Visa Inc. (NYSE:V) today announced financial results for the Company's fiscal second quarter 2014. Net income for the quarter was $1.6 billion, an increase of 26% over the prior year, or $2.52 per share, an increase of 31% over the prior year.
These results include a tax benefit of $218 million of which $201 million relates to prior periods. Excluding the prior periods' impact, earnings per share was $2.20, an increase of 15% over the prior year. All references to earnings per share assume fully-diluted class A share count unless otherwise noted.
Net operating revenue in the fiscal second quarter of 2014 was $3.2 billion, an increase of 7% nominally or 9% on a constant dollar basis over the prior year, driven by solid growth in service revenues, data processing revenues and international transaction revenues. The strengthening of the U.S. dollar impacted net operating revenues by 2 percentage points of negative growth during the quarter.
"Our underlying business drivers remained strong during the fiscal second quarter with payments volume continuing to grow at solid levels," said Charlie Scharf, Chief Executive Officer of Visa Inc. "As expected, softer net revenue growth was impacted by a strengthening U.S. dollar and difficult year-over-year comparisons due to non-recurring items. We expect this impact to be slightly more pronounced next quarter before rebounding in our fiscal fourth quarter, which will be more reflective of the fundamental strength of the business model. We continue to make substantial investments in products and services that will drive our future growth, while enhancing our financial institution and merchant client relationships."
Fiscal Second Quarter 2014 Financial Highlights:
Payments volume growth, on a constant dollar basis, for the three months ended December 31, 2013, on which fiscal second quarter service revenue is recognized, was 12% over the prior year at $1.2 trillion.
Payments volume growth, on a constant dollar basis, for the three months ended March 31, 2014, was 12% over the prior year at $1.1 trillion.
Cross-border volume growth, on a constant dollar basis, was 8% for the three months ended March 31, 2014.
Total processed transactions, which represent transactions processed by VisaNet, for the three months ended March 31, 2014, were 15.4 billion, an 11% increase over the prior year.
Fiscal second quarter 2014 service revenues were $1.5 billion, an increase of 7% over the prior year, and are recognized based on payments volume in the prior quarter. All other revenue categories are recognized based on current quarter activity. Data processing revenues rose 7% over the prior year to $1.2 billion. International transaction revenues, which are driven by cross-border volume, grew 5% over the prior year to $871 million. Other revenues, which include the Visa Europe licensing fee, were $183 million, an increase of 5% over the prior year. Client incentives, which are a contra revenue item, were $587 million and represent 15.6% of gross revenues.
Total operating expenses were $1.1 billion for the quarter, a 2% increase over the prior year, primarily due to an increase in marketing spend to support the 2014 Sochi Winter Olympics and 2014 World Cup campaigns, offset by a reduction in personnel and professional fees.
The effective tax rate was 22.5% for the quarter ended March 31, 2014. This rate was positively impacted by a $218 million tax benefit recognized during the quarter related to a deduction for U.S. domestic production activities. This benefit was fully contemplated in the Company's earnings per share guidance for fiscal full-year 2014.
Cash, cash equivalents, and available-for-sale investment securities were $6.5 billion at March 31, 2014.
The weighted-average number of diluted shares of class A common stock outstanding was 634 million for the quarter ended March 31, 2014.
During the three months ended March 31, 2014, the Company repurchased 5.1 million shares of class A common stock, at an average price of $217.61 per share, using $1.1 billion of cash on hand. At March 31, 2014, the Company had $3.0 billion of remaining funds, authorized by the board of directors, available for share repurchase under the current program.
On April 23, 2014, the board of directors declared a quarterly cash dividend of $0.40 per share of class A common stock (determined in the case of class B and class C common stock on an as-converted basis) payable on June 3, 2014, to all holders of record of the Company's class A, class B and class C common stock as of May 16, 2014.
Visa Inc. updates its financial outlook for the following metrics for fiscal full-year 2014:
- Annual net revenue growth: Low double-digit constant revenue growth in the 10-11% range, with an expectation of two percentage points of negative foreign currency impact; and
- Annual operating margin: Low to mid 60s.
Visa Inc. affirms its financial outlook for the following metrics for fiscal full-year 2014:
- Client incentives as a percent of gross revenues: 16.5% to 17.5% range;
- Annual diluted class A common stock earnings per share growth: Mid to high teens; and
- Annual free cash flow: About $5 billion.
Visa Inc. provides its financial outlook for the following metric for fiscal full-year 2014:
- Tax rate: Approaching 30%.
Full figures available here.