10-QPeriod: Q2 FY2017

VISA INC. Quarterly Report for Q2 Ended Mar 31, 2017

Filed April 21, 2017For Securities:V

Summary

Visa Inc. reported solid financial results for the quarter and six months ended March 31, 2017, demonstrating continued growth driven by increased payment volumes and processed transactions, bolstered by the inclusion of Visa Europe's operations. While reported net income saw a significant decrease primarily due to a large, non-recurring income tax provision related to a legal entity reorganization, adjusted net income and earnings per share showed robust year-over-year growth. The company continues to return value to shareholders through substantial share repurchases and dividend payments, with significant capacity remaining under authorized programs. Key operational metrics, such as nominal payments volume and processed transactions, continued their upward trajectory. The integration of Visa Europe is proceeding as expected, contributing to revenue growth across various segments. Despite facing some foreign currency headwinds and managing ongoing litigation provisions, Visa's core business remains strong, supported by its expansive global network and strategic investments. Investors should note the significant impact of the tax provision on reported net income, but focus on the underlying operational performance and adjusted financial metrics that indicate a healthy and growing business.

Financial Highlights

43 data points
Beta

Revenue

$4.48B

Net Income

$430.00M

9.6% Net Margin

Total Assets

$63.23B

Cash & Equivalents

$6.43B

Free Cash Flow

$396.00M

Financial Statements
Beta
Revenue$4.48B
Operating Expenses$1.67B
Operating Income$2.81B
Net Income$430.00M

Key Highlights

  • 1Net operating revenues increased by 23% year-over-year for the three months ended March 31, 2017, reaching $4.5 billion, driven by the inclusion of Visa Europe and growth in payments volume and transactions.
  • 2Adjusted net income grew by 27% to $2.07 billion for the three months ended March 31, 2017, indicating strong underlying operational performance despite a significant reported net income decrease.
  • 3The company repurchased 18 million shares of Class A common stock for $1.6 billion during the quarter ended March 31, 2017, and has substantial remaining authorization for future buybacks.
  • 4A non-recurring, non-cash income tax provision of $1.5 billion was recorded in the quarter due to a legal entity reorganization, significantly impacting reported net income and the effective tax rate.
  • 5Processed transactions increased by 42% year-over-year for the three months ended March 31, 2017, highlighting continued expansion of Visa's network utilization.
  • 6Client incentives increased by 30% to $1.03 billion for the three months ended March 31, 2017, reflecting incentives on new and renewed contracts and integration of Visa Europe.
  • 7Interest expense increased by 71% for the six months ended March 31, 2017, primarily due to the issuance of $16 billion in senior notes in December 2015.

Frequently Asked Questions

The reported net income for the three months ended March 31, 2017, decreased significantly primarily due to a $1.5 billion non-recurring, non-cash income tax provision related to a legal entity reorganization of Visa Europe and other entities. This adjustment significantly impacted the effective tax rate.

The acquisition of Visa Europe, completed in June 2016, contributed significantly to revenue growth in the current period, with its operations included in the International segment. This integration led to increases in net operating revenues, service revenues, data processing revenues, and international transaction revenues, though it also increased operating expenses and client incentives.

Visa continues to actively return capital to shareholders through share repurchases and dividends. In the quarter ended March 31, 2017, the company repurchased 18 million shares for $1.6 billion, with approximately $2.3 billion remaining on its July 2016 authorization. Additionally, an April 2017 authorization for $5.0 billion was announced. The company also declared and paid quarterly dividends.

Visa had $14.14 billion in long-term debt as of March 31, 2017, largely consisting of senior notes issued in December 2015. The first principal payment of $1.8 billion is due in December 2017, and the company intends to refinance this portion if market conditions permit. Interest expense increased notably in the six-month period due to these debt issuances.