Visa posts third quarter results

Source: Visa

Visa Inc. (NYSE:V) today announced financial results for the Company's fiscal third quarter 2010 ended June 30, 2010.

GAAP net income for the quarter was $716 million, or $0.97 per diluted class A common share. The weighted average number of diluted class A common shares outstanding was 738 million.

GAAP net operating revenue in the fiscal third quarter of 2010 was $2.0 billion, an increase of 23% over the prior year and driven by strong contributions across all revenue categories, in particular data processing and international transaction revenues.

"Visa delivered a solid financial performance during our fiscal third quarter as we saw continued improvements in global cross border and payments volume growth," said Joseph Saunders, Chairman and Chief Executive Officer of Visa Inc. "As we look to the remainder of our fiscal 2010 year, we remain focused on integrating our recent acquisition of CyberSource, maintaining strong financial performance and expense control discipline."

"It goes without saying, the United States debit market will undergo changes following implementation of the Wall Street Reform and Consumer Protection Act next year," added Saunders. "While it is too early to fully and accurately gauge the impact of the legislation, Visa has demonstrated an ability to manage our business through periods of change. The global shift from cash and checks to digital currency is a powerful force that continues unabated, providing tangible benefits to consumers, merchants, and governments worldwide. I continue to have strong confidence in our prospects for long-term growth driven by Visa's highly resilient network business model, our continued investment in innovation and the expansion of our global reach."

Fiscal Third Quarter 2010 Financial Highlights:

Payments volume growth, on a constant dollar basis for the three months ended March 31, 2010 on which fiscal third quarter service revenue is recognized, was a positive 13% over the prior year at $745 billion.

Payments volume growth, on a constant dollar basis, for the threthree months ended June 30, 2010, was a positive 14% over the prior year at $803 billion.

Cross border volume growth, on a constant dollar basis, was a positive 17% for the three months ended June 30, 2010.

Total processed transactions, which represent transactions processed by VisaNet, for the three months ended June 30, 2010 totaled 11.7 billion, were a positive 14% increase over the prior year.

For the fiscal third quarter 2010, service revenues were $873 million, an increase of 13% versus 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 31% over the prior year to $792 million. International transaction revenues, which are driven by cross border payments volume, grew 25% over the prior year to $574 million. Other revenues, which include the Visa Europe licensing fee, were $183 million, up 15% over the prior year. Volume and support incentives, which are a contra revenue item, were $393 million, which represents 16% of gross revenues.

Total operating expenses on a GAAP basis were $892 million for the quarter, an 8% increase over the prior year.

Cash, cash equivalents, restricted cash, and available-for-sale investment securities were $7.4 billion at June 30, 2010.

Notable Events:

On May 28, 2010, the Company deposited $500 million (the "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 reduced the conversion rate applicable to the Company's class B common stock from 0.5824 to 0.5550. On an as-converted basis, the deposit of Loss Funds had the effect of a repurchase of approximately 6.7 million shares of class A common stock from the Company's class B shareholders.

On July 21, 2010, the Company completed its acquisition of CyberSource Corporation, a leading provider of electronic payment, risk management and payment security solutions to online merchants, at a price of $26.00 per common share, or total consideration of approximately $2.0 billion paid with cash on hand. With the addition of CyberSource, Visa will offer merchants and financial institutions eCommerce solutions that include enhanced online payment processing capabilities, payment routing, fraud protection services and secure data hosting.

On July 22, 2010, the Company announced that the 2011 annual meeting of stockholders will be held on January 27, 2011 (the "Annual Meeting"), with a record date of December 3, 2010. The Company's stockholders at the close of business on the record date will be entitled to vote at the Annual Meeting.

In addition, the Company announced that its board of directors had unanimously voted to declassify the board and to submit a proposal at the Annual Meeting to amend the Company's certificate of incorporation to eliminate the classification of the board of directors. The board of directors also unanimously voted to amend the Company's certificate of incorporation, bylaws and corporate governance guidelines to adopt a majority vote standard for uncontested elections of directors and to submit a proposal to amend the Company's certificate of incorporation to allow for the adoption of the majority vote standard. The changes to the bylaws and corporate governance guidelines are contingent on stockholder approval of the amendments to the certificate of incorporation.

Also, the Board of Directors declared a quarterly divided in the aggregate amount of $0.125 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 September 1, 2010, to all holders of record of Visa's class A, class B and class C common stock as of August 13, 2010.

Financial Outlook:

Visa Inc. updates its financial outlook for the following metrics for 2010:

* GAAP tax rate: 37% to 38% range; and
* Capital expenditures: moderately above $200 million.


Visa Inc. affirms its financial outlook for the following metrics through 2010:

* Annual net revenue growth: high end of the 11% to 15% range;
* Volume and support incentives as a percent of gross revenues: high end of the 16% to 17% range;
* Advertising, marketing and promotion expenses: less than $1 billion;
* Annual operating margin: mid to high 50% range;
* Annual diluted class A common stock earnings per share: growth greater than 20%; and
* Annual free cash flow: in excess of $2 billion.


Visa Inc. affirms its financial outlook for the following metrics through 2011:

* Annual diluted class A common stock earnings per share: growth greater than 20%; and
* Annual free cash flow: in excess of $2 billion.

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