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VISA, INC.

(V)
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Delayed Nyse  -  04:00 2022-09-29 pm EDT
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VISA INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

07/28/2022 | 04:15pm EDT
This management's discussion and analysis provides a review of the results of
operations, financial condition and the liquidity and capital resources of Visa
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 the U.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 invasion of Ukraine by
Russia; the ongoing effects of the COVID-19 pandemic, as well as 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 our SEC filings, including our Annual
Report on Form 10-K, for the year ended September 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.

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Overview


Visa 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-reported U.S. GAAP and non-GAAP operating results is as follows:

                                                      Three Months Ended                                            Nine Months Ended
                                                           June 30,                                                     June 30,
                                                                                  %                                                           %
                                         2022               2021              Change(1)              2022              2021               Change(1)
                                                                   (in millions, except percentages and per share data)
Net revenues                        $     7,275          $ 6,130                      19  %       $ 21,523          $ 17,546                      23  %
Operating expenses                  $     3,127          $ 2,066                      51  %       $  7,797          $  6,057                      29  %
Net income                          $     3,411          $ 2,575                      32  %       $ 11,017          $  8,727                      26  %
Diluted earnings per share          $      1.60          $  1.18                      36  %       $   5.14          $   3.98                      29  %

Non-GAAP operating expenses(2)      $     2,353          $ 2,048                      15  %       $  6,755          $  5,854                      15  %
Non-GAAP net income(2)              $     4,206          $ 3,256                      29  %       $ 11,943          $  9,412                      27  %
Non-GAAP diluted earnings per
share(2)                            $      1.98          $  1.49                      33  %       $   5.57          $   4.29                      30  %


(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.


Russia & Ukraine. During the quarter ended March 31, 2022, economic sanctions
were imposed on Russia by the U.S., European Union, United Kingdom and other
jurisdictions and authorities, impacting Visa and its clients. We announced in
March 2022 that we were suspending our operations in Russia. As a result, we are
no longer generating revenue from domestic and cross-border activities related
to Russia. Since 2015, domestic transactions have been processed by Russia's
state-owned payments operator, National Payment Card System. With respect to
cross-border activities, all transactions initiated with Visa cards issued by
financial institutions outside Russia no longer work within Russia, and all
transactions on cards issued in Russia no longer work outside the country.
Furthermore, during the quarter ended March 31, 2022 we deconsolidated our
Russian subsidiary, as required under U.S. GAAP. For the nine months ended
June 30, 2022 and full year fiscal 2021, total net revenues from Russia,
including revenues driven by domestic as well as cross-border activities, were
approximately 3% and 4% of our consolidated net revenues, respectively.

With respect to Russia's invasion of Ukraine, our priority is ensuring the safety and security of our colleagues and their families who are directly impacted. We are in close contact with those in the region and are providing ongoing support to our colleagues.


COVID-19. As the effects of the evolving COVID-19 pandemic continue, 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 the return to office of our U.S. employees in April 2022 in a new
hybrid model of flexible work.

The ongoing effects of Russia's invasion of Ukraine and COVID-19 are difficult
to predict due to numerous uncertainties identified in Part II, Item 1A "Risk
Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31,
2022. We will continue to evaluate the nature and extent of the impact to our
business.

Highlights for the first nine months of fiscal 2022. For the three and nine months ended June 30, 2022, net revenues increased 19% and 23% over the prior-year comparable periods, primarily due to the growth in nominal cross-border volume, nominal payments volume and processed transactions, partially offset by higher client incentives. During the three and nine months ended June 30, 2022, exchange rate movements and our hedging

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program negatively impacted our net revenues growth by approximately three percentage points and two percentage points, respectively.


For the three months ended June 30, 2022, GAAP operating expenses increased 51%
over the prior-year comparable period primarily due to higher expenses for
litigation provision and personnel. For the nine months ended June 30, 2022,
GAAP operating expenses increased 29% over the prior-year comparable period
primarily due to higher expenses related to litigation provision and personnel.
See Results of Operations-Operating Expenses below for further discussion.
During the three and nine months ended June 30, 2022, exchange rate movements
positively impacted our operating expense growth by approximately two percentage
points.

For the three months ended June 30, 2022, non-GAAP operating expenses increased
15% over the prior-year comparable period primarily due to higher expenses for
personnel and general and administrative. For the nine months ended June 30,
2022, non-GAAP operating expenses increased 15% over the prior year comparable
period primarily due to higher expenses related to personnel and marketing.

Senior notes. In June 2022, we issued Euro-denominated fixed-rate senior notes
in a public offering in an aggregate principal amount of €3.0 billion, with
maturities ranging between 4 and 12 years. See Note 7-Debt to our unaudited
consolidated financial statements.

Acquisitions. On December 20, 2021, we acquired The Currency Cloud Group Limited
("Currencycloud"), a UK-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).

On March 10, 2022, we acquired 100% of the share capital of Tink AB ("Tink") for
$1.9 billion in cash. Tink is a European open banking platform that enables
financial institutions, fintechs and merchants to build financial products and
services and move money. See Note 2-Acquisitions to our unaudited consolidated
financial statements.

Interchange multidistrict litigation. During the nine months ended June 30,
2022, we recorded additional accruals of $861 million to address claims
associated with the interchange multidistrict litigation. We also made deposits
of $850 million into the U.S. litigation escrow account. See Note 5-U.S. and
Europe Retrospective Responsibility Plans and Note 13-Legal Matters to our
unaudited consolidated financial statements.

Common stock repurchases. In December 2021, our board of directors authorized a
$12.0 billion share repurchase program. During the nine months ended June 30,
2022, we repurchased 46 million shares of our class A common stock in the open
market for $9.5 billion. As of June 30, 2022, our repurchase program had
remaining authorized funds of $7.3 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.

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•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. These costs also include 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 and nine months ended June 30, 2022, we
recorded additional accruals to address claims associated with the interchange
multidistrict litigation of $716 million and $861 million, respectively, and
related tax benefit of $159 million and $191 million, respectively, determined
by applying applicable tax rates. Under the U.S. retrospective responsibility
plan, we recover the monetary liabilities related to the U.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.

•Russia-Ukraine charges. During the nine months ended June 30, 2022, we recorded
a loss within general and administrative expense of $35 million from the
deconsolidation of our Russian subsidiary. See Note 1-Summary of Significant
Accounting Policies to our unaudited consolidated financial statements. We also
incurred charges of $25 million in personnel expense as a result of steps taken
to support our employees in Russia and Ukraine. We have excluded these amounts
and the related tax benefit of $4 million, determined by applying applicable tax
rates, as they are one-time charges and do not reflect the underlying
performance of our business.

•Remeasurement of deferred tax balances. During the three and nine months ended
June 30, 2021, in connection with the UK enacted legislation on June 10, 2021
that will increase the tax rate from 19% to 25%, effective April 1, 2023, we
remeasured our net deferred tax liabilities, resulting in the recognition of a
non-recurring, non-cash income tax expense of $1.0 billion.

•Indirect taxes. During the nine months ended June 30, 2021, we recognized a
one-time charge within general and administrative expense of $152 million, and
related tax benefit of $40 million determined by applying applicable tax rates.
This charge is to record our estimate of probable additional indirect taxes,
related to prior periods, for which we could be liable as a result of certain
changes in applicable law. This one-time charge is not representative of our
ongoing operations.

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 with U.S. GAAP. The following tables
reconcile our as-reported financial measures, calculated in accordance with U.S.
GAAP, to our respective non-GAAP financial measures:

                                                                              Three Months Ended June 30, 2022
                                                                                                                                                                            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                                 $       3,127                $           (319)               $        418                    10.9  %       $ 3,411          $       1.60
(Gains) losses on equity investments,
net                                                     -                             246                          54                                      192                  0.09
Amortization of acquired intangible
assets                                                (44)                              -                          10                                       34                  0.02
Acquisition-related costs                             (14)                              -                           2                                       12                  0.01

Litigation provision                                 (716)                              -                         159                                      557                  0.26

Non-GAAP                                    $       2,353                $            (73)               $        643                    13.3  %       $ 4,206          $       1.98


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                                                                              Nine Months Ended June 30, 2022
                                                                                                                                                                           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                                  $     7,797                $           (458)               $     2,251                    17.0  %       $ 11,017          $       5.14
(Gains) losses on equity investments,
net                                                    -                             142                         40                                       102                  0.05
Amortization of acquired intangible
assets                                               (77)                              -                         17                                        60                  0.03
Acquisition-related costs                            (44)                              -                          6                                        38                  0.02

Litigation provision                                (861)                              -                        191                                       670                  0.31
Russia-Ukraine charges                               (60)                              -                          4                                        56                  0.03
Non-GAAP                                     $     6,755                $           (316)               $     2,509                    17.4  %       $ 11,943          $       5.57


                                                                           

Three Months Ended June 30, 2021

                                                                                                                                                                          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                                 $      2,066                $            325                $     1,814                    41.3  %       $ 2,575          $       1.18
(Gains) losses on equity investments,
net                                                    -                            (439)                       (99)                                    (340)                (0.16)
Amortization of acquired intangible
assets                                               (13)                              -                          3                                       10                     -
Acquisition-related costs                             (5)                              -                          1                                        4                     -

Remeasurement of deferred tax
balances                                               -                               -                     (1,007)                                   1,007                  0.46
Non-GAAP                                    $      2,048                $           (114)               $       712                    17.9  %       $ 3,256          $       1.49



                                                                           

Nine Months Ended June 30, 2021

                                                                                                                                                                         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                                 $     6,057                $            276                $     3,038                    25.8  %       $ 8,727          $       3.98
(Gains) losses on equity investments,
net                                                   -                            (611)                      (138)                                    (473)                (0.22)
Amortization of acquired intangible
assets                                              (38)                              -                          9                                       29                  0.01
Acquisition-related costs                           (13)                              -                          3                                       10                     -
Remeasurement of deferred tax
balances                                              -                               -                     (1,007)                                   1,007                  0.46
Indirect taxes                                     (152)                              -                         40                                      112                  0.05
Non-GAAP                                    $     5,854                $           (335)               $     1,945                    17.1  %       $ 9,412          $       4.29

(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.

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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/foreign 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.

The following table presents nominal payments and cash volume:

                                                U.S.                                                   International                                                 Visa Inc.
                                  Three Months Ended March 31,(1)                             Three Months Ended March 31,(1)                             Three Months Ended March 31,(1)
                           2022              2021             % Change(2)              2022              2021             % Change(2)              2022              2021             % Change(2)
                                                                                             (in billions, except percentages)
Nominal payments volume
Consumer credit         $    487          $   384                     27   %       $     659          $   584                      13  %       $   1,146          $   968                     18   %
Consumer debit(3)            637              607                      5   %             659              584                      13  %           1,295            1,191                      9   %
Commercial(4)                214              166                     28   %             120               99                      22  %             334              265                     26   %
Total nominal payments
volume(2)               $  1,337          $ 1,157                     16   %       $   1,438          $ 1,267                      13  %       $   2,775          $ 2,424                     14   %
Cash volume(5)               144              158                     (9  %)             464              463                       -  %             608              621                     (2  %)
Total nominal
volume(2),(6)           $  1,482          $ 1,316                     13   %       $   1,902          $ 1,730                      10  %       $   3,383          $ 3,045                     11   %

                                                U.S.                                                   International                                                 Visa Inc.
                                   Nine Months Ended March 31,(1)                             Nine Months Ended March 31,(1)                              Nine Months Ended March 31,(1)
                           2022              2021             % Change(2)              2022              2021             % Change(2)              2022              2021             % Change(2)
                                                                                             (in billions, except percentages)
Nominal payments volume
Consumer credit         $  1,492          $ 1,175                     27   %       $   2,018          $ 1,778                      14  %       $   3,510          $ 2,953                     19   %
Consumer debit(3)          1,927            1,718                     12   %           2,081            1,782                      17  %           4,008            3,500                     15   %
Commercial(4)                637              501                     27   %             366              296                      24  %           1,003              797                     26   %
Total nominal payments
volume(2)               $  4,057          $ 3,394                     20   %       $   4,465          $ 3,855                      16  %       $   8,522          $ 7,249                     18   %
Cash volume(5)               477              466                      2   %           1,475            1,442                       2  %           1,952            1,908                      2   %
Total nominal
volume(2),(6)           $  4,533          $ 3,860                     17   %       $   5,940          $ 5,297                      12  %       $  10,473          $ 9,157                     14   %


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The following table presents the change in nominal and constant payments and
cash volume:

                                                      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,
                                                  2022 vs. 2021(1),(2)                                 2022 vs. 2021(1),(2)                                2022 vs. 2021(1),(2)                                  2022 vs. 2021(1),(2)
                                            Nominal                  Constant(7)                Nominal                 Constant(7)                  Nominal                  Constant(7)                 Nominal                  Constant(7)
Payments volume growth
Consumer credit growth                               13  %                     17  %                   18   %                     21  %                       14  %                     15  %                      19  %                     20  %
Consumer debit growth(3)                             13  %                     18  %                    9   %                     11  %                       17  %                     17  %                      15  %                     15  %
Commercial growth(4)                                 22  %                     29  %                   26   %                     29  %                       24  %                     26  %                      26  %                     27  %
Total payments volume growth                         13  %                     18  %                   14   %                     17  %                       16  %                     17  %                      18  %                     18  %
Cash volume growth(5)                                 -  %                      7  %                   (2  %)                      2  %                        2  %                      6  %                       2  %                      5  %
Total volume growth                                  10  %                     15  %                   11   %                     14  %                       12  %                     14  %                      14  %                     15  %


(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, 2022 and 2021, respectively, were based on
nominal payments volume reported by our financial institution clients for the
three and nine months ended March 31, 2022 and 2021, 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 by Visa.
(7)Growth on a constant-dollar basis excludes the impact of foreign currency
fluctuations against the U.S. dollar.

The following table presents the number of processed transactions:

                                                          Three Months Ended                                                  Nine Months Ended
                                                               June 30,                                                           June 30,
                                                                                        %                                                                   %
                                           2022                 2021                Change(1)                 2022                  2021                Change(1)
                                                                                    (in millions, except percentages)
Visa processed transactions                 49,279              42,561                      16  %              141,645             119,418                      19  %

(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.


Results of Operations

Net Revenues

The following table presents our net revenues earned in the U.S. and
internationally:

                        Three Months Ended                        Nine Months Ended
                             June 30,                                 June 30,
                                                            %                                                %
                      2022            2021              Change(1)        2022          2021              Change(1)
                                      (in millions, except percentages)
U.S.            $    3,170          $ 2,806                  13  %    $  9,427      $  8,156                  16  %
International        4,105            3,324                  23  %      12,096         9,390                  29  %
Net revenues    $    7,275          $ 6,130                  19  %    $ 21,523      $ 17,546                  23  %

(1)Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.

Net revenues increased during the three and nine-month comparable periods primarily due to the growth in nominal cross-border volume, nominal payments volume and processed transactions, partially offset by higher client incentives.

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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 and nine months ended
June 30, 2022, exchange rate movements and our hedging program negatively
impacted our net revenues growth by approximately three percentage points and
two percentage points, respectively.

The following table presents the components of our net revenues:

                                                  Three Months Ended                                  Nine Months Ended
                                                       June 30,                                           June 30,
                                                                                            %                                                                 %
                                            2022                2021                    Change(1)              2022              2021                     Change(1)
                                                                       (in millions, except percentages)
Service revenues                      $    3,189             $ 2,828                            13  %       $  9,903          $  8,350                            19  %
Data processing revenues                   3,579               3,327                             8  %         10,673             9,356                            14  %
International transaction revenues         2,560               1,696                            51  %          6,942             4,635                            50  %
Other revenues                               517                 409                            26  %          1,440             1,185                            21  %
Client incentives                         (2,570)             (2,130)                           21  %         (7,435)           (5,980)                           24  %
Net revenues                          $    7,275             $ 6,130                            19  %       $ 21,523          $ 17,546                            23  %

(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 14% and 18% growth in nominal payments volume during the three and nine-month comparable periods, respectively. For the three-month comparable period, service revenues were partially offset by our suspension of operations in Russia as we recognized revenues from fiscal third quarter, based on fiscal second quarter payments volume, in fiscal second quarter.


•Data processing revenues increased primarily due to overall growth in processed
transactions of 16% and 19% during the three and nine-month comparable periods,
respectively, partially offset by our suspension of operations in Russia and
unfavorable currency fluctuations.

•International transaction revenues increased primarily due to growth in nominal
cross-border volumes, excluding transactions within Europe, of 38% and 42%
during the three and nine-month comparable periods, respectively. International
transaction revenues also increased due to volatility of a broad range of
currencies and select pricing modifications.

•Other revenues increased primarily due to value added services revenues tied to
marketing services, travel related card benefits, consulting revenues, other
value added services and select pricing modifications.

•Client incentives increased primarily due to growth in payments volume during
the three and nine-month comparable periods. 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                                 Nine Months Ended
                                                        June 30,                                          June 30,
                                                                                             %                                                               %
                                             2022                2021                    Change(1)              2022             2021                    Change(1)
                                                                       (in millions, except percentages)
Personnel                              $    1,283             $ 1,098                           17   %       $ 3,634          $ 3,193                            14  %
Marketing                                     313                 268                           17   %           907              679                            34  %
Network and processing                        178                 186                           (4  %)           558              538                             4  %
Professional fees                             117                 108                            9   %           342              273                            25  %
Depreciation and amortization                 230                 204                           13   %           635              602                             6  %
General and administrative                    289                 204                           41   %           856              770                            11  %
Litigation provision                          717                  (2)                              NM           865                2                               NM
Total operating expenses               $    3,127             $ 2,066                           51   %       $ 7,797          $ 6,057                   

29 %



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 during the three months ended June 30, 2022
primarily due to a provision for U.S. covered litigation, partially offset by a
decrease in expenses due to the suspension of our operations in Russia. In the
nine months ended June 30, 2022, expenses increased as we lapped planned delays
in spending in the first half of fiscal 2021 and invested in future growth and
due to the provision for U.S. covered litigation.

•Personnel expenses increased during the three and nine months ended June 30,
2022 primarily due to higher headcount and compensation, reflecting our strategy
to invest in future growth, including acquisitions. The increase during the nine
months ended June 30, 2022 also included expenses incurred as a result of steps
taken to support our employees in Russia and Ukraine.

•Marketing expenses increased during the three months ended June 30, 2022
primarily in support of a number of campaigns and client marketing. In the nine
months ended June 30, 2022, expenses increased as we lapped planned delays in
spending in the first half of fiscal 2021 and increased spending in various
campaigns, including the Beijing 2022 Olympics Winter Games, and client
marketing.

•Professional fees increased during the three months ended June 30, 2022,
reflecting higher investment in various corporate projects. In the nine months
ended June 30, 2022, expenses increased as we lapped planned delays in spending
in the first half of fiscal 2021.

•Depreciation and amortization expenses increased during the three and nine months ended June 30, 2022 primarily due to additional depreciation and amortization from our acquisitions and on-going investments.


•General and administrative expenses increased during the three months ended
June 30, 2022 primarily due to higher travel expenses, higher usage of travel
related card benefits and the inclusion of expenses from our acquisitions. In
the nine months ended June 30, 2022, expenses increased primarily due to the
suspension of our operations in Russia and deconsolidation of our Russian
subsidiary, higher usage of travel related card benefits, higher travel expenses
and the inclusion of expenses from our acquisitions, partially offset by
one-time charge of indirect taxes in the prior year.

•Litigation provision increased during the three and nine months ended June 30,
2022 primarily due to additional accruals of $716 million and $861 million,
respectively, 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.

                                       37

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Non-operating Income (Expense)


The following table presents the components of our non-operating income
(expense):

                                                   Three Months Ended                                  Nine Months Ended
                                                        June 30,                                           June 30,
                                                                                              %                                                         %
                                             2022                 2021                    Change(1)              2022             2021              Change(1)
                                                                       (in millions, except percentages)
Interest expense, net                 $     (111)              $  (131)                         (15  %)       $  (379)         $  (388)                    (2  %)
Investment income and other                 (208)                  456                         (146  %)           (79)             664                   (112  %)
Total non-operating income (expense)  $     (319)              $   325                         (198  %)       $  (458)         $   276                  

(266 %)

(1)Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.


•Interest expense, net decreased in the three months ended June 30, 2022
primarily due to lower interest expense related to income taxes, partially
offset by higher interest expense as a result of the issuance of debt in the
three months ended June 30, 2022. The decrease in the nine months ended June 30,
2022 was primarily driven by lower interest expense due to the timing of debt
issuance.

•Investment income and other decreased in the three and nine months ended June 30, 2022 primarily due to losses on our equity investments.

Effective Income Tax Rate

The following table presents our effective income tax rates:

                                 Three Months Ended               Nine Months Ended
                                      June 30,                         June 30,
                                   2022             2021            2022            2021
Effective income tax rate                 11  %     41  %                 17  %     26  %


The effective tax rates for the three and nine months ended June 30, 2022 differ
from the effective tax rates for the same periods in the prior year primarily
due to the following:

•during the three months ended June 30, 2022, a decrease in the state apportionment rate, including a $176 million tax benefit related to prior years, as a result of a tax position taken related to a recent ruling;

•during the three months ended June 30, 2021, a $1.0 billion non-recurring, non-cash tax expense related to the remeasurement of UK deferred tax liabilities;

•during the three months ended June 30, 2021, a $51 million tax benefit as a result of a tax position taken on certain expenses; and

•during the nine months ended June 30, 2021, $147 million of tax benefits as a result of the conclusion of audits by taxing authorities.

                                       38

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Liquidity and Capital Resources

Cash Flow Data


The following table summarizes our cash flow activity for the periods presented:

                                                                              Nine Months Ended
                                                                                   June 30,
                                                                           2022                2021
                                                                                (in millions)
Total cash provided by (used in):
Operating activities                                                  $    12,973          $   11,256
Investing activities                                                       (4,395)              1,546
Financing activities                                                       (8,656)            (10,791)

Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents

                                         (725)                 92

Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents

                                           $     

(803) $ 2,103



Operating activities. Cash provided by operating activities for the nine months
ended June 30, 2022 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 nine months
ended June 30, 2022 as compared to cash provided by investing activities during
the prior-year comparable period primarily due to lower proceeds from sales and
maturities of investment securities, combined with higher purchases of
investment securities, and higher cash paid for acquisitions, net of cash and
restricted cash acquired. See Note 2-Acquisitions and Note 4-Cash, Cash
Equivalents, Restricted Cash and Restricted Cash Equivalents to our unaudited
consolidated financial statements.

Financing activities. Cash used in financing activities for the nine months
ended June 30, 2022 was lower than the prior-year comparable period primarily
due to proceeds received from the issuance of senior notes in the current year
and the absence of the principal debt payment made in the prior year, partially
offset by higher share repurchases and higher dividends paid. See Note 7-Debt
and Note 9-Stockholders' Equity to our unaudited consolidated financial
statements.

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.

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 ended June 30, 2022, we repaid $300 million and $650 million of
commercial paper that was issued in March 2022 and April 2022, respectively. We
had no outstanding obligations under the program as of June 30, 2022.

Senior notes. In June 2022, we issued Euro-denominated fixed-rate senior notes in a public offering in an aggregate principal amount of €3.0 billion ($3.2 billion), with maturities ranging between 4 and 12 years. See Note 7-Debt to our unaudited consolidated financial statements.

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Table of Contents

Uses of Liquidity

There has been no significant change to our primary uses of liquidity since September 30, 2021, except as discussed below.

Common stock repurchases. During the nine months ended June 30, 2022, we repurchased shares of our class A common stock in the open market for $9.5 billion. As of June 30, 2022, our repurchase program had remaining authorized funds of $7.3 billion. See Note 9-Stockholders' Equity to our unaudited consolidated financial statements.


Dividends. During the nine months ended June 30, 2022, we declared and paid
$2.4 billion in dividends to holders of our common and preferred stock. On
July 22, 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). 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 in September 2022 and December 2022, respectively, for
which we have sufficient liquidity. See Note 7-Debt to our unaudited
consolidated financial statements.

Litigation. During the nine months ended June 30, 2022, we deposited $850
million into the U.S. litigation escrow account to address claims associated
with the interchange multidistrict litigation. The balance of this account as of
June 30, 2022 was $1.5 billion and is reflected as restricted cash in our
consolidated balance sheets. See Note 5-U.S. and Europe Retrospective
Responsibility Plans and Note 13-Legal Matters to our unaudited consolidated
financial statements.

Acquisitions. On December 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), and on March 10, 2022, we
acquired 100% of the share capital of Tink for $1.9 billion in cash. See Note
2-Acquisitions to our unaudited consolidated financial statements.

Accounting Pronouncements Not Yet Adopted


In March 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-04, which provides optional expedients
and exceptions for applying U.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 through December 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.

© Edgar Online, source Glimpses

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