Income Share(1)
(in millions, except percentages and per share data)
As reported $ 1,843 $ (96) $ 622 16.6 % $ 3,126 $ 1.42
(Gains) losses on equity investments,
net - (16) (4) (12) (0.01)
Amortization of acquired intangible
assets (12) - 3 9 -
Acquisition-related costs (3) - 1 2 -
Non-GAAP $ 1,828 $ (112) $ 622 16.6 % $ 3,125 $ 1.42
(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.
Payments volume and processed transactions. 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.
Payments volume represents the aggregate dollar amount of purchases made with
cards and other form factors carrying the Visa , Visa Electron, V PAY and
Interlink brands and excludes Europe co-badged volume. Nominal payments volume
is denominated in U.S. dollars and is calculated each quarter by applying an
established U.S. dollar/local currency exchange rate for each local currency in
which our volumes are reported. Processed transactions represent transactions
using cards and other form factors carrying the Visa , Visa Electron, V PAY,
Interlink and PLUS brands processed on Visa's networks.
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The following table presents nominal payments and cash volume:
U.S. International Visa Inc.
Three Months Ended September 30,(1) Three Months Ended September 30,(1) Three Months Ended September 30,(1)
2021 2020 % Change(2) 2021 2020 % Change(2) 2021 2020 % Change(2)
(in billions, except percentages)Nominal payments volume Consumer credit$ 480 $ 378 27 %$ 651 $ 574 13 %$ 1,131 $ 951 19 % Consumer debit(3) 640 555 15 % 690 585 18 % 1,330 1,140 17 % Commercial(4) 205 164 25 % 117 94 24 % 322 258 25 % Total nominal payments volume(2)$ 1,325 $ 1,097 21 %$ 1,458 $ 1,253 16 %$ 2,784 $ 2,349 18 % Cash volume(5) 180 165 9 % 496 482 3 % 676 647 5 % Total nominal volume(2),(6)$ 1,506 $ 1,262 19 %$ 1,955 $ 1,734 13 %$ 3,460 $ 2,996 15 % The following table presents the change in nominal and constant payments and cash volume: International Visa Inc. Three Months Three Months Ended September 30, Ended September 30, 2021 vs. 2020(1),(2) 2021 vs. 2020(1),(2) Nominal Constant(7) Nominal Constant(7) Payments volume growth Consumer credit growth 13 % 11 % 19 % 17 % Consumer debit growth(3) 18 % 14 % 17 % 15 % Commercial growth(4) 24 % 21 % 25 % 24 % Total payments volume growth 16 % 13 % 18 % 17 % Cash volume growth(5) 3 % 4 % 5 % 5 % Total volume growth 13 % 11 % 15 %
14 %
(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 months endedDecember 31, 2021 and 2020, respectively, were based on nominal payments volume reported by our financial institution clients for the three months endedSeptember 30, 2021 and 2020, respectively. On occasion, previously presented volume information may be updated. Prior-period updates are not material. (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)Cash volume generally consists of cash access transactions, balance access transactions, balance transfers and convenience checks. (6)Total nominal volume is the sum of total nominal payments volume and cash volume. Total nominal volume is provided by our financial institution clients, subject to review byVisa . (7)Growth on a constant-dollar basis excludes the impact of foreign currency fluctuations against theU.S. dollar. The following table presents the number of processed transactions: Three Months Ended December 31, % 2021 2020 Change(1) (in millions, except percentages) Visa processed transactions 47,558 39,213 21 %
(1)Figures in the table may not recalculate exactly due to rounding. Percentage change is calculated based on unrounded numbers. On occasion, previously presented information may be updated. Prior period updates are not material.
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Results of Operations
Net Revenues
The following table presents our net revenues earned in the U.S. and
internationally:
Three Months Ended
December 31,
%
2021 2020 Change(1)
(in millions, except percentages)
U.S. $ 3,178 $ 2,667 19 %
International 3,881 3,020 28 %
Net revenues $ 7,059 $ 5,687 24 %
(1)Figures in the table may not recalculate exactly due to rounding. Percentage
changes are calculated based on unrounded numbers.
Net revenues increased primarily due to the growth in nominal payments volume,
processed transactions and nominal cross-border volume, partially offset by
higher client incentives.
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. During the three months ended
December 31, 2021 , exchange rate movements and our hedging program negatively
impacted our net revenues growth by approximately one percentage point.
The following table presents the components of our net revenues:
Three Months Ended
December 31,
%
2021 2020 Change(1)
(in millions, except percentages)
Service revenues $ 3,193 $ 2,677 19 %
Data processing revenues 3,614 3,033 19 %
International transaction revenues 2,174 1,451 50 %
Other revenues 449 384 17 %
Client incentives (2,371) (1,858) 28 %
Net revenues $ 7,059 $ 5,687 24 %
(1)Figures in the table may not recalculate exactly due to rounding. Percentage
changes are calculated based on unrounded numbers.
•Service revenues increased primarily due to 18% growth in nominal payments
volume.
•Data processing revenues increased primarily due to overall growth in processed
transactions of 21%.
•International transaction revenues increased primarily due to growth in nominal
cross-border volumes, excluding transactions within Europe , of 49%.
•Other revenues increased primarily due to higher consulting revenues and other
value added services.
•Client incentives increased primarily due to growth in 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.
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Operating Expenses
The following table presents the components of our total operating expenses:
Three Months Ended
December 31,
%
2021 2020 Change(1)
(in millions, except percentages)
Personnel $ 1,125 $ 981 15 %
Marketing 280 205 36 %
Network and processing 190 173 9 %
Professional fees 100 83 19 %
Depreciation and amortization 198 197 1 %
General and administrative 242 203 19 %
Litigation provision 148 1 NM
Total operating expenses $ 2,283 $ 1,843 24 %
NM - Not meaningful
(1)Figures in the table may not recalculate exactly due to rounding. Percentage
changes are calculated based on unrounded numbers.
Total operating expenses increased primarily due to our planned reduction and
delay of our spend as revenue was impacted by the COVID-19 pandemic in the first
half of the prior year.
•Personnel expenses increased primarily due to higher headcount and
compensation, reflecting our strategy to invest in future growth.
•Marketing expenses increased as we lapped planned reductions in spending in the
prior year as well as higher spending in various campaigns.
•Network and processing expenses increased mainly due to higher continued
technology and processing network investments to support growth.
•Professional fees increased primarily due to higher consulting fees as we
lapped planned reductions in spending in the prior year.
•General and administrative expenses increased primarily as a result of higher
usage of travel related card benefits and unfavorable foreign currency
fluctuations, partially offset by lower indirect taxes.
•Litigation provision increased primarily due to an additional $145 million
accrual related to the U.S. covered litigation. See Note 5-U.S. and Europe
Retrospective Responsibility Plans and Note 13-Legal Matters to our unaudited
consolidated financial statements.
Non-operating Income (Expense)
The following table presents the components of our non-operating income
(expense):
Three Months Ended
December 31,
%
2021 2020 Change(1)
(in millions, except percentages)
Interest expense, net $ (134) $ (136) (1 %)
Investment income and other 255 40 544 %
Total non-operating income (expense)$ 121 $ (96) (225
%)
(1)Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.
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•Interest expense, net decreased primarily as a result of lower interest expense
due to lower outstanding debt and derivative instruments that lowered the cost
of borrowing, partially offset by an increase in interest expense related to
income tax liabilities.
•Investment income and other increased primarily due to higher gains on our
equity investments.
Effective Income Tax Rate
The following table presents our effective income tax rates:
Three Months Ended
December 31,
2021 2020
Effective income tax rate 19 % 17 %
The difference in the effective tax rates is primarily due to an $81 million tax
benefit recognized during the three months ended December 31, 2020 as a result
of the conclusion of audits by taxing authorities.
Liquidity and Capital Resources
Cash Flow Data
The following table summarizes our cash flow activity for the periods presented:
Three Months Ended
December 31,
2021 2020
(in millions)
Total cash provided by (used in):
Operating activities $ 4,232 $ 3,513
Investing activities (547) 639
Financing activities (4,967) (5,572)Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents
(194) 304
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents
$
(1,476)
Operating activities. Cash provided by operating activities for the three months endedDecember 31, 2021 was higher than the prior-year comparable period primarily due to growth in our underlying business, partially offset by higher client incentive payments. Investing activities. Cash was used in investing activities for the three months endedDecember 31, 2021 as compared to cash provided by investing activities during the prior-year comparable period, primarily due to higher cash paid for acquisitions and lower proceeds from sales and maturities, net of purchases of investment securities. See Note 2-Acquisitions to our unaudited consolidated financial statements. Financing activities. Cash used in financing activities for the three months endedDecember 31, 2021 was lower than the prior-year comparable period primarily due to the absence of the principal debt payment made in the prior year, partially offset by higher share repurchases and higher dividends paid. See Note 9-Stockholders' Equity to our unaudited consolidated financial statements. 30 -------------------------------------------------------------------------------- Table of Contents Sources of Liquidity Our primary sources of liquidity are cash on hand, cash flow from our 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 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 budgets and 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. 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. Uses of Liquidity There has been no significant change to our primary uses of liquidity sinceSeptember 30, 2021 , except as discussed below. Common stock repurchases. InDecember 2021 , our board of directors authorized a new$12.0 billion share repurchase program. During the three months endedDecember 31, 2021 , we repurchased 19 million shares of our class A common stock in the open market for$4.1 billion . As ofDecember 31, 2021 , our repurchase programs had remaining authorized funds of$12.7 billion . See Note 9-Stockholders' Equity to our unaudited consolidated financial statements. Dividends. During the three months endedDecember 31, 2021 , we declared and paid$809 million in dividends to holders of our common and preferred stock. OnJanuary 25, 2022 , our board of directors declared a cash dividend in the amount of$0.375 per share of class A common stock (determined in the case of class B and C common stock and series A, B and C convertible participating preferred stock on an as-converted basis), which will be paid onMarch 1, 2022 , to all holders of record as ofFebruary 11, 2022 . See Note 9-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 preferred and class B and C common stock will share ratably on an as-converted basis in such future dividends. Senior notes. Principal payments on our fixed-rate senior notes of$1.0 billion and$2.3 billion are due inSeptember 2022 andDecember 2022 , respectively, for which we have sufficient liquidity. See Note 7-Debt to our unaudited consolidated financial statements. Litigation. DuringDecember 2021 , we deposited$250 million into theU.S. litigation escrow account to address claims associated with the interchange multidistrict litigation. See Note 5-U.S. and Europe Retrospective Responsibility Plans and Note 13-Legal Matters to our unaudited consolidated financial statements. Closed acquisition. OnDecember 20, 2021 , we acquired Currencycloud for a total purchase consideration of$893 million (which includes the fair value of our previously held equity interest in Currencycloud). See Note 2-Acquisitions to our unaudited consolidated financial statements. Pending acquisition. OnJune 24, 2021 , we entered into a definitive agreement to acquire Tink for €1.8 billion, inclusive of cash and retention incentives. This acquisition is subject to customary closing conditions, including regulatory reviews and approvals. Accounting Pronouncements Not Yet Adopted InMarch 2020 , theFinancial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, which provides optional expedients and exceptions for applyingU.S. GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate or another reference rate expected to be discontinued because of reference rate reform. Subsequently, the FASB also issued an amendment to this standard. The amendments in the ASU are effective upon issuance throughDecember 31, 2022 . We are evaluating the effect ASU 2020-04 and its subsequent amendment will have on our consolidated financial statements. The adoption is not expected to have a material impact on our consolidated financial statements. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no significant changes to our market risks since
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