EX-99.1 2 vex991093016earningsrelease.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
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Visa Inc. Reports Strong Fiscal Fourth Quarter and Full-Year 2016 Results
GAAP quarterly net income of $1.9 billion or $0.79 per share, including special items
GAAP full-year 2016 net income was $6.0 billion or $2.48 per share, including special items
Adjusted quarterly net income of $1.9 billion or $0.78 per share, excluding special items
Adjusted full-year 2016 net income of $6.9 billion or $2.84 per share, excluding special items

San Francisco, CA, October 24, 2016 - Visa Inc. (NYSE: V) today announced financial results for the Company’s fiscal fourth quarter and full-year 2016, ended September 30, 2016. GAAP net income in the fiscal fourth quarter, inclusive of special items, was $1.9 billion or $0.79 per share, an increase of 28% and 28%, respectively, over the prior year’s results. GAAP net income for the full-year 2016, inclusive of special items, was $6.0 billion or $2.48 per share, a decrease of 5% and 4%, respectively, over the prior year’s results. The full-year 2016 results include fiscal fourth quarter financial results from Visa Europe. 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.
During the fiscal fourth quarter of 2016, the Company recorded the following special items:
A charge of $110 million (pretax) for severance costs; and
Non-cash and non-recurring $88 million gain due to the remeasurement of a deferred tax liability recorded upon the acquisition of Visa Europe to reflect a newly announced tax rate change in the United Kingdom.
Excluding these special items, adjusted net income in the fiscal fourth quarter was $1.9 billion or $0.78 per share, an increase of 27% and 27%, respectively, over the prior year’s results¹. Adjusted net income for the full-year 2016 was $6.9 billion or $2.84 per share, an increase of 7% and 8%, respectively, over the prior year’s adjusted results. The Company’s full-year 2016 adjusted financial results excluded special items related to the acquisition of Visa Europe incurred during the first three quarters and the above mentioned special items incurred in the fourth quarter.
Net operating revenue in the fiscal fourth quarter 2016 was $4.3 billion, an increase of 19%, driven by the inclusion of Europe and continued growth in payments volume and processed transactions. Net operating revenue in the fiscal full-year 2016 was $15.1 billion, an increase of 9%, driven by the inclusion of Europe and continued growth in payments volume and processed transactions. Exchange rate shifts versus the prior year negatively impacted reported net operating revenue growth by approximately 3 percentage points.


1 The Company did not report adjusted results for the three months ended September 30, 2015.
1





“We continue to deliver healthy earnings growth in the face of continued, but abating headwinds. We have begun to see the benefits from our acquisition of Visa Europe and strong cost discipline helped our results. At the same time, we are unwavering in our commitment to invest in client partnership opportunities and the further build out of our digital payments capabilities,” said Charlie Scharf, Chief Executive Officer of Visa Inc.

“As we enter fiscal 2017, we are positioned well as revenue headwinds will continue to ease, we will continue to see the benefits from Visa Europe in our results, and our strong client franchise continues to grow,” added Scharf.

Fiscal Fourth Quarter 2016 Financial Highlights:
Payments volume growth, excluding Visa Europe and on a constant dollar basis, for the three months ended June 30, 2016, on which fiscal fourth quarter service revenue is recognized, was 10% over the prior year at $1.3 trillion.
Payments volume growth, including Visa Europe and on a constant dollar basis, for the three months ended September 30, 2016, was 47% over the prior year at $1.9 trillion.
Cross-border volume growth, including Visa Europe and on a constant dollar basis, was 149% for the three months ended September 30, 2016.
Total processed transactions, which represent transactions processed by Visa (including Visa Europe), for the three months ended September 30, 2016, were 25.9 billion, a 41% increase over the prior year.
Fiscal fourth quarter 2016 service revenues were $1.8 billion, an increase of 8% 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 36% over the prior year to $1.5 billion. Other revenues were $218 million, an increase of 1% over the prior year. Client incentives, which are a contra revenue item, were $993 million and represent 18.9% of gross revenues.
GAAP operating expenses were $1.6 billion for the fiscal fourth quarter 2016, a 27% increase over the prior year's results, primarily driven by the inclusion of Europe and increases in personnel expenses due to a charge of $110 million for severance costs. Adjusted operating expenses, which exclude the special item, were $1.5 billion, an 18% increase over the prior year.
GAAP effective income tax rate was 23.1% for the quarter ended September 30, 2016 and included a $38 million benefit related to the charge for severance costs of $110 million and a non-cash and non-recurring $88 million gain upon the remeasurement of a deferred tax liability recorded upon the acquisition of Visa Europe to reflect a newly announced tax rate change in the United Kingdom. Excluding the tax impact from the special items, the adjusted effective income tax rate was 26.9% for the fiscal fourth quarter.
Cash, cash equivalents, and available-for-sale investment securities were $12.8 billion at September 30, 2016.
The weighted-average number of diluted shares of class A common stock outstanding was 2.44 billion for the quarter ended September 30, 2016.

2



Summary Table of Adjustments to Earnings (1):
 
Three Months Ended September 30,2016
(in millions, except percentages and per share data)
Operating Expenses
 
Operating Margin(2)
 
Income Before Income Taxes
 
Income Taxes
 
Effective Income Tax Rate(2)
 
Net Income
 
Diluted Earnings per Share(2)
As reported
$
1,636

 
62
%
 
$
2,510

 
$
579

 
23.1
%
 
$
1,931

 
$
0.79

Severance costs
(110
)
 
3
%
 
110

 
38

 
 
 
72

 
0.03

Remeasurement of deferred tax liability

 
%
 

 
88

 
 
 
(88
)
 
(0.04
)
As adjusted
$
1,526

 
64
%
 
$
2,620

 
$
705

 
26.9
%
 
$
1,915

 
$
0.78

Diluted weighted-average shares outstanding, as reported
 
 
 
 
 
 
 
 
 
 
 
 
2,440

(1) 
The Company did not report adjusted results for the three months ended September 30, 2015.
(2) 
Figures in the table may not recalculate exactly due to rounding. Operating margin, effective income tax rate and diluted earnings per share figures are calculated based on unrounded numbers.

Fiscal Full-Year 2016 Financial Highlights:
For the fiscal full-year 2016, service revenues were $6.7 billion, an increase of 7% over the prior year. Data processing revenues rose 13% over the prior year to $6.3 billion. International transaction revenues grew 14% over the prior year to $4.6 billion. Other revenues were $823 million, flat over the prior year. Client incentives were $3.4 billion and represent 18.4% of gross revenues.
GAAP operating expenses were $7.2 billion for the twelve months ended September 30, 2016, a 49% increase over the prior year's results, primarily related to increases in personnel, network and processing expenses, and special items incurred in all four fiscal quarters primarily related to the acquisition of Visa Europe.
Adjusted operating expenses, which exclude special items incurred in all four fiscal quarters, were $5.1 billion, an increase of 5% over the prior year’s results.
GAAP effective income tax rate was 25.2% for the twelve months ended September 30, 2016. Adjusted effective income tax rate, excluding the special items related to the acquisition of Visa Europe, severance costs and deferred tax liability remeasurement described above, was 29.1%.
The weighted-average number of diluted shares of class A common stock outstanding was 2.41 billion for the full-year.



3



Summary Table of Adjustments to Earnings (1):
 
Twelve Months Ended September 30,2016
(in millions, except percentages and per share data)
Operating Expenses
 
Operating Margin(2)
 
Non-operating Income (Expense)
 
Income Before Income Taxes
 
Income Taxes
 
Effective Income Tax Rate(2)
 
Net Income
 
Diluted Earnings per Share(2)
As reported
$
7,199

 
52
%
 
$
129

 
$
8,012

 
$
2,021

 
25.2
%
 
$
5,991

 
$
2.48

Severance costs
(110
)
 
1
%
 

 
110

 
38

 
 
 
72

 
0.03

Remeasurement of deferred tax liability

 
%
 

 

 
88

 
 
 
(88
)
 
(0.04
)
Acquisition-related costs
(152
)
 
1
%
 

 
152

 
56

 
 
 
96

 
0.04

Visa Europe Framework Agreement loss
(1,877
)
 
12
%
 

 
1,877

 
693

 
 
 
1,184

 
0.49

Net gains on currency forward contracts

 
%
 
(74
)
 
(74
)
 
(27
)
 
 
 
(47
)
 
(0.02
)
Foreign exchange gain on euro deposits

 
%
 
(145
)
 
(145
)
 
(54
)
 
 
 
(91
)
 
(0.04
)
Revaluation of Visa Europe put option

 
%
 
(255
)
 
(255
)
 

 
 
 
(255
)
 
(0.11
)
As adjusted
$
5,060

 
66
%
 
$
(345
)
 
$
9,677

 
$
2,815

 
29.1
%
 
$
6,862

 
$
2.84

Diluted weighted-average shares outstanding, as reported
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,414

(1) 
Refer to the accompanying financial tables for a reconciliation of adjusted results for the twelve months ended September 30, 2015.
(2) 
Figures in the table may not recalculate exactly due to rounding. Operating margin, effective income tax rate and diluted earnings per share figures are calculated based on unrounded numbers.

Notable Events:
During the three months ended September 30, 2016, the Company repurchased 20.5 million shares of class A common stock, at an average price of $80.76 per share, using $1.7 billion of cash on hand. During the twelve months ended September 30, 2016, the Company repurchased a total of 92.1 million shares of class A common stock, at an average price of $77.13 per share, using $7.1 billion of cash on hand. At September 30, 2016, the Company had $5.7 billion of remaining funds, authorized by the board of directors, available for share repurchase under the current programs.
On October 17, 2016, 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 December 6, 2016, to all holders of record of the Company’s common and preferred stock as of November 18, 2016.
In addition, on October 17, 2016, the Company announced that Charlie Scharf has resigned as chief executive officer effective December 1, 2016, and the board of directors appointed current board member Alfred F. Kelly, Jr. to become CEO effective December 1, 2016.



4



Financial Outlook for Fiscal Full-Year 2017:
Visa Inc. provides its financial outlook for the following GAAP metrics for fiscal full-year 2017:
Annual net revenue growth: 16% to 18% range on a nominal dollar basis, including 1.0 to 1.5 ppts of negative foreign currency impact;
Client incentives as a percent of gross revenues: 20.5% to 21.5% range;
Annual operating margin: Mid 60s;
Effective tax rate: Low 30s; and
Annual diluted class A common stock earnings per share growth: Low 30s on a GAAP nominal dollar basis and mid-teens on an adjusted, non-GAAP nominal dollar basis (see note below), both including 1.5 to 2.0 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. 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.

Fiscal Fourth Quarter 2016 Earnings Results Conference Call Details:
Visa’s executive management team will host a live audio webcast beginning at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) today to discuss the financial results and business highlights. All interested parties are invited to listen to the live webcast at http://investor.visa.com. A replay of the webcast will be available on the Visa Investor Relations website for 30 days. Investor information, including supplemental financial information, is available on Visa Inc.’s Investor Relations website at http://investor.visa.com.

Non-GAAP Financial Information:
The Company has presented certain financial data that are considered non-GAAP financial measures that are reconciled to their most directly comparable GAAP financial measures in the accompanying tables. Management believes that the presentation of adjusted net income and adjusted earnings per share facilitate a clearer understanding of Visa’s operating performance and provides a meaningful comparison of its results between periods. Refer to the accompanying financial tables for further details and a reconciliation of the non-GAAP measures presented.
Visa’s management uses non-GAAP financial measures to evaluate its ongoing operations in relation to historical results and for internal planning and forecasting purposes. The presentation of non-GAAP measures should not be considered in isolation or as a substitute for Visa’s related financial results prepared in accordance with GAAP.


5



About Visa Inc.
Visa Inc. (NYSE: V) is a global payments technology company that connects consumers, businesses, financial institutions, and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. We operate one of the world’s most advanced processing networks - VisaNet - that is capable of handling more than 65,000 transaction messages a second, with fraud protection for consumers and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa’s innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, pay ahead with prepaid or pay later with credit products. For more information, visit usa.visa.com/about-visa, visacorporate.tumblr.com and @VisaNews.

Forward-Looking Statements:

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that relate to, among other things, our future operations, prospects, developments, strategies, business growth and financial outlook for fiscal full-year 2017. Forward-looking statements generally are identified by words such as "believes," "estimates," "expects," "intends," "may," "projects," “outlook”, "could," "should," "will," "continue" and other similar expressions. All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict.

Actual results could differ materially from those expressed in, or implied by, our forward-looking statements due to a variety of factors, including, but not limited to:

increased oversight and regulation of the global payments industry and our business;
impact of government-imposed restrictions on payment systems;
outcome of tax and litigation matters;
increasingly intense competition in the payments industry, including competition for our clients and merchants;
proliferation and continuous evolution of new technologies and business models;
our ability to maintain relationships with our clients, merchants and other third parties;
brand or reputational damage;
management changes;
impact of global economic, political, market and social events or conditions;
exposure to loss or illiquidity due to settlement guarantees;

6



uncertainty surrounding the impact of the United Kingdom’s withdrawal from the European Union;
cyber security attacks, breaches or failure of our networks;
failure to maintain interoperability with Visa Europe’s systems;
our ability to successfully integrate and manage our acquisitions and other strategic investments; and
other factors described in our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended September 30, 2015, and our subsequent reports on Forms 10-Q and 8-K.

Except as required by law, we do not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise.


Contacts:
Investor Relations: Jack Carsky or Victoria Hyde-Dunn, 650-432-7644, ir@visa.com
Media Relations: Connie Kim, 212-521-3962, globalmedia@visa.com

7


VISA INC.
 
 
 
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
 
 
 
September 30, 2016
 
September 30, 2015
 
(in millions, except par value data)
Assets
 
 
 
Cash and cash equivalents
$
5,619

 
$
3,518

Restricted cash—litigation escrow
1,027

 
1,072

Investment securities:
 
 
 
Trading
71

 
66

Available-for-sale
3,248

 
2,431

Settlement receivable
1,467

 
408

Accounts receivable
1,041

 
847

Customer collateral
1,001

 
1,023

Current portion of client incentives
284

 
303

Prepaid expenses and other current assets
555

 
353

Total current assets
14,313

 
10,021

Investment securities, available-for-sale
3,931

 
3,384

Client incentives
448

 
110

Property, equipment and technology, net
2,150

 
1,888

Other assets
893

 
778

Intangible assets, net
27,234

 
11,361

Goodwill
15,066

 
11,825

Total assets
$
64,035

 
$
39,367

Liabilities
 
 
 
Accounts payable
$
203

 
$
127

Settlement payable
2,084

 
780

Customer collateral
1,001

 
1,023

Accrued compensation and benefits
673

 
503

Client incentives
1,976

 
1,049

Accrued liabilities
1,128

 
849

Accrued litigation
981

 
1,024

Total current liabilities
8,046

 
5,355

Long-term debt
15,882

 

Deferred tax liabilities
4,808

 
3,273

Deferred purchase consideration
1,225

 

Other liabilities
1,162

 
897

Total liabilities
31,123

 
9,525

Equity
 
 
 
Preferred stock, $0.0001 par value, 25 shares authorized and 5 issued and outstanding as follows:
 
 
 
Series A convertible participating preferred stock, none issued

 

Series B convertible participating preferred stock, 2 shares issued and outstanding at September 30, 2016
2,516

 

Series C convertible participating preferred stock, 3 shares issued and outstanding at September 30, 2016
3,201

 

Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,871 and 1,950 shares issued and outstanding at September 30, 2016 and 2015, respectively

 

Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at September 30, 2016 and 2015

 

Class C common stock, $0.0001 par value, 1,097 shares authorized, 17 and 20 shares issued and outstanding at September 30, 2016 and 2015, respectively

 

Treasury stock
(170
)
 

Right to recover for covered losses
(34
)
 

Additional paid-in capital
17,395

 
18,073

Accumulated income
10,462

 
11,843

Accumulated other comprehensive loss, net:
 
 
 
Investment securities, available-for-sale
36

 
5

Defined benefit pension and other postretirement plans
(225
)
 
(161
)
Derivative instruments classified as cash flow hedges
(50
)
 
83

Foreign currency translation adjustments
(219
)
 
(1
)
Total accumulated other comprehensive loss, net
(458
)
 
(74
)
Total equity
32,912

 
29,842

Total liabilities and equity
$
64,035

 
$
39,367


8


VISA INC.
 
 
 
 
 
 
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
 
 
 
 
(UNAUDITED)
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Twelve Months Ended
September 30,
 
2016 (1)
 
2015
 
2016 (1)
 
2015
 
(in millions, except per share data)
Operating Revenues
 
 
 
 
 
 
 
Service revenues
$
1,768

 
$
1,637

 
$
6,747

 
$
6,302

Data processing revenues
1,779

 
1,429

 
6,272

 
5,552

International transaction revenues
1,489

 
1,091

 
4,649

 
4,064

Other revenues
218

 
216

 
823

 
823

Client incentives
(993
)
 
(802
)
 
(3,409
)
 
(2,861
)
Total operating revenues
4,261

 
3,571

 
15,082

 
13,880

 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
Personnel
690

 
521

 
2,226

 
2,079

Marketing
300

 
253

 
869

 
872

Network and processing
161

 
134

 
538

 
474

Professional fees
113

 
107

 
389

 
336

Depreciation and amortization
141

 
119

 
502

 
494

General and administrative
230

 
143

 
796

 
547

Litigation provision
1

 
11

 
2

 
14

Visa Europe Framework Agreement loss

 

 
1,877

 

Total operating expenses
1,636

 
1,288

 
7,199

 
4,816

Operating income
2,625

 
2,283

 
7,883

 
9,064

 
 
 
 
 
 
 
 
Non-operating (Expense) Income
 
 
 
 
 
 
 
Interest expense
(135
)
 

 
(427
)
 
(3
)
Other
20

 

 
556

 
(66
)
Non-operating (expense) income
(115
)
 

 
129

 
(69
)
Income before income taxes
2,510

 
2,283

 
8,012

 
8,995

Income tax provision
579

 
771

 
2,021

 
2,667

Net income
$
1,931

 
$
1,512

 
$
5,991

 
$
6,328

 
 
 
 
 
 
 
 
Basic earnings per share
 
 
 
 
 
 
 
Class A common stock
$
0.79

 
$
0.62

 
$
2.49

 
$
2.58

Class B common stock
$
1.31

 
$
1.02

 
$
4.10

 
$
4.26

Class C common stock
$
3.17

 
$
2.48

 
$
9.94

 
$
10.33

 
 
 
 
 
 
 
 
Basic weighted-average shares outstanding
 
 
 
 
 
 
 
Class A common stock
1,878

 
1,948

 
1,906

 
1,954

Class B common stock
245

 
245

 
245

 
245

Class C common stock
17

 
19

 
19

 
22

 
 
 
 
 
 
 
 
Diluted earnings per share
 
 
 
 
 
 
 
Class A common stock
$
0.79

 
$
0.62

 
$
2.48

 
$
2.58

Class B common stock
$
1.30

 
$
1.02

 
$
4.09

 
$
4.25

Class C common stock
$
3.16

 
$
2.48

 
$
9.93

 
$
10.30

 
 
 
 
 
 
 
 
Diluted weighted-average shares outstanding
 
 
 
 
 
 
 
Class A common stock
2,440

 
2,440

 
2,414

 
2,457

Class B common stock
245

 
245

 
245

 
245

Class C common stock
17

 
19

 
19

 
22

(1) 
We did not include Visa Europe's financial results in our unaudited consolidated statements of operations from the acquisition date, June 21, 2016, through June 30, 2016 as the impact was immaterial. Our unaudited consolidated statement of operations for the year ended September 30, 2016 includes Visa Europe's financial results for the three months ended September 30, 2016.


9


VISA INC.
 
 
 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
 
 
(UNAUDITED)
 
 
 
 
 
 
For the Years Ended September 30,
 
2016
 
2015
 
2014
 
(in millions)
Operating Activities
 
 
 
 
 
Net income
$
5,991

 
$
6,328

 
$
5,438

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Client incentives
3,409

 
2,861

 
2,592

Fair value adjustment for the Visa Europe put option
(255
)
 
110

 

Share-based compensation
221

 
187

 
172

Excess tax benefit for share-based compensation
(63
)
 
(84
)
 
(90
)
Depreciation and amortization of property, equipment, technology and intangible assets
502

 
494

 
435

Deferred income taxes
(764
)
 
195

 
(580
)
Right to recover for covered losses recorded in equity
(9
)
 

 

Litigation provision
4

 
14

 
453

Other
64

 
24

 
37

Change in operating assets and liabilities:
 
 
 
 
 
Settlement receivable
391

 
378

 
13

Accounts receivable
(65
)
 
(19
)
 
(53
)
Client incentives
(3,508
)
 
(2,970
)
 
(2,395
)
Other assets
(315
)
 
(41
)
 
(379
)
Accounts payable
43

 
(13
)
 
(56
)
Settlement payable
(302
)
 
(552
)
 
107

Accrued and other liabilities
277

 
118

 
513

Accrued litigation
(47
)
 
(446
)
 
998

Net cash provided by operating activities
5,574

 
6,584

 
7,205

 
 
 
 
 
 
Investing Activities
 
 
 
 
 
Purchases of property, equipment, technology and intangible assets
(523
)
 
(414
)
 
(553
)
Proceeds from sales of property, equipment and technology

 
10

 

Investment securities, available-for-sale:
 
 
 
 
 
Purchases
(28,004
)
 
(2,850
)
 
(2,572
)
Proceeds from maturities and sales
26,697

 
1,925

 
2,342

Acquisitions, net of $2.8 billion cash received from Visa Europe
(9,082
)
 
(93
)
 
(149
)
Purchases of / contributions to other investments
(10
)
 
(25
)
 
(9
)
Proceeds / distributions from other investments
6

 
12

 

Net cash used in investing activities
(10,916
)
 
(1,435
)
 
(941
)
 
 
 
 
 
 
Financing Activities
 
 
 
 
 
Repurchase of class A common stock
(6,987
)
 
(2,910
)
 
(4,118
)
Treasury stock—class C common stock
(170
)
 

 

Dividends paid
(1,350
)
 
(1,177
)
 
(1,006
)
Proceeds from issuance of senior notes
15,971

 

 

Debt issuance costs
(98
)
 

 

Deposit into litigation escrow account—U.S. retrospective responsibility plan

 

 
(450
)
Payments from (return to) litigation escrow account—U.S. retrospective responsibility plan
45

 
426

 
(999
)
Cash proceeds from issuance of common stock under employee equity plans
95

 
82

 
91

Restricted stock and performance-based shares settled in cash for taxes
(92
)
 
(108
)
 
(86
)
Excess tax benefit for share-based compensation
63

 
84

 
90

Net cash provided by (used in) financing activities
7,477

 
(3,603
)
 
(6,478
)
Effect of exchange rate changes on cash and cash equivalents
(34
)
 
1

 
(1
)
Increase (decrease) in cash and cash equivalents
2,101

 
1,547

 
(215
)
Cash and cash equivalents at beginning of year
3,518

 
1,971

 
2,186

Cash and cash equivalents at end of year
$
5,619

 
$
3,518

 
$
1,971

 
 
 
 
 
 
Supplemental Disclosure
 
 
 
 
 
Series B and C convertible participating preferred stock issued in Visa Europe acquisition
$
5,717

 
$

 
$

Deferred purchase consideration recorded for Visa Europe acquisition
$
1,236

 
$

 
$

Income taxes paid, net of refunds
$
2,842

 
$
2,486

 
$
2,656

Interest payments on debt
$
244

 
$

 
$

Accruals related to purchases of property, equipment, technology and intangible assets
$
42

 
$
81

 
$
62

Right to recover for covered losses related to Visa Europe acquisition
$
34

 
$

 
$


10


VISA INC.
 
 
 
 
 
 
 
 
 
FISCAL 2016 AND 2015 QUARTERLY RESULTS OF OPERATIONS
 
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fiscal 2016 Quarter Ended
 
Fiscal 2015 Quarter Ended
 
September 30, 2016 (1)
 
June 30,
2016 (1)
 
March 31,
2016
 
December 31, 2015
 
September 30, 2015
 
(in millions)
Operating Revenues
 
 
 
 
 
 
 
 
 
Service revenues
$
1,768

 
$
1,635

 
$
1,699

 
$
1,645

 
$
1,637

Data processing revenues
1,779

 
1,541

 
1,473

 
1,479

 
1,429

International transaction revenues
1,489

 
1,084

 
1,045

 
1,031

 
1,091

Other revenues
218

 
209

 
198

 
198

 
216

Client incentives
(993
)
 
(839
)
 
(789
)
 
(788
)
 
(802
)
Total operating revenues
4,261

 
3,630

 
3,626

 
3,565

 
3,571

 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
Personnel
690

 
509

 
528

 
499

 
521

Marketing
300

 
189

 
186

 
194

 
253

Network and processing
161

 
123

 
126

 
128

 
134

Professional fees
113

 
138

 
66

 
72

 
107

Depreciation and amortization
141

 
120

 
121

 
120

 
119

General and administrative
230

 
246

 
164

 
156

 
143

Litigation provision
1

 

 
1

 

 
11

Visa Europe Framework Agreement loss

 
1,877

 

 

 

Total operating expenses
1,636

 
3,202

 
1,192

 
1,169

 
1,288

Operating income
2,625

 
428

 
2,434

 
2,396

 
2,283

 
 
 
 
 
 
 
 
 
 
Non-operating (Expense) Income
 
 
 
 
 
 
 
 
 
Interest expense
(135
)
 
(131
)
 
(132
)
 
(29
)
 

Other
20

 
125

 
139

 
272

 

Non-operating (expense) income
(115
)
 
(6
)
 
7

 
243

 

Income before income taxes
2,510

 
422

 
2,441

 
2,639

 
2,283

Income tax provision
579

 
10

 
734

 
698

 
771

Net income
$
1,931

 
$
412

 
$
1,707

 
$
1,941

 
$
1,512

(1) 
We did not include Visa Europe's financial results in our unaudited consolidated statements of operations from the acquisition date, June 21, 2016, through June 30, 2016 as the impact was immaterial. Our unaudited consolidated statements of operations for the three months ended September 30, 2016 includes Visa Europe's financial results.

11


VISA INC.
RECONCILIATION OF NON-GAAP FINANCIAL RESULTS
(UNAUDITED)
Our financial results during the three and twelve months ended September 30, 2016 reflect the impact of certain significant items that we do not believe are indicative of our ongoing operating performance, as they are either non-recurring or have no cash impact. As such, we believe the presentation of adjusted financial results excluding the following items provides a clearer understanding of our operating performance for the periods presented.
Severance cost. In the fiscal fourth quarter, we recorded a $110 million charge for severance costs related to personnel reductions including planned reductions at Visa Europe. Although we routinely record severance expenses, these charges are larger than any past quarterly accrual due to the acquisition and integration of Visa Europe. Net of related tax benefit of $38 million, determined by applying applicable tax rates, the adjustment to net income was an increase of $72 million.
Remeasurement of deferred tax liability. In September 2016, we recorded a non-cash, non-recurring $88 million gain upon the remeasurement of a deferred tax liability, recorded upon the acquisition of Visa Europe, to reflect a tax rate change in the United Kingdom.
Acquisition-related costs. During the twelve months ended September 30, 2016, we incurred $152 million of non-recurring acquisition costs in operating expense as a result of the Visa Europe transaction. This amount is comprised of $60 million of transaction expenses recorded in professional fees, and $92 million of U.K. stamp duty recorded in general and administrative expenses. Net of related tax benefit of $56 million, determined by applying applicable federal and state tax rates, the adjustment to net income was an increase of $96 million.
Visa Europe Framework Agreement loss. Upon consummation of the transaction, on June 21, 2016, we recorded a non-recurring loss of $1.9 billion, before tax, in operating expense resulting from the effective settlement of the Framework Agreement between Visa and Visa Europe. Net of related tax benefit of $693 million, determined by applying applicable federal and state tax rates, the adjustment to net income was an increase of $1.2 billion.
Net gains on currency forward contracts. During the twelve months ended September 30, 2016, we entered into currency forward contracts to mitigate a portion of the foreign currency exchange rate risk associated with the upfront cash consideration paid in the Visa Europe acquisition. As a result, we recorded non-recurring, net gains of $74 million, before tax, in other non-operating income. Net of related tax expense of $27 million, determined by applying applicable federal and state tax rates, the adjustment to net income was a decrease of $47 million.
Foreign exchange gain on euro deposits. During the twelve months ended September 30, 2016, we recorded a non-recurring foreign exchange gain of $145 million, before tax, in other non-operating income as a result of holding euro-denominated bank balances for a short period in advance of the closing date of the Visa Europe transaction. Net of related tax expense of $54 million, determined by applying applicable federal and state tax rates, the impact to net income was a decrease of $91 million.
Revaluation of Visa Europe put option. During the first quarter of fiscal 2016 and the third quarter of fiscal 2015, we recorded a decrease of $255 million and an increase of $110 million, respectively, in the fair value of the Visa Europe put option, resulting in the recognition of non-cash income and expense in other non-operating income. These amounts are not subject to income tax and therefore have no impact on the reported income tax provision.
Adjusted operating expenses, operating margin, non-operating income (expense), income before income taxes, income taxes, effective income tax rate, net income and diluted earnings per share are non-GAAP financial measures and should not be relied upon as substitutes for measures calculated in accordance with U.S. GAAP. The following tables reconcile our as-reported financial measures calculated in accordance with U.S. GAAP, to the respective non-GAAP adjusted financial measures for the three and twelve months ended September 30, 2016 and the twelve months ended September 30, 2015. There were no comparable adjustments recorded during the three months ended September 30, 2015.
 
Three Months Ended September 30, 2016 (1)
(in millions, except percentages and per share data)
Operating Expenses
 
Operating Margin
(2),(3)
 
Non-operating (Expense)
Income
 
Income Before Income Taxes
 
Income Taxes
 
Effective Income Tax Rate
(2)
 
Net Income
 
Diluted Earnings Per Share(2)
As reported
$
1,636

 
62
%
 
$
(115
)
 
$
2,510

 
$
579

 
23.1
%
 
$
1,931

 
$
0.79

Severance cost
(110
)
 
3
%
 

 
110

 
38

 


 
72

 
0.03

Remeasurement of deferred tax liability

 
%
 

 

 
88

 


 
(88
)
 
(0.04
)
As adjusted
$
1,526

 
64
%
 
$
(115
)
 
$
2,620

 
$
705

 
26.9
%
 
$
1,915

 
$
0.78

Diluted weighted-average shares outstanding, as reported
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,440



12


 
Twelve Months Ended September 30, 2016 (1)
(in millions, except percentages and per share data)
Operating Expenses
 
Operating Margin
(2),(3)
 
Non-operating
Income
(Expense)
 
Income Before Income Taxes
 
Income Taxes
 
Effective Income Tax Rate
(2)
 
Net Income
 
Diluted Earnings Per Share(2)
As reported
$
7,199

 
52
%
 
$
129

 
$
8,012

 
$
2,021

 
25.2
%
 
$
5,991

 
$
2.48

Severance cost
(110
)
 
1
%
 

 
110

 
38

 
 
 
72

 
0.03

Remeasurement of deferred tax liability

 
%
 

 

 
88

 
 
 
(88
)
 
(0.04
)
Acquisition-related costs
(152
)
 
1
%
 

 
152

 
56

 
 
 
96

 
0.04

Visa Europe Framework Agreement loss
(1,877
)
 
12
%
 

 
1,877

 
693

 
 
 
1,184

 
0.49

Net gains on currency forward contracts

 
%
 
(74
)
 
(74
)
 
(27
)
 
 
 
(47
)
 
(0.02
)
Foreign exchange gain on euro deposits

 
%
 
(145
)
 
(145
)
 
(54
)
 
 
 
(91
)
 
(0.04
)
Revaluation of Visa Europe put option

 
%
 
(255
)
 
(255
)
 

 
 
 
(255
)
 
(0.11
)
As adjusted
$
5,060

 
66
%
 
$
(345
)
 
$
9,677

 
$
2,815

 
29.1
%
 
$
6,862

 
$
2.84

Diluted weighted-average shares outstanding, as reported
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,414

 
Twelve Months Ended September 30, 2015
(in millions, except per share data)
Non-operating (Expense) Income
 
Income Before Income Taxes
 
Net Income
 
Diluted Earnings Per Share(2)
As reported
$
(69
)
 
$
8,995

 
$
6,328

 
$
2.58

Revaluation of Visa Europe put option
110

 
110

 
110

 
0.04

As adjusted
$
41

 
$
9,105

 
$
6,438

 
$
2.62

Diluted weighted-average shares outstanding, as reported
 
 
 
 
 
 
2,457

(1) 
We did not include Visa Europe's financial results in our unaudited consolidated statements of operations from the acquisition date, June 21, 2016, through June 30, 2016 as the impact was immaterial. Our unaudited consolidated statement of operations for the year ended September 30, 2016 includes Visa Europe's financial results for the three months ended September 30, 2016.
(2) 
Figures in the table may not recalculate exactly due to rounding. Operating margin, effective income tax rate and diluted earnings per share figures are calculated based on unrounded numbers.
(3) 
Operating margin is calculated as operating income divided by total operating revenues.



13



    vbm_blugrad01.gif
Operational Performance Data
The tables below provide information regarding the available operational results for the 3 months ended September 30, 2016, as well as the prior four quarterly reporting periods and the 12 months ended September 30, 2016 and 2015, for cards carrying the Visa, Visa Electron, V PAY and Interlink brands. Sections 1-3 below reflect the acquisition of Visa Europe, with Europe included in Visa Inc. results effective the three months ended September 30, 2016.
1. Branded Volume and Transactions
The tables present regional total volume, payments volume, and cash volume, and the number of payments transactions, cash transactions, accounts and cards for cards carrying the Visa, Visa Electron, V PAY and Interlink brands. Card counts include PLUS proprietary cards. Nominal and constant dollar growth rates over prior years are provided for volume-based data.
 
For the 3 Months Ended September 30, 2016
 
Total Volume ($ billions)
 
Growth (Nominal USD)
 
Growth (Constant USD)
 
Payments Volume ($ billions)
 
Growth (Nominal USD)
 
Growth (Constant USD)
 
Payments Transactions (millions)
 
Cash Volume ($ billions)
 
Growth (Nominal USD)
 
Growth (Constant USD)
 
Cash Transactions (millions)
All Visa Credit & Debit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asia Pacific
$
535

 
4.9
%
 
3.7
%
 
$
406

 
9.4
%
 
7.8
%
 
5,220

 
$
128

 
(7.2
)%
 
(7.4
)%
 
983

Canada
62

 
5.4
%
 
5.3
%
 
57

 
5.4
%
 
5.3
%
 
759

 
5

 
5.4
 %
 
5.3
 %
 
11

CEMEA
237

 
2.4
%
 
7.5
%
 
69

 
12.7
%
 
17.4
%
 
2,582

 
169

 
(1.3
)%
 
4.0
 %
 
1,235

LAC
236

 
3.8
%
 
10.4
%
 
91

 
7.1
%
 
13.6
%
 
2,992

 
145

 
1.9
 %
 
8.6
 %
 
1,165

US
902

 
9.8
%
 
9.8
%
 
767

 
10.7
%
 
10.7
%
 
14,899

 
135

 
4.8
 %
 
4.8
 %
 
954

Europe
643

 


 


 
467

 


 


 
9,569

 
176

 


 


 
1,407

Visa Inc.
2,614

 
41.4
%
 
42.9
%
 
1,857

 
46.9
%
 
47.1
%
 
36,022

 
757

 
29.6
 %
 
33.5
 %
 
5,755

Visa Credit Programs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
US
$
424

 
18.2
%
 
18.2
%
 
$
409

 
18.7
%
 
18.7
%
 
5,122

 
$
15

 
6.1
 %
 
6.1
 %
 
18

International
725

 
47.6
%
 
47.4
%
 
656

 
44.0
%
 
43.6
%
 
9,540

 
68

 
94.0
 %
 
98.1
 %
 
394

Visa Inc.
1,149

 
35.2
%
 
35.1
%
 
1,065

 
33.1
%
 
32.9
%
 
14,661

 
84

 
68.7
 %
 
71.2
 %
 
412

Visa Debit Programs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
US
$
478

 
3.2
%
 
3.2
%
 
$
358

 
2.7
%
 
2.7
%
 
9,777

 
$
120

 
4.7
 %
 
4.7
 %
 
936

International
988

 
84.2
%
 
91.2
%
 
433

 
275.3
%
 
285.9
%
 
11,583

 
554

 
31.7
 %
 
37.1
 %
 
4,407

Visa Inc.
1,465

 
46.7
%
 
49.6
%
 
792

 
70.6
%
 
71.7
%
 
21,361

 
674

 
25.9
 %
 
29.9
 %
 
5,343


14

Operational Performance Data
 
 
 


 
For the 3 Months Ended June 30, 2016
 
Total Volume ($ billions)
 
Growth (Nominal USD)
 
Growth (Constant USD)
 
Payments Volume ($ billions)
 
Growth (Nominal USD)
 
Growth (Constant USD)
 
Payments Transactions (millions)
 
Cash Volume ($ billions)
 
Growth (Nominal USD)
 
Growth (Constant USD)
 
Cash Transactions (millions)
 
Accounts (millions)
 
Cards (millions)
All Visa Credit & Debit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asia Pacific
$
531

 
4.3
 %
 
7.3
%
 
$
393

 
7.9
 %
 
10.3
%
 
5,055

 
$
138

 
(5.0
)%
 
(0.4
)%
 
1,014

 
766

 
870

Canada
62

 
0.7
 %
 
6.7
%
 
57

 
0.5
 %
 
6.4
%
 
741

 
5

 
3.6
 %
 
9.7
 %
 
11

 
47

 
54

CEMEA
233

 
(2.0
)%
 
11.4
%
 
64

 
4.8
 %
 
18.3
%
 
2,415

 
169

 
(4.3
)%
 
8.9
 %
 
1,255

 
331

 
318

LAC
223

 
(5.8
)%
 
10.8
%
 
86

 
(3.3
)%
 
14.4
%
 
2,871

 
138

 
(7.2
)%
 
8.8
 %
 
1,127

 
419

 
456

US
883

 
9.1
 %
 
9.1
%
 
749

 
9.7
 %
 
9.7
%
 
14,681

 
134

 
5.9
 %
 
5.9
 %
 
972

 
678

 
851

Visa Inc.
1,933

 
4.2
 %
 
9.0
%
 
1,349

 
7.6
 %
 
10.4
%
 
25,763

 
584

 
(3.0
)%
 
5.8
 %
 
4,379

 
2,240

 
2,549

Visa Credit Programs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
US
$
390

 
10.9
 %
 
10.9
%
 
$
376

 
10.8
 %
 
10.8
%
 
4,583

 
$
15

 
11.0
 %
 
11.0
 %
 
17

 
272

 
355

International
513

 
4.5
 %
 
9.8
%
 
476

 
5.0
 %
 
9.9
%
 
6,638

 
37

 
(2.0
)%
 
8.7
 %
 
159

 
511

 
572

Visa Inc.
903

 
7.2
 %
 
10.3
%
 
852

 
7.5
 %
 
10.3
%
 
11,221

 
51

 
1.4
 %
 
9.4
 %
 
176

 
783

 
927

Visa Debit Programs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
US
$
493

 
7.7
 %
 
7.7
%
 
$
374

 
8.5
 %
 
8.5
%
 
10,099

 
$
119

 
5.3
 %
 
5.3
 %
 
955

 
406

 
496

International
537

 
(3.3
)%
 
8.0
%
 
123

 
5.4
 %
 
17.1
%
 
4,444

 
413

 
(5.6
)%
 
5.6
 %
 
3,248

 
1,051

 
1,126

Visa Inc.
1,030

 
1.7
 %
 
7.9
%
 
497

 
7.7
 %
 
10.5
%
 
14,543

 
532

 
(3.4
)%
 
5.5
 %
 
4,203

 
1,457

 
1,622

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Europe
654

 
 
 
 
 
479

 
 
 
 
 
9,350

 
175

 
 
 
 
 
1,416

 
472

 
537

 
For the 3 Months Ended March 31, 2016
 
Total Volume ($ billions)
 
Growth (Nominal USD)
 
Growth (Constant USD)
 
Payments Volume ($ billions)
 
Growth (Nominal USD)
 
Growth (Constant USD)
 
Payments Transactions (millions)
 
Cash Volume ($ billions)
 
Growth (Nominal USD)
 
Growth (Constant USD)
 
Cash Transactions (millions)
 
Accounts (millions)
 
Cards (millions)
All Visa Credit & Debit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asia Pacific
$
511

 
3.2
 %
 
8.9
%
 
$
376

 
9.6
 %
 
14.4
%
 
4,745

 
$
135

 
(11.1
)%
 
(3.8
)%
 
1,017

 
753

 
856

Canada
51

 
(5.1
)%
 
5.0
%
 
46

 
(5.3
)%
 
4.7
%
 
659

 
5

 
(2.4
)%
 
8.0
 %
 
11

 
47

 
54

CEMEA
205

 
(3.4
)%
 
8.4
%
 
57

 
4.9
 %
 
17.3
%
 
2,185

 
148

 
(6.2
)%
 
5.3
 %
 
1,161

 
330

 
321

LAC
204

 
(16.1
)%
 
9.1
%
 
79

 
(15.2
)%
 
15.0
%
 
2,799

 
124

 
(16.8
)%
 
5.6
 %
 
1,077

 
417

 
451

US
823

 
10.0
 %
 
10.0
%
 
694

 
10.5
 %
 
10.5
%
 
13,622

 
129

 
7.3
 %
 
7.3
 %
 
932

 
662

 
827

Visa Inc.
1,793

 
2.4
 %
 
9.3
%
 
1,252

 
7.3
 %
 
12.0
%
 
24,010

 
541

 
(7.4
)%
 
3.4
 %
 
4,198

 
2,208

 
2,510

Visa Credit Programs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
US
$
349

 
10.5
 %
 
10.5
%
 
$
335

 
10.6
 %
 
10.6
%
 
4,067

 
$
14

 
8.8
 %
 
8.8
 %
 
16