Visa Inc. (NYSE: V) today announced financial results for the company's fiscal first quarter 2009 ended December 31, 2008. On an adjusted basis (reflective of a normalized tax rate, restructuring and purchase amortization), net income for the quarter was $599 million, or $0.78 per diluted class A common share. GAAP net income for the quarter was $574 million, or $0.74 per diluted class A common share. The weighted average number of diluted class A common shares outstanding was 772 million. The company's adjusted net income and adjusted diluted net income per class A common share are non-GAAP financial measures that are reconciled to their most directly comparable GAAP measures in the accompanying financial tables.
Net operating revenue in the fiscal first quarter of 2009 was $1.7 billion, an increase of 17% over the prior year, driven by strong contributions across all revenue categories. Payments volume and processed transactions remained solid, in particular in the Asia Pacific (AP), Central Europe, Middle East and Africa (CEMEA), and Latin America and Caribbean (LAC) regions.
"We are very pleased with our fiscal first quarter earnings results and our ability to deliver strong operating performance," said Joseph Saunders, Chairman and Chief Executive Officer. "Despite the increasingly challenging economy, processed transaction growth, the strength of debit, and the global diversity of our business continue to highlight the resilience of our business model."
"Even though we now foresee tougher economic trends in the second half of fiscal 2009 with resulting net revenue growth likely in the low single digits, we remain stead-fast in our ability to meet our 2009 EPS guidance," added Saunders. "Rationalizing our expense structure and further leveraging operational efficiencies within the organization remain priorities. These directives, coupled with providing innovative products and services along with the global expansion of our business, will further support our long-term success."
Fiscal First Quarter 2009 Financial Highlights:
Visa Inc.'s operational performance highlights for the fiscal first quarter, as measured by business activity through September 30, 2008, include:
• Payments volume grew 12% over the prior year to $701 billion;
• Total volume, inclusive of cash volume was $1.1 trillion, an increase of 16% over the prior year;
• Total cards carrying the Visa brands rose 10% worldwide over the prior year to 1.7 billion; and
• Total payment transactions increased by 13% over the prior year to 14.5 billion.
Total processed transactions, which represent r transactions processed by VisaNet through December 31, 2008, were 9.8 billion, an 8% llion, an 8% incsaNet through December 31, 2008, were 9.8 billion, an 8% llion, an 8% increase over the prior year. For the fiscal first quarter 2009, service revenues were $793 million, an increase of over 8% versus the prior year, and are recognized based on payment volume in the prior quarter. All other revenue categories are recognized based on current quarter activity. Data processing revenues rose 13% over the prior year to $554 million. International transaction revenues, which are driven by cross-border payments volume, grew 33% over the prior year to $505 million, as the company benefited from prior pricing initiatives. Other revenues, which include the Visa Europe licensing fee, were $156 million, up 17% over the prior year. Volume and support incentives, which are a contra revenue item, were $269 million.
Adjusted total operating expenses were $728 million for the fiscal first quarter, a 4% decrease from the prior year. Total operating expenses on a GAAP basis were $773 million for the quarter, a 5% decrease from the prior year. Cash, cash equivalents, restricted cash, and available-for-sale investment securities were $5.6 billion at December 31, 2008.
In October 2008, as planned, the company used $1.508 billion of net proceeds from its initial public offering (IPO) for the required redemption of 35,263,585 shares of class C (series III) common stock. Following the redemption, the remaining 27,499,203 shares of class C (series III) and class C (series IV) common stock outstanding automatically converted into shares of class C (series I) common stock on a one-to-one basis. The company also utilized net proceeds from the IPO to fund the redemption of all class C (series II) common stock. The redemption price of $1.146 billion was adjusted for dividends paid and related interest, resulting in a cash payment of $1.138 billion.
In December 2008, the company formed Visa Processing Services, Ltd. ("VPS"), a joint venture that enables us to offer comprehensive multi-currency and multi-language issuer processing services outside the US, in some of the fastest growing economies in the world such as Japan and India. VPS reflects Visa's strategic focus on growing our processing capabilities worldwide, expanding our global strength in debit, and furthering the migration to electronic payments.
On December 19, 2008, as planned, the company deposited $1.1 billion ("Loss Funds") into the litigation escrow account previously established under the company's Retrospective Responsibility Plan. The deposit of the Loss Funds into the escrow account to fund the Discover settlement reduced the conversion ratio applicable to the company's class B common stock outstanding from 0.7143 per class A share to 0.6296 per class A share. The deposit of Loss Funds has the effect of a repurchase of 20,800,824 class A common stock equivalents from the company's class B shareholders.
Visa Inc. updates its financial outlook for the following metric for full-year 2009:
• Annual net revenue growth in the high single-digits Visa Inc. affirms its financial outlook for the following metrics through 2010 with the caveat that annual net revenue growth may be somewhat challenged in 2010 if the current economic environment in the U.S. and around the globe persists beyond 2009:
• Annual net revenue growth at the lower end of the 11% to 15% range;
• Annual adjusted operating margin in the mid-to-high 40% range;
• Annual adjusted diluted class A common earnings per share growth of greater than 20%;
• Annual free cash flow in excess of $1 billion; and
• Capital expenditures in the range of $300 to $350 million in 2009 and representing 3 to 4% of gross revenues in 2010.
This outlook reflects an assumed 40% percent GAAP tax rate for fiscal year 2009. The company's intent is to reduce this rate to a level around 35-36% over the next four years.