10-QPeriod: Q2 FY2012

VISA INC. Quarterly Report for Q2 Ended Mar 31, 2012

Filed May 2, 2012For Securities:V

Summary

Visa Inc. reported a strong financial performance for the quarter ending March 31, 2012, with total operating revenues increasing by 15% year-over-year to $2.58 billion. This growth was driven by robust increases in service revenues (up 13%), data processing revenues (up 12%), and international transaction revenues (up 17%), reflecting continued global payment volume growth and an increasing number of processed transactions. Net income attributable to Visa Inc. saw a substantial increase of 47% to $1.29 billion, or $1.91 per diluted share, compared to the prior year's quarter. This improvement was partly due to a significant reduction in the effective income tax rate, which benefited from a one-time non-cash adjustment related to changes in California's state tax apportionment rules. However, excluding this adjustment, adjusted diluted earnings per share were $1.60. The company also highlighted its ongoing efforts to mitigate the impact of the U.S. Dodd-Frank Act on debit interchange fees through client incentives and strategic renegotiations. Visa continues to manage its capital effectively, with significant cash generated from operations and ongoing share repurchase programs.

Financial Highlights

40 data points
Beta

Revenue

$2.58B

Net Income

$1.29B

50.1% Net Margin

Total Assets

$36.85B

Cash & Equivalents

$2.04B

Free Cash Flow

$1.10B

Financial Statements
Beta
Revenue$2.58B
Operating Expenses$972.00M
Operating Income$1.61B
Net Income$1.29B

Key Highlights

  • 1Total operating revenues grew 15% to $2.58 billion, driven by service, data processing, and international transaction revenues.
  • 2Net income attributable to Visa Inc. increased significantly by 47% to $1.29 billion.
  • 3Diluted earnings per share (EPS) rose to $1.91, a 54% increase year-over-year.
  • 4The company experienced strong growth in processed transactions, up 8% year-over-year.
  • 5Visa made a substantial $1.57 billion deposit into its litigation escrow account as part of the retrospective responsibility plan.
  • 6The effective income tax rate decreased significantly due to a one-time non-cash deferred tax adjustment related to California tax law changes.
  • 7Visa announced a new $500 million share repurchase program in February 2012.

Frequently Asked Questions

Visa Inc. reported a 15% increase in total operating revenues, reaching $2.58 billion for the quarter ended March 31, 2012. This growth was primarily fueled by a 13% rise in service revenues, a 12% increase in data processing revenues, and a significant 17% jump in international transaction revenues.

The Dodd-Frank Act, specifically the rules capping debit interchange fees, is expected to adversely affect Visa's pricing and revenues in the U.S. In response, Visa is increasing client incentives and renegotiating contracts to mitigate these impacts. While these efforts are ongoing, the company noted that the full year fiscal 2012 revenue growth is anticipated to be in the low double-digits, and client incentives are expected to be between 17% to 18% of gross revenues.

The effective income tax rate decreased significantly for the three months ended March 31, 2012, to 19.7% (28.1% year-to-date). This reduction was primarily due to changes in California's state tax apportionment rules, which were applied retroactively. A one-time, non-cash benefit of $208 million was recorded from the remeasurement of deferred tax liabilities, which also reduced the overall effective tax rate.

Visa deposited $1.57 billion into its litigation escrow account on December 29, 2011, as part of its retrospective responsibility plan related to covered litigation. This action reduces the outstanding 'as-converted' Class A common stock count from an EPS perspective and impacts the settlement of potential future litigation losses.