Visa Inc. (NYSE:V) today announced financial results for the Company's fiscal first quarter 2016. GAAP net income for the quarter, inclusive of non-cash, non-operating income related to an adjustment in the Company's fair value of its Visa Europe put option, was $1.9 billion, or $0.80 per share.
All references to earnings per share assume fully-diluted class A share count unless otherwise noted.
Excluding the $255 million non-cash, non-operating income recorded upon remeasurement of the Visa Europe put option, adjusted net income for the quarter was $1.7 billion, an increase of 7% over the prior year, or $0.69 per share, an increase of 10% over the prior year. The change in the fair value of the Visa Europe put option was triggered by the amendment of the put option in connection with the Visa Europe Transaction Agreement. The Companys adjusted quarterly net income, effective income tax rate and earnings per share are non-GAAP financial measures that are reconciled to their most directly comparable GAAP measure in the accompanying financial tables.
Net operating revenue in the fiscal first quarter of 2016 was $3.6 billion, an increase of 5% nominally or 8% on a constant dollar basis over the prior year, driven by growth in service revenues, data processing revenues and international transaction revenues. Currency rate shifts versus the prior year negatively impacted reported net operating revenue growth by approximately 3 percentage points.
We continue to be pleased with our financial performance given the uneven global economy and the ongoing negative effects of the strong U.S. dollar. While we continue to see relatively strong payments volume growth, these factors have meaningfully reduced our cross-border volume and revenue growth. While these headwinds do not appear to be abating in the short-term as we had hoped, the fundamentals of our business remain strong and our long-term growth trajectory remains intact as we navigate through this uncertain environment, said Charlie Scharf, Chief Executive Officer of Visa Inc.
Fiscal First Quarter 2016 Financial Highlights:
Payments volume growth, on a constant dollar basis, for the three months ended September 30, 2015, on which fiscal first quarter service revenue is recognized, was 12% over the prior year at $1.3 trillion.
Payments volume growth, on a constant dollar basis, for the three months ended December 31, 2015, was 11% over the prior year at $1.3 trillion.
Cross-border volume growth, on a constant dollar basis, was 4% for the three months ended December 31, 2015.
Total processed transactions, which represent transactions processed by VisaNet, for the three months ended December 31, 2015, were 19.0 billion, an 8% increase over the prior year.
Fiscal first quarter 2016 service revenues were $1.6 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 $1.5 billion. International transaction revenues grew 6% over the prior year to $1.0 billion. Other revenues were $198 million, a decrease of 3% over the prior year. Client incentives, which are a contra revenue item, were $788 million and represent 18.1% of gross revenues.
Total operating expenses were $1.2 billion for the quarter, a 2% increase over the prior year, as the Company took the necessary steps to prioritize cost controls given an increasingly challenging macro-economic environment.
The Company recognized interest expense of $24 million for the quarter ended December 31, 2015 as a result of the issuance of approximately $16.0 billion of fixed-rate senior notes.
For the quarter ended December 31, 2015, the GAAP effective tax rate was 26.4% and the adjusted effective tax rate was 29.3%.
Cash, cash equivalents, and available-for-sale investment securities were $24.8 billion at December 31, 2015.
The weighted-average number of diluted shares of class A common stock outstanding was 2.4 billion for the quarter ended December 31, 2015.
On December 14, 2015, the Company issued fixed-rate senior notes in an aggregate principal amount of $16.0 billion with maturities ranging between 2 and 30 years, and interest rates from 1.20% to 4.30%. The weighted average interest rate is 3.08% and the weighted average maturity of the notes is 13 years. Among other things, the proceeds will be used to fund the up-front cash consideration of the purchase price for the planned acquisition of Visa Europe Limited.
During the three months ended December 31, 2015, the Company repurchased 25.7 million shares of class A common stock, at an average price of $78.52 per share, using $2.0 billion of cash on hand. The Company has $5.8 billion of remaining funds, authorized by the board of directors, available for share repurchase under the current programs as of December 31, 2015.
Financial Outlook for Fiscal Full-Year 2016:
While the Company is not changing its financial outlook for the fiscal full-year, continued moderating cross-border volume growth and subdued domestic activity across our geographies could ultimately affect our results. Current guidance is outlined below:
- Annual net revenue growth: High single-digit to low double-digit range on a constant dollar basis, with an expectation of about three percentage points of negative foreign currency impact;
- Client incentives as a percent of gross revenues: 17.5% to 18.5% range;
- Annual operating margin: Mid 60s;
- Adjusted effective tax rate: Low 30s;
- Annual adjusted diluted class A common stock earnings per share growth: Low-end of the mid-teens range on a constant dollar basis, with an expectation of about four percentage points of negative foreign currency impact; and
- Annual free cash flow: About $7 billion.
Note: The financial outlook for fiscal full-year 2016 does not include any impact from the Visa Europe transaction, including interest expense from the $16.0 billion issuance of fixed-rate senior notes of about $125 million per quarter.