v-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-33977

VISA INC.

(Exact name of Registrant as specified in its charter)

Delaware

26-0267673

(State or other jurisdiction
of incorporation or organization)

(IRS Employer
Identification No.)

P.O. Box 8999

94128-8999

San Francisco,

California

(Address of principal executive offices)

(Zip Code)

(650) 432-3200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of July 24, 2020, there were 1,686,007,156 shares outstanding of the registrant’s class A common stock, par value $0.0001 per share, 245,513,385 shares outstanding of the registrant’s class B common stock, par value $0.0001 per share, and 10,859,763 shares outstanding of the registrant’s class C common stock, par value $0.0001 per share.

Table of Contents

VISA INC.

TABLE OF CONTENTS



		Page
PART I.	Financial Information	4

Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets—June 3 0 , 2020 and September 30, 2019	4
	Consolidated Statements of Operations—Three and Nine Months Ended June 3 0 , 2020 and 2019	5
	Consolidated Statements of Comprehensive Income—Three and Nine Months Ended June 3 0 , 2020 and 2019	6
	Consolidated Statements of Changes in Equity—Three and Nine Months Ended June 3 0 , 2020 and 2019	7
	Consolidated Statements of Cash Flows—Nine Months Ended June 3 0 , 2020 and 2019	11
	Notes to Consolidated Financial Statements (Unaudited)	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40

PART II.	Other Information	41

Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
	Signatures	44

Table of Contents

PART I. FINANCIAL INFORMATION


ITEM 1.			Financial Statements (Unaudited)

VISA INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	June 30, 2020		September 30, 2019
	(in millions, except par value data)
Assets
Cash and cash equivalents	$	13,898	$	7,838
Restricted cash equivalents—U.S. litigation escrow (Note 4 and Note 5)	1,148		1,205
Investment securities (Note 6)	2,739		4,236


Settlement receivable	2,111		3,048
Accounts receivable	1,453		1,542
Customer collateral (Note 4 and Note 9)	1,759		1,648
Current portion of client incentives	1,150		741
Prepaid expenses and other current assets	753		712
Total current assets	25,011		20,970
Investment securities (Note 6)	547		2,157
Client incentives	3,168		2,084
Property, equipment and technology, net	2,746		2,695
Goodwill	15,791		15,656
Intangible assets, net	27,188		26,780
Other assets	3,433		2,232
Total assets	$	77,884	$	72,574
Liabilities
Accounts payable	$	153	$	156
Settlement payable	2,725		3,990
Customer collateral (Note 4 and Note 9)	1,759		1,648
Accrued compensation and benefits	703		796
Client incentives	4,208		3,997
Accrued liabilities	2,397		1,625

Current maturities of debt (Note 8)	2,999		—
Accrued litigation (Note 14)	1,156		1,203
Total current liabilities	16,100		13,415
Long-term debt (Note 8)	17,880		16,729
Deferred tax liabilities	4,728		4,807
Other liabilities	3,652		2,939
Total liabilities	42,360		37,890
Equity
Preferred stock, $0.0001 par value, 25 shares authorized and 5 shares issued and outstanding as follows:
Series A convertible participating preferred stock, none issued (the “class A equivalent preferred stock”) (Note 10)	—		—
Series B convertible participating preferred stock, 2 shares issued and outstanding at June 30, 2020 and September 30, 2019 (the “UK&I preferred stock”) (Note 5 and Note 10)	2,213		2,285
Series C convertible participating preferred stock, 3 shares issued and outstanding at June 30, 2020 and September 30, 2019 (the “Europe preferred stock”) (Note 5 and Note 10)	3,085		3,177
Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,687 and 1,718 shares issued and outstanding at June 30, 2020 and September 30, 2019, respectively (Note 10)	—		—
Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at June 30, 2020 and September 30, 2019 (Note 10)	—		—
Class C common stock, $0.0001 par value, 1,097 shares authorized, 11 shares issued and outstanding at June 30, 2020 and September 30, 2019 (Note 10)	—		—

Right to recover for covered losses (Note 5)	(24)		(171)
Additional paid-in capital	16,457		16,541
Accumulated income	14,072		13,502
Accumulated other comprehensive income (loss), net:
Investment securities	4		6
Defined benefit pension and other postretirement plans	(192)		(192)
Derivative instruments	(39)		199
Foreign currency translation adjustments	(52)		(663)
Total accumulated other comprehensive income (loss), net	(279)		(650)
Total equity	35,524		34,684
Total liabilities and equity	$	77,884	$	72,574

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

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VISA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2020		2019		2020		2019
	(in millions, except per share data)






Net revenues	$	4,837	$	5,840	$	16,745	$	16,840

Operating Expenses
Personnel	941		872		2,863		2,573
Marketing	174		282		683		799
Network and processing	172		184		536		528
Professional fees	95		113		304		305
Depreciation and amortization	197		165		571		484
General and administrative	258		315		840		855
Litigation provision (Note 14)	1		1		9		30

Total operating expenses	1,838		1,932		5,806		5,574
Operating income	2,999		3,908		10,939		11,266

Non-operating Income (Expense)
Interest expense, net	(142)		(128)		(371)		(413)
Investment income and other	75		86		167		320
Total non-operating income (expense)	(67)		(42)		(204)		(93)
Income before income taxes	2,932		3,866		10,735		11,173
Income tax provision (Note 13)	559		765		2,006		2,118
Net income	$	2,373	$	3,101	$	8,729	$	9,055

Basic Earnings Per Share (Note 11)
Class A common stock	$	1.07	$	1.37	$	3.92	$	3.98
Class B common stock	$	1.74	$	2.23	$	6.37	$	6.49
Class C common stock	$	4.29	$	5.48	$	15.70	$	15.92

Basic Weighted-average Shares Outstanding (Note 11)
Class A common stock	1,690		1,735		1,702		1,748
Class B common stock	245		245		245		245
Class C common stock	11		12		11		12

Diluted Earnings Per Share (Note 11)
Class A common stock	$	1.07	$	1.37	$	3.92	$	3.97
Class B common stock	$	1.74	$	2.23	$	6.36	$	6.48
Class C common stock	$	4.29	$	5.48	$	15.68	$	15.90

Diluted Weighted-average Shares Outstanding (Note 11)
Class A common stock	2,214		2,265		2,227		2,278
Class B common stock	245		245		245		245
Class C common stock	11		12		11		12

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

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VISA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2020		2019		2020		2019
	(in millions)
Net income	$	2,373	$	3,101	$	8,729	$	9,055
Other comprehensive income (loss), net of tax:
Investment securities:
Net unrealized gain (loss)	(3)		5		2		20
Income tax effect	1		(1)		—		(5)
Reclassification adjustments	(1)		1		(3)		1
Income tax effect	1		—		1		—
Defined benefit pension and other postretirement plans:
Net unrealized actuarial gain (loss) and prior service credit (cost)	—		(1)		2		(8)
Income tax effect	—		—		(1)		1
Reclassification adjustments	9		2		15		2
Income tax effect	(2)		—		(3)		—
Derivative instruments:
Net unrealized gain (loss)	(106)		(68)		(247)		29
Income tax effect	23		14		54		(9)
Reclassification adjustments	(43)		(22)		(58)		(69)
Income tax effect	9		4		13		13
Foreign currency translation adjustments	277		262		621		(419)
Other comprehensive income (loss), net of tax	165		196		396		(444)
Comprehensive income	$	2,538	$	3,297	$	9,125	$	8,611

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

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VISA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)


	Three Months Ended June 30, 2020
	Preferred Stock				Common Stock								Preferred Stock		Right to Recover for Covered Losses		Additional Paid-In Capital		Accumulated Income	Accumulated Other Comprehensive Income (Loss), Net	Total Equity
	Series B	Series C	Class A		Class B	Class C
	(in millions, except per share data)
Balance as of March 31, 2020	2	3	1,693		245	11	$	5,462	$	(184)	$	16,385	$	13,366	$	(444)	$	34,585
Net income													2,373				2,373
Other comprehensive income (loss), net of tax															165		165
Comprehensive income																	2,538

VE territory covered losses incurred (Note 5)									(9)								(9)
Recovery through conversion rate adjustment (Note 5 and 10)							(164)		169								5

Vesting of restricted stock and performance-based shares			—	⁽¹⁾													—
Share-based compensation, net of forfeitures (Note 12)											107						107
Restricted stock and performance-based shares settled in cash for taxes			—	⁽¹⁾							(3)						(3)
Cash proceeds from issuance of common stock under employee equity plans			—	⁽¹⁾							33						33
Cash dividends declared and paid, at a quarterly amount of $0.30 per class A common stock (Note 10)													(663)				(663)
Repurchase of class A common stock (Note 10)			(6)								(65)		(1,004)				(1,069)
Balance as of June 30, 2020	2	3	1,687		245	11	$	5,298	$	(24)	$	16,457	$	14,072	$	(279)	$	35,524

⁽¹⁾Increase or decrease is less than one million shares.

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

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VISA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

(UNAUDITED)


	Nine Months Ended June 30, 2020
	Preferred Stock			Common Stock									Preferred Stock		Right to Recover for Covered Losses		Additional Paid-In Capital		Accumulated Income	Accumulated Other Comprehensive Income (Loss), Net	Total Equity
	Series B	Series C	Class A	Class B	Class C
	(in millions, except per share data)
Balance as of September 30, 2019	2	3	1,718	245	11		$	5,462	$	(171)	$	16,541	$	13,502	$	(650)	$	34,684
Net income													8,729				8,729
Other comprehensive income (loss), net of tax															396		396
Comprehensive income																	9,125
Adoption of new accounting standards (Note 1)													25		(25)		—
VE territory covered losses incurred (Note 5)									(22)								(22)
Recovery through conversion rate adjustment (Note 5 and 10)							(164)		169								5
Conversion of class C common stock upon sales into public market			3		—	⁽¹⁾											—
Vesting of restricted stock and performance-based shares			3														—
Share-based compensation, net of forfeitures (Note 12)											322						322
Restricted stock and performance-based shares settled in cash for taxes			(1)								(158)						(158)
Cash proceeds from issuance of common stock under employee equity plans			1								142						142
Cash dividends declared and paid, at a quarterly amount of $0.30 per class A common stock (Note 10)													(2,002)				(2,002)
Repurchase of class A common stock (Note 10)			(37)								(390)		(6,182)				(6,572)
Balance as of June 30, 2020	2	3	1,687	245	11		$	5,298	$	(24)	$	16,457	$	14,072	$	(279)	$	35,524

⁽¹⁾Increase or decrease is less than one million shares.

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

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VISA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

(UNAUDITED)


	Three Months Ended June 30, 2019
	Preferred Stock				Common Stock									Preferred Stock		Right to Recover for Covered Losses		Additional Paid-In Capital		Accumulated Income	Accumulated Other Comprehensive Income (Loss), Net	Total Equity
	Series B	Series C	Class A		Class B	Class C
	(in millions, except per share data)
Balance as of March 31, 2019	2	3	1,741		245	12		$	5,464	$	(163)	$	16,547	$	12,513	$	(86)	$	34,275
Net income														3,101				3,101
Other comprehensive income (loss), net of tax																196		196
Comprehensive income																		3,297

VE territory covered losses incurred (Note 5)										(8)								(8)
Recovery through conversion rate adjustment (Note 5 and 10)								(2)		2								—
Conversion of class C common stock upon sales into public market			—	⁽¹⁾		—	⁽¹⁾											—
Vesting of restricted stock and performance-based shares			—	⁽¹⁾														—
Share-based compensation, net of forfeitures (Note 12)												110						110
Restricted stock and performance-based shares settled in cash for taxes			—	⁽¹⁾								(3)						(3)
Cash proceeds from issuance of common stock under employee equity plans			1									38						38
Cash dividends declared and paid, at a quarterly amount of $0.25 per class A common stock (Note 10)														(565)				(565)
Repurchase of class A common stock (Note 10)			(13)									(140)		(2,009)				(2,149)
Balance as of June 30, 2019	2	3	1,729		245	12		$	5,462	$	(169)	$	16,552	$	13,040	$	110	$	34,995

⁽¹⁾Increase or decrease is less than one million shares.

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

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VISA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

(UNAUDITED)


	Nine Months Ended June 30, 2019
	Preferred Stock			Common Stock								Preferred Stock		Right to Recover for Covered Losses		Additional Paid-In Capital	Accumulated Income	Accumulated Other Comprehensive Income (Loss), Net	Total Equity
	Series B	Series C	Class A	Class B	Class C
	(in millions, except per share data)
Balance as of September 30, 2018	2	3	1,768	245	12	$	5,470	$	(7)	$	16,678	$	11,318	$	547