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 invasion ofUkraine byRussia ; 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 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. 29
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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
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 endedMarch 31, 2022 , economic sanctions were imposed onRussia by theU.S. ,European Union ,United Kingdom and other jurisdictions and authorities, impactingVisa and its clients. We announced inMarch 2022 that we were suspending our operations inRussia . As a result, we are no longer generating revenue from domestic and cross-border activities related toRussia . Since 2015, domestic transactions have been processed byRussia's state-owned payments operator, National Payment Card System. With respect to cross-border activities, all transactions initiated withVisa cards issued by financial institutions outsideRussia no longer work withinRussia , and all transactions on cards issued inRussia no longer work outside the country. Furthermore, during the quarter endedMarch 31, 2022 we deconsolidated our Russian subsidiary, as required underU.S. GAAP. For the nine months endedJune 30, 2022 and full year fiscal 2021, total net revenues fromRussia , 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
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 ourU.S. employees inApril 2022 in a new hybrid model of flexible work. The ongoing effects ofRussia's invasion ofUkraine 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 endedMarch 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
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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 endedJune 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 endedJune 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 endedJune 30, 2022 , exchange rate movements positively impacted our operating expense growth by approximately two percentage points. For the three months endedJune 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 endedJune 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. InJune 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. 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). OnMarch 10, 2022 , we acquired 100% of the share capital ofTink 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 endedJune 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 theU.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. InDecember 2021 , our board of directors authorized a$12.0 billion share repurchase program. During the nine months endedJune 30, 2022 , we repurchased 46 million shares of our class A common stock in the open market for$9.5 billion . As ofJune 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. 31
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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 endedJune 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 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. •Russia-Ukraine charges. During the nine months endedJune 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 inRussia andUkraine . 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 endedJune 30, 2021 , in connection with theUK enacted legislation onJune 10, 2021 that will increase the tax rate from 19% to 25%, effectiveApril 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 endedJune 30, 2021 , we recognized a one-time charge within general and administrative expense of$152 million , and related tax benefit of$40 million determined by applying applicable tax rates. This charge is to record our estimate of probable additional indirect taxes, related to prior periods, for which we could be liable as a result of certain changes in applicable law. This one-time charge is not representative of our ongoing operations. Non-GAAP operating expenses, non-operating income (expense), income tax provision, effective income tax rate, net income and diluted earnings per share should not be relied upon as substitutes for, or considered in isolation from, measures calculated in accordance withU.S. GAAP. The following tables reconcile our as-reported financial measures, calculated in accordance withU.S. GAAP, to our respective non-GAAP financial measures: Three Months Ended June 30, 2022 Diluted Operating Non-operating Income Tax Effective Income Net Earnings Per Expenses Income (Expense) Provision Tax Rate(1) Income Share(1) (in millions, except percentages and per share data) As reported$ 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 32
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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
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
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 theVisa , Visa Electron, V PAY and Interlink brands and excludesEurope co-badged volume. Nominal payments volume is denominated inU.S. dollars and is calculated each quarter by applying an establishedU.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 theVisa , Visa Electron, V PAY, Interlink and PLUS brands processed onVisa'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 % 34
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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 OperationsNet Revenues The following table presents our net revenues earned in theU.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 theU.S. dollar as payments volume and related revenues denominated in local currencies are converted toU.S. dollars. During the three and nine months endedJune 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
•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 inRussia and unfavorable currency fluctuations. •International transaction revenues increased primarily due to growth in nominal cross-border volumes, excluding transactions withinEurope , 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. 36
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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 endedJune 30, 2022 primarily due to a provision forU.S. covered litigation, partially offset by a decrease in expenses due to the suspension of our operations inRussia . In the nine months endedJune 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 forU.S. covered litigation. •Personnel expenses increased during the three and nine months endedJune 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 endedJune 30, 2022 also included expenses incurred as a result of steps taken to support our employees inRussia andUkraine . •Marketing expenses increased during the three months endedJune 30, 2022 primarily in support of a number of campaigns and client marketing. In the nine months endedJune 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 theBeijing 2022 Olympics Winter Games, and client marketing. •Professional fees increased during the three months endedJune 30, 2022 , reflecting higher investment in various corporate projects. In the nine months endedJune 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
•General and administrative expenses increased during the three months endedJune 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 endedJune 30, 2022 , expenses increased primarily due to the suspension of our operations inRussia 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 endedJune 30, 2022 primarily due to additional accruals of$716 million and$861 million , respectively, related to theU.S. covered litigation. See Note 5-U.S. andEurope 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 endedJune 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 endedJune 30, 2022 . The decrease in the nine months endedJune 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
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
•during the three months ended
•during the three months ended
•during the nine months ended
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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)
Operating activities. Cash provided by operating activities for the nine months endedJune 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 endedJune 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 endedJune 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 endedJune 30, 2022 , we repaid$300 million and$650 million of commercial paper that was issued inMarch 2022 andApril 2022 , respectively. We had no outstanding obligations under the program as ofJune 30, 2022 .
Senior notes. In
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Uses of Liquidity
There has been no significant change to our primary uses of liquidity since
Common stock repurchases. During the nine months ended
Dividends. During the nine months endedJune 30, 2022 , we declared and paid$2.4 billion in dividends to holders of our common and preferred stock. OnJuly 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 inSeptember 2022 andDecember 2022 , respectively, for which we have sufficient liquidity. See Note 7-Debt to our unaudited consolidated financial statements. Litigation. During the nine months endedJune 30, 2022 , we deposited$850 million into theU.S. litigation escrow account to address claims associated with the interchange multidistrict litigation. The balance of this account as ofJune 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. 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), and onMarch 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
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.
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