23 September 2017
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Visa Q2 profits jump

21 April 2017  |  4631 views  |  0 Source: Visa

Visa Inc. (NYSE:V) today announced financial results for the Company’s fiscal second quarter 2017, ended March 31, 2017.

Fiscal Second Quarter 2017 Key Highlights:

  • GAAP net income of $430 million or $0.18 per share including special items related to the legal entity reorganization of Visa Europe
  • Adjusted net income of $2.1 billion or $0.86 per share excluding special items related to the legal entity reorganization of Visa Europe
  • Net operating revenue of $4.5 billion, an increase of 23%, driven by inclusion of Europe and continued growth in payments volume, cross-border volume and processed transactions
  • Payments volume growth, on a constant dollar basis, was 37% over the prior year at $1.7 trillion
  • Cross-border volume growth, on a constant dollar basis, was 132% or 11% inclusive of Europe in prior year results
  • Total Visa processed transactions were 26.3 billion, a 42% increase over the prior year, or 12% growth inclusive of Europe in prior year results
  • Newly-formed Visa Foundation funded with contribution of $192 million
  • Returned approximately $2.1 billion of capital to shareholders in the form of share repurchases and dividends
  • Board authorized a new $5.0 billion class A common stock share repurchase program

“In the face of geo-political uncertainty, Visa continues to execute well against our operating plan and strategic priorities, delivering sustained growth across nearly every part of our business,” said Alfred F. Kelly, Jr., Chief Executive Officer of Visa Inc. "Robust growth in payments volume, cross-border volume and processed transactions drove better than expected results. Looking ahead, we are continuing our efforts across the globe to electronify commerce and digitize economies to the benefit of consumers and societies alike.”

Fiscal Second Quarter 2017 Special Items Related to the Visa Europe Reorganization:

During the fiscal second quarter of 2017, the Company completed a legal entity reorganization of Visa Europe and certain other Visa subsidiaries to align the Company's global corporate structure to the geographic jurisdictions in which it conducts business operations. Associated with this reorganization, the Company recorded the following special items:

  • $1.5 billion non-recurring, non-cash income tax provision related to the elimination of deferred tax balances originally recorded upon the acquisition of Visa Europe in June 2016; and
  • $192 million non-recurring, non-cash general and administrative expense associated with the charitable donation of Visa Inc. shares that were acquired as part of the Visa Europe acquisition and held as treasury stock. The newly-formed Visa Foundation received the donation of Visa Inc. shares and the Company recognized a $71 million cash income tax benefit.

All references to earnings per share assume fully-diluted class A share count, inclusive of series B and C convertible participating preferred stock, unless otherwise noted. The Company’s adjusted quarterly operating expenses, effective income tax rate, net income and earnings per share of class A common stock are non-GAAP financial measures that are reconciled to their most directly comparable GAAP measure in the accompanying financial tables.

Fiscal Second Quarter 2017 Financial Highlights:

GAAP net income for the quarter, inclusive of special items related to the legal entity reorganization of Visa Europe, was $430 million or $0.18 per share, both decreasing 75% over the prior year's results, primarily related to the special items from the Visa Europe legal entity reorganization noted above.

Excluding special items, adjusted net income for the quarter was $2.1 billion and adjusted earnings per share was $0.86, both increasing 27% over the prior year's adjusted results. Exchange rate shifts versus the prior year negatively impacted earnings per share growth by approximately 4 percentage points. The prior year's adjusted results exclude the impact of a non-recurring, non-operating gain related to currency forward contracts.

Net operating revenue in the fiscal second quarter of 2017 was $4.5 billion, an increase of 23%, driven by the inclusion of Europe and continued growth in payments volume, cross-border volume and processed transactions. Exchange rate shifts versus the prior year negatively impacted reported net operating revenue growth by approximately 2.5 percentage points.

Payments volume growth, on a constant dollar basis, for the three months ended December 31, 2016, on which fiscal second quarter service revenue is recognized, was 39% over the prior year at $1.8 trillion. Effective with the three months ended December 31, 2016, Europe co-badge volume is no longer included in reported volume.

Payments volume growth, on a constant dollar basis, for the three months ended March 31, 2017, was 37% over the prior year at $1.7 trillion.

Cross-border volume growth, on a constant dollar basis, was 132% for the three months ended March 31, 2017. Cross-border volume growth, on a constant dollar basis and inclusive of Europe in prior year results, was 11%.

Total processed transactions, which represent transactions processed by Visa, for the three months ended March 31, 2017, were 26.3 billion, a 42% increase over the prior year. Total processed transactions growth was 12%, inclusive of Europe in prior year results.

Fiscal second quarter 2017 service revenues were $2.0 billion, an increase of 17% 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 25% over the prior year to $1.8 billion. International transaction revenues grew 41% over the prior year to $1.5 billion. Other revenues were $203 million, an increase of 3% over the prior year. Client incentives, which are a contra revenue item, were $1.0 billion and represent 18.7% of gross revenues.

GAAP operating expenses were $1.7 billion for the fiscal second quarter 2017, a 40% increase over the prior year's results, primarily driven by increases in general and administrative expense related to the charitable donation to the newly-formed Visa Foundation. Adjusted operating expenses, which excludes the charitable donation, were $1.5 billion, an increase of 24% over the prior year's results, primarily from the inclusion of Visa Europe's operating expenses following the acquisition.

GAAP effective income tax rate was 84.1% for the quarter ended March 31, 2017, including the $1.5 billion non-recurring, non-cash income tax provision related to the elimination of deferred tax balances originally recorded upon the acquisition of Visa Europe and the $71 million tax benefit related to the charitable donation. Adjusted effective income tax rate was 28.6%, excluding the aforementioned items.

Cash, cash equivalents, and available-for-sale investment securities were $10.7 billion at March 31, 2017.

The weighted-average number of diluted shares of class A common stock outstanding was 2.41 billion for the quarter ended March 31, 2017.

Notable Events:

During the three months ended March 31, 2017, the Company repurchased 19.1 million shares of class A common stock, at an average price of $88.51 per share, using $1.7 billion of cash on hand. In the six months ended March 31, 2017, the Company repurchased a total of 41.4 million shares of class A common stock, at an average price of $83.81 per share, using $3.5 billion of cash on hand. The board of directors has authorized a new $5.0 billion class A common stock share repurchase program and the Company currently has $7.2 billion of funds available for share repurchase.

On April 18, 2017, the board of directors declared a quarterly cash dividend of $0.165 per share of class A common stock (determined in the case of class B and C common stock and series B and C convertible participating preferred stock on an as-converted basis) payable on June 6, 2017, to all holders of record of the Company’s common and preferred stock as of May 19, 2017.

Financial Outlook for Fiscal Full-Year 2017:

Visa Inc. updates its financial outlook for the following GAAP metrics for fiscal full-year 2017:

  • Annual net revenue growth: High end of 16% to 18% range on a nominal dollar basis, including 2.0 to 2.5 ppts of negative foreign currency impact;
  • Client incentives as a percent of gross revenues: Low end of 20.5% to 21.5% range;
  • Annual operating margin: Mid 60s;
  • Effective tax rate: Mid 40s on a GAAP basis and approximately 30% on an adjusted, non-GAAP basis; and
  • Annual diluted class A common stock earnings per share growth: High single-digits on a GAAP nominal dollar basis and high end of mid-teens on an adjusted, non-GAAP nominal dollar basis (see note below), both including 2.5 to 3.0 ppts of negative foreign currency impact.

Note: The financial outlook for fiscal full-year 2017 includes Visa Europe integration expenses of approximately $80 million for the full-year. Differences in our financial outlook for fiscal full-year 2017 GAAP and non-GAAP financial measures relate to the one-time, non-recurring items that are included in the accompanying reconciliation. Annual adjusted diluted class A common stock earnings per share growth is derived from adjusted full-year 2016 earnings per share results of $2.84. Refer to the accompanying financial tables for further details and a reconciliation of the adjusted fiscal full-year 2016 results. 

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