10-QPeriod: Q3 FY2012

VISA INC. Quarterly Report for Q3 Ended Jun 30, 2012

Filed July 27, 2012For Securities:V

Summary

Visa Inc. reported a net loss of $1.84 billion for the third quarter of fiscal year 2012, a significant shift from the $1.005 billion net income in the same period last year. This loss was primarily driven by a substantial $4.1 billion litigation provision related to covered litigation, which heavily impacted operating expenses. Excluding this significant, non-recurring litigation charge, the company's adjusted net income would have been $1.06 billion, and adjusted diluted EPS would have been $1.56, showing continued underlying operational strength. Despite the reported net loss, Visa's core business demonstrated resilience with total operating revenues increasing by 10% year-over-year to $2.57 billion, fueled by strong growth in service, data processing, and international transaction revenues. This growth was supported by increases in nominal payments volume and processed transactions. The company also continued its capital return program, repurchasing shares and paying dividends, while strategically managing the impacts of new regulations, particularly the U.S. Durbin Amendment.

Financial Highlights

41 data points
Beta

Revenue

$2.56B

Net Income

-$1.84B

-71.7% Net Margin

Total Assets

$38.74B

Cash & Equivalents

$1.56B

Free Cash Flow

$1.26B

Financial Statements
Beta
Revenue$2.56B
Operating Expenses$5.17B
Operating Income-$2.61B
Net Income-$1.84B

Key Highlights

  • 1Reported a net loss of $1.84 billion for the quarter, largely due to a $4.1 billion litigation provision.
  • 2Excluding the litigation provision, adjusted net income was $1.06 billion, with adjusted diluted EPS of $1.56, indicating strong operational performance.
  • 3Total operating revenues grew 10% to $2.57 billion, driven by robust performance in service, data processing, and international transaction revenues.
  • 4Nominal payments volume increased 7% in the U.S. and 17% internationally, demonstrating continued global transaction growth.
  • 5Visa continued its share repurchase program, buying back approximately 4 million shares during the quarter.
  • 6The company is actively managing the impact of the Durbin Amendment on its debit card business through pricing modifications and client incentives.
  • 7Restricted cash in the litigation escrow account increased significantly to $4.28 billion as of June 30, 2012.

Frequently Asked Questions

The net loss of $1.84 billion was primarily caused by a significant litigation provision of $4.1 billion related to covered litigation. This provision was recorded in operating expenses and heavily impacted the company's bottom line.

Excluding the $4.1 billion litigation provision, Visa's adjusted net income was $1.06 billion, and adjusted diluted earnings per share was $1.56. This indicates that the core operations of the business continue to perform strongly, with revenue growth driven by increasing payment volumes and transaction counts.

The restricted cash in the litigation escrow account increased to $4.28 billion. This reflects significant deposits made to cover potential settlements or judgments related to covered litigation, highlighting the company's proactive approach to managing significant legal liabilities.

Visa is implementing strategies to mitigate the negative impacts of the Durbin Amendment, including pricing modifications, working with clients to encourage routing transactions through Visa's network, and adjusting incentive programs. The company expects a continued impact but remains committed to adapting to the new regulatory environment.