UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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



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

For the quarterly period ended ~~March~~December 31, 2019

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



☐	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 ~~San Francisco, California~~		94128-8999
San Francisco,	California
(Address of principal executive offices)		(Zip Code)

~~(650)~~ (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	V	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 þ☑ No o☐

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 þ☑ No o☐

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 filerþ	☑	Accelerated filero	☐
Non-accelerated filer	☐	Smaller reporting companyo	☐
~~Non-accelerated filer~~ o		Emerging growth companyo	☐

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. o☐

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

As of ~~April 19, 2019~~January 24, 2020, there were ~~1,738,987,989~~1,706,024,403 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 ~~11,565,095~~10,969,172 shares outstanding of the registrant’s class C common stock, par value $0.0001 per ~~share, of Visa Inc. outstanding.~~share.

VISA INC.

TABLE OF CONTENTS




		Page
PART I.	Financial Information	34

Item 1.	Financial Statements (unaudited)	3
	~~Consolidated Balance Sheets—March 31, 2019 and September 30, 2018~~	3
	~~Consolidated Statements of Operations—Three and Six Months Ended March 31, 2019 and 2018~~	4
	Consolidated Balance Sheets—December 31, 2019 and September 30, 2019	4
	Consolidated Statements of ~~Comprehensive Income—~~Operations—Three ~~and Six~~ Months Ended ~~March~~December 31, 2019 and 2018	5
	Consolidated Statements of ~~Changes in Equity—~~Comprehensive Income—Three ~~and Six~~ Months Ended ~~March~~December 31, 2019 and 2018	6
	Consolidated Statements of Changes in Equity—Three Months Ended December 31, 2019 and 2018	7
	Consolidated Statements of Cash Flows—~~Six~~Three Months Ended ~~March~~December 31, 2019 and 2018	9
	Notes to Consolidated Financial Statements (unaudited)	10
	~~Notes to Consolidated Financial Statements (unaudited)~~	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2924
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3831
Item 4.	Controls and Procedures	3831

PART II.	Other Information	3932

Item 1.	Legal Proceedings	3932
Item 1A.	Risk Factors	3932
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3932
Item 3.	Defaults Upon Senior Securities	3932
Item 4.	Mine Safety Disclosures	3932
Item 5.	Other Information	3932
Item 6.	Exhibits	4033
	Signatures	4134

PART I. FINANCIAL INFORMATION



ITEM 1.	Financial Statements

VISA INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	March 31, 2019			September 30, 2018			December 31, 2019			September 30, 2019
	(in millions, except par value data)						(in millions, except par value data)
Assets
Cash and cash equivalents	$	7,648		$	8,162		$	8,768		$	7,838
Restricted cash equivalents—U.S. litigation escrow (Note 3 and Note 4)	899			1,491			1,634			1,205
Investment securities (Note 5)	3,876			3,547			3,902			4,236
Settlement receivable	1,574			1,582			3,273			3,048
Accounts receivable	1,404			1,208			1,661			1,542
Customer collateral (Note 3 and Note 7)	1,735			1,324
Customer collateral (Note 3 and Note 8)							1,698			1,648
Current portion of client incentives	589			340			803			741
Prepaid expenses and other current assets	765			562			580			712
Total current assets	18,490			18,216			22,319			20,970
Investment securities (Note 5)	3,506			4,082			1,719			2,157
Client incentives	1,664			538			2,481			2,084
Property, equipment and technology, net	2,456			2,472			2,739			2,695
Goodwill	15,088			15,194			15,767			15,656
Intangible assets, net	26,966			27,558			27,137			26,780
Other assets	1,695			1,165			2,619			2,232
Total assets	$	69,865		$	69,225		$	74,781		$	72,574
Liabilities
Accounts payable	$	119		$	183		$	133		$	156
Settlement payable	2,081			2,168			4,277			3,990
Customer collateral (Note 7)	1,735			1,325
Customer collateral (Note 3 and Note 8)							1,698			1,648
Accrued compensation and benefits	578			901			527			796
Client incentives	3,484			2,834			4,270			3,997
Accrued liabilities	1,207			1,160			2,045			1,625
Deferred purchase consideration	1,262			1,300
Current maturities of long-term debt (Note 7)							3,000			0
Accrued litigation (Note 13)	914			1,434			1,629			1,203
Total current liabilities	11,380			11,305			17,579			13,415
Long-term debt (Note 6)	16,630			16,630
Long-term debt (Note 7)							13,688			16,729
Deferred tax liabilities	4,911			4,618			4,810			4,807
Other liabilities	2,669			2,666			3,434			2,939
Total liabilities	35,590			35,219			39,511			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 9)	—			—			0			0
Series B convertible participating preferred stock, 2 shares issued and outstanding at March 31, 2019 and September 30, 2018 (the “UK&I preferred stock”) (Note 9)	2,286			2,291
Series C convertible participating preferred stock, 3 shares issued and outstanding at March 31, 2019 and September 30, 2018 (the “Europe preferred stock”) (Note 9)	3,178			3,179
Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,741 and 1,768 shares issued and outstanding at March 31, 2019 and September 30, 2018, respectively (Note 9)	—			—
Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at March 31, 2019 and September 30, 2018 (Note 9)	—			—
Class C common stock, $0.0001 par value, 1,097 shares authorized, 12 shares issued and outstanding at March 31, 2019 and September 30, 2018 (Note 9)	—			—
Series B convertible participating preferred stock, 2 shares issued and outstanding at December 31, 2019 and September 30, 2019 (the “UK&I preferred stock”) (Note 4 and Note 9)							2,285			2,285
Series C convertible participating preferred stock, 3 shares issued and outstanding at December 31, 2019 and September 30, 2019 (the “Europe preferred stock”) (Note 4 and Note 9)							3,177			3,177
Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,709 and 1,718 shares issued and outstanding at December 31, 2019 and September 30, 2019, respectively (Note 9)							0			0
Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at December 31, 2019 and September 30, 2019 (Note 9)							0			0
Class C common stock, $0.0001 par value, 1,097 shares authorized, 11 shares issued and outstanding at December 31, 2019 and September 30, 2019 (Note 9)							0			0
Right to recover for covered losses (Note 4)	(163		)	(7		)	(175		)	(171		)
Additional paid-in capital	16,547			16,678			16,424			16,541
Accumulated income	12,513			11,318			13,899			13,502
Accumulated other comprehensive income (loss), net:
Investment securities	1			(17		)	4			6
Defined benefit pension and other postretirement plans	(67		)	(61		)	(203		)	(192		)
Derivative instruments	96			60			49			199
Foreign currency translation adjustments	(116		)	565			(190		)	(663		)
Total accumulated other comprehensive income (loss), net	(86		)	547			(340		)	(650		)
Total equity	34,275			34,006			35,270			34,684
Total liabilities and equity	$	69,865		$	69,225		$	74,781		$	72,574

VISA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



	Three Months Ended December 31,
	2019			2018
	(in millions, except per share data)
Net revenues	$	6,054		$	5,506

Operating Expenses
Personnel	982			807
Marketing	274			276
Network and processing	181			173
Professional fees	106			91
Depreciation and amortization	182			159
General and administrative	313			276
Litigation provision (Note 13)	0			7
Total operating expenses	2,038			1,789
Operating income	4,016			3,717

Non-operating Income (Expense)
Interest expense, net	(111		)	(145		)
Investment income and other	69			58
Total non-operating income (expense)	(42		)	(87		)
Income before income taxes	3,974			3,630
Income tax provision (Note 12)	702			653
Net income	$	3,272		$	2,977

Basic Earnings Per Share (Note 10)	��
Class A common stock	$	1.46		$	1.30
Class B common stock	$	2.37		$	2.12
Class C common stock	$	5.85		$	5.20

Basic Weighted-average Shares Outstanding (Note 10)
Class A common stock	1,713			1,760
Class B common stock	245			245
Class C common stock	11			12

Diluted Earnings Per Share (Note 10)
Class A common stock	$	1.46		$	1.30
Class B common stock	$	2.37		$	2.12
Class C common stock	$	5.84		$	5.20

Diluted Weighted-average Shares Outstanding (Note 10)
Class A common stock	2,240			2,291
Class B common stock	245			245
Class C common stock	11			12

Three Months Ended
March 31, Six Months Ended
March 31,
2019 2018 2019 2018
(in millions, except per share data)
Net revenues $ 5,494
$ 5,073
$ 11,000
$ 9,935

Operating Expenses
Personnel 894
824
1,701
1,503
Marketing 241
261
517
484
Network and processing 171
169
344
329
Professional fees 101
108
192
200
Depreciation and amortization 160
153
319
298
General and administrative 264
222
540
458
Litigation provision (Note 13) 22
—
29
—
Total operating expenses 1,853
1,737
3,642
3,272
Operating income 3,641
3,336
7,358
6,663

Non-operating Income (Expense)
Interest expense, net (140 ) (153 ) (285 ) (307 )
Investment income and other 176
34
234
100
Total non-operating income (expense) 36
(119 ) (51 ) (207 )
Income before income taxes 3,677
3,217
7,307
6,456
Income tax provision (Note 12) 700
612
1,353
1,329
Net income $ 2,977
$ 2,605
$ 5,954
$ 5,127

Basic Earnings Per Share (Note 10)
Class A common stock $ 1.31
$ 1.12
$ 2.61
$ 2.19
Class B common stock $ 2.13
$ 1.84
$ 4.25
$ 3.61
Class C common stock $ 5.23
$ 4.46
$ 10.44
$ 8.76

Basic Weighted-average Shares Outstanding (Note 10)
Class A common stock 1,748
1,798
1,754
1,805
Class B common stock 245
245
245
245
Class C common stock 12
12
12
13

Diluted Earnings Per Share (Note 10)
Class A common stock $ 1.31
$ 1.11
$ 2.61
$ 2.19
Class B common stock $ 2.13
$ 1.84
$ 4.25
$ 3.60
Class C common stock $ 5.23
$ 4.46
$ 10.42
$ 8.74

Diluted Weighted-average Shares Outstanding (Note 10)
Class A common stock 2,279
2,337
2,285
2,345
Class B common stock 245
245
245
245
Class C common stock 12
12
12
13

VISA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended December 31,
	2019			2018			2019			2018			2019			2018
	(in millions)												(in millions)
Net income	$	2,977		$	2,605		$	5,954		$	5,127		$	3,272		$	2,977
Other comprehensive income (loss), net of tax:
Investment securities:
Net unrealized gain (loss)	7			41			15			50			0			8
Income tax effect	(2		)	(9		)	(4		)	(12		)	0			(2		)
Reclassification adjustment for net (gain) loss realized in net income	—			—			—			(28		)
Income tax effect	—			—			—			10
Defined benefit pension and other postretirement plans:
Net unrealized actuarial gain (loss) and prior service credit (cost)	—			(2		)	(7		)	(2		)	(1		)	(7		)
Income tax effect													0			1
Reclassification adjustments													4			0
Income tax effect	—			1			1			1			(1		)	0
Derivative instruments:
Net unrealized gain (loss)	59			(41		)	97			(42		)	(188		)	38
Income tax effect	(13		)	2			(23		)	(3		)	39			(10		)
Reclassification adjustment for net (gain) loss realized in net income	(22		)	24			(47		)	35
Reclassification adjustments													(2		)	(25		)
Income tax effect	4			(3		)	9			(5		)	1			5
Foreign currency translation adjustments	(394		)	512			(681		)	846			483			(287		)
Other comprehensive income (loss), net of tax	(361		)	525			(640		)	850			335			(279		)
Comprehensive income	$	2,616		$	3,130		$	5,314		$	5,977		$	3,607		$	2,698

VISA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)



	Three Months Ended December 31, 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, 2019	2	3	1,718		245	11		$	5,462	$	(171	)	$	16,541		$	13,502		$	(650	)	$	34,684
Net income																3,272						3,272
Other comprehensive income (loss), net of tax																			335			335
Comprehensive income																						3,607
Adoption of new accounting standards (Note 1)																25			(25		)	0
VE territory covered losses incurred (Note 4)										(4		)										(4		)
Conversion of class C common stock upon sales into public market			1			0	⁽¹⁾															—
Vesting of restricted stock and performance-based shares			3																			—
Share-based compensation, net of forfeitures (Note 11)													116									116
Restricted stock and performance-based shares settled in cash for taxes			(1	)									(147		)							(147		)
Cash proceeds from issuance of common stock under employee equity plans			1										55									55
Cash dividends declared and paid, at a quarterly amount of $0.30 per as-converted share (Note 9)																(671		)				(671		)
Repurchase of class A common stock (Note 9)			(13	)									(141		)	(2,229		)				(2,370		)
Balance as of December 31, 2019	2	3	1,709		245	11		$	5,462	$	(175	)	$	16,424		$	13,899		$	(340	)	$	35,270

Three Months Ended March 31, 2019
Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses
Additional
Paid-In Capital

Accumulated
Income
Accumulated
Other
Comprehensive
Income Total
Equity
UK&I Europe Class A Class B Class C
(in millions, except per share data)
Balance as of December 31, 2018 2
3
1,754
245
12
$ 5,464
$ (92 ) $ 16,540
$ 11,908
$ 275
$ 34,095
Net income 2,977
2,977
Other comprehensive income (loss), net of tax (361 ) (361 )
Comprehensive income 2,616
Adoption of new accounting standards (Note 1) (8 ) —
(8 )
VE territory covered losses incurred (Note 4) (71 ) (71 )
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 11) 111
111
Restricted stock and performance-based shares settled in cash for taxes —
⁽¹⁾
(2 ) (2 )
Cash proceeds from issuance of common stock under employee equity plans —
⁽¹⁾
41
41
Cash dividends declared and paid, at a quarterly amount of $0.25 per Class A share (Note 9) (569 ) (569 )
Repurchase of class A common stock (Note 9) (14 ) (143 ) (1,795 ) (1,938 )
Balance as of March 31, 2019 2
3
1,741
245
12
$ 5,464
$ (163 ) $ 16,547
$ 12,513
$ (86 ) $ 34,275


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

~~VISA INC.~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)~~

~~(UNAUDITED)~~

Six Months Ended March 31, 2019
Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses
Additional
Paid-In Capital

Accumulated
Income
Accumulated
Other
Comprehensive
Income Total
Equity
UK&I Europe 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
$ 34,006
Net income 5,954
5,954
Other comprehensive income (loss), net of tax (640 ) (640 )
Comprehensive income 5,314
Adoption of new accounting standards (Note 1) �� 385
7
392
VE territory covered losses incurred (Note 4) (162 ) (162 )
Recovery through conversion rate adjustment (Note 4 and Note 9) (6 ) 6
—
Conversion of class C common stock upon sales into public market 1
—
⁽¹⁾
—
Vesting of restricted stock and performance-based shares 3
—
Share-based compensation, net of forfeitures (Note 11) 211
211
Restricted stock and performance-based shares settled in cash for taxes (1 ) (103 ) (103 )
Cash proceeds from issuance of common stock under employee equity plans 1
89
89
Cash dividends declared and paid, at a quarterly amount of $0.25 per Class A share (Note 9) (1,141 ) (1,141 )
Repurchase of class A common stock (Note 9) (31 ) (328 ) (4,003 ) (4,331 )
Balance as of March 31, 2019 2
3
1,741
245
12
$ 5,464
$ (163 ) $ 16,547
$ 12,513
$ (86 ) $ 34,275

⁽¹⁾

~~Decrease is less than one million shares.~~

VISA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

(UNAUDITED)



	Three Months Ended December 31, 2018
	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		$	34,006
Net income																		2,977						2,977
Other comprehensive income (loss), net of tax																					(279		)	(279		)
Comprehensive income																								2,698
Adoption of new accounting standards																		393			7			400
VE territory covered losses incurred (Note 4)												(91		)										(91		)
Recovery through conversion rate adjustment (Note 4 and Note 9)									(6		)	6												—
Conversion of class C common stock upon sales into public market			0		⁽¹⁾		0	⁽¹⁾																—
Vesting of restricted stock and performance-based shares			3																					—
Share-based compensation, net of forfeitures (Note 11)															100									100
Restricted stock and performance-based shares settled in cash for taxes			(1	)											(101		)							(101		)
Cash proceeds from issuance of common stock under employee equity plans			1												48									48
Cash dividends declared and paid, at a quarterly amount of $0.25 per as-converted share (Note 9)																		(572		)				(572		)
Repurchase of class A common stock (Note 9)			(17	)											(185		)	(2,208		)				(2,393		)
Balance as of December 31, 2018	2	3	1,754			245	12		$	5,464		$	(92	)	$	16,540		$	11,908		$	275		$	34,095

Three Months Ended March 31, 2018
Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses
Additional
Paid-In Capital

Accumulated
Income
Accumulated
Other
Comprehensive
Income Total
Equity
UK&I Europe Class A Class B Class C
(in millions, except per share data)
Balance as of December 31, 2017 2
3
1,805
245
12
$ 5,476
$ (5 ) $ 16,761
$ 9,966
$ 1,203
$ 33,401
Net income 2,605
2,605
Other comprehensive income (loss), net of tax 525
525
Comprehensive income 3,130
VE territory covered losses incurred (Note 4) (1 ) (1 )
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 11) —
⁽¹⁾
85
85
Restricted stock and performance-based shares settled in cash for taxes —
⁽¹⁾
—
—
Cash proceeds from issuance of common stock under employee equity plans 1
50
50
Cash dividends declared and paid, at a quarterly amount of $0.210 per Class A share (Note 9) (490 ) (490 )
Repurchase of class A common stock (Note 9) (17 ) (183 ) (1,889 ) (2,072 )
Balance as of March 31, 2018 2
3
1,790
245
12
$ 5,476
$ (6 ) $ 16,713
$ 10,192
$ 1,728
$ 34,103


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

~~VISA INC.~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)~~

~~(UNAUDITED)~~

Six Months Ended March 31, 2018
Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses
Additional
Paid-In Capital

Accumulated
Income
Accumulated
Other
Comprehensive
Income Total
Equity
UK&I Europe Class A Class B Class C
(in millions, except per share data)
Balance as of September 30, 2017 2
3
1,818
245
13
$ 5,526
$ (52 ) $ 16,900
$ 9,508
$ 878
$ 32,760
Net income 5,127
5,127
Other comprehensive income (loss), net of tax 850
850
Comprehensive income 5,977
VE territory covered losses incurred (Note 4) (4 ) (4 )
Recovery through conversion rate adjustment (Note 4 and Note 9) (50 ) 50
—
Conversion of class C common stock upon sales into public market 2
(1 ) —
Vesting of restricted stock and performance-based shares 2
—
Share-based compensation, net of forfeitures (Note11) —
⁽¹⁾
153
153
Restricted stock and performance-based shares settled in cash for taxes (1 ) (88 ) (88 )
Cash proceeds from issuance of common stock under employee equity plans 2
103
103
Cash dividends declared and paid, at a quarterly amount of $0.195 per Class A share in the first quarter and $0.210 per Class A share in the second quarter (Note 9) (948 ) (948 )
Repurchase of class A common stock (Note 9) (33 ) (355 ) (3,495 ) (3,850 )
Balance as of March 31, 2018 2
3
1,790
245
12
$ 5,476
$ (6 ) $ 16,713
$ 10,192
$ 1,728
$ 34,103

⁽¹⁾

~~Decrease is less than one million shares.~~

VISA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended March 31,						Three Months Ended December 31,
	2019			2018			2019			2018
	(in millions)						(in millions)
Operating Activities
Net income	$	5,954		$	5,127		$	3,272		$	2,977
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Client incentives (Note 2)	2,934			2,615			1,748			1,456
Share-based compensation (Note 11)	211			153			116			100
Depreciation and amortization of property, equipment, technology and intangible assets	319			298			182			159
Deferred income taxes	256			(945		)	(47		)	139
Right to recover for covered losses recorded in equity (Note 4)	(162		)	(4		)
VE territory covered losses incurred (Note 4)							(4		)	(91		)
Other	(106		)	(10		)	(50		)	9
Change in operating assets and liabilities:
Settlement receivable	(23		)	(1,039		)	(183		)	(1,551		)
Accounts receivable	(203		)	(113		)	(107		)	(200		)
Client incentives	(3,142		)	(2,177		)	(1,943		)	(1,361		)
Other assets	(245		)	41			123			(37		)
Accounts payable	(48		)	(26		)	(12		)	(46		)
Settlement payable	(38		)	986			218			1,739
Accrued and other liabilities	170			975			136			(54		)
Accrued litigation (Note 13)	(519		)	(152		)	426			55
Net cash provided by operating activities	5,358			5,729
Net cash provided by (used in) operating activities							3,875			3,294
Investing Activities
Purchases of property, equipment and technology	(313		)	(354		)	(191		)	(157		)
Investment securities:
Purchases	(1,806		)	(2,342		)	(400		)	(1,124		)
Proceeds from maturities and sales	2,038			1,771			1,202			1,233
Acquisitions, net of cash acquired	—			(196		)	(77		)	0
Purchases of / contributions to other investments	(236		)	(16		)	(9		)	(22		)
Proceeds / distributions from other investments	10			—			1			0
Other investing activities	(89		)	—			36			0
Net cash used in investing activities	(396		)	(1,137		)
Net cash provided by (used in) investing activities							562			(70		)
Financing Activities
Repurchase of class A common stock (Note 9)	(4,331		)	(3,850		)	(2,370		)	(2,393		)
Repayments of long-term debt	—			(1,750		)
Dividends paid (Note 9)	(1,141		)	(948		)	(671		)	(572		)
Cash proceeds from issuance of common stock under employee equity plans	89			103			55			48
Restricted stock and performance-based shares settled in cash for taxes	(103		)	(88		)	(147		)	(101		)
Net cash used in financing activities	(5,486		)	(6,533		)
Net cash provided by (used in) financing activities							(3,133		)	(3,018		)
Effect of exchange rate changes on cash and cash equivalents	(171		)	206			127			(68		)
Decrease in cash, cash equivalents, restricted cash and restricted cash equivalents	(695		)	(1,735		)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents							1,431			138
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period (Note 3)	10,977			12,011			10,832			10,977
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period (Note 3)	$	10,282		$	10,276		$	12,263		$	11,115
Supplemental Disclosure
Income taxes paid, net of refunds	$	1,381		$	1,197		$	345		$	168
Interest payments on debt (Note 6)	$	269		$	276
Interest payments on debt							$	234		$	234
Accruals related to purchases of property, equipment and technology	$	51		$	21		$	66		$	34

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~December 31, 2019

(UNAUDITED)

Note 1—Summary of Significant Accounting Policies

Organization. Visa Inc. (“Visa” or the “Company”) is a global payments technology company that enables fast, secure and reliable electronic payments across more than 200 countries and territories. Visa and its wholly-owned consolidated subsidiaries, including Visa U.S.A. Inc. (“Visa U.S.A.”), Visa International Service Association (“Visa International”), Visa Worldwide Pte. Limited, Visa Europe Limited (“Visa Europe”), Visa Canada Corporation (“Visa Canada”), Visa Technology & Operations LLC and CyberSource Corporation, operate one of the world’s largest ~~retail~~ electronic payments networks — VisaNet — which facilitates authorization, clearing and settlement of payment transactions and enables the Company to provide its financial institution and merchant clients a wide range of products, platforms and value-added services. ~~VisaNet also offers fraud protection for account holders and assured payment for merchants.~~ Visa is not a ~~bank~~financial institution and does not issue cards, extend credit or set rates and fees for account holders on Visa products. In most cases, account holder and merchant relationships belong to, and are managed by, Visa’s financial institution clients.

Consolidation and basis of presentation. The accompanying unaudited consolidated financial statements include the accounts of Visa and its consolidated entities and are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company consolidates its majority-owned and controlled entities, including variable interest entities (“VIEs”) for which the Company is the primary beneficiary. The Company’s investments in VIEs have not been material to its unaudited consolidated financial statements as of and for the periods presented. All significant intercompany accounts and transactions are eliminated in consolidation.

The accompanying unaudited consolidated financial statements are presented in accordance with the U.S. Securities and Exchange Commission ~~(SEC)~~(“SEC”) requirements for Quarterly Reports on Form 10-Q and, consequently, do not include all of the annual disclosures required by U.S. GAAP. Reference should be made to the Visa Annual Report on Form 10-K for the year ended September 30, ~~2018~~2019 for additional disclosures, including a summary of the Company’s significant accounting policies.

In the opinion of management, the accompanying unaudited consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented.

Recently Issued and Adopted Accounting Pronouncements.

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of goods or services to customers. This new revenue standard replaces all existing revenue recognition guidance in U.S. GAAP. Subsequently, the FASB also issued a series of amendments to the new revenue standard. The new revenue standard changes the classification and timing of recognition of certain client incentives and marketing-related funds paid to customers, as well as revenues and expenses for market development funds and services provided to customers as an incentive. The Company adopted the standard effective October 1, 2018 using the modified retrospective transition method applied to the aggregate of all modifications for contracts not completed as of October 1, 2018. Results for reporting periods beginning after October 1, 2018 are presented under the new revenue standard. The comparative prior period amounts appearing on the financial statements have not been restated and continue to be reported under the prior revenue standard. See ~~Note 2—Revenues~~ ~~for the impact of the new revenue standard on the accompanying unaudited consolidated financial statements as of and for the three and six months ended March 31, 2019.~~

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

The following table summarizes the cumulative transition adjustments for the adoption of the new revenue standard recorded on the October 1, 2018 consolidated balance sheet to reflect the aggregate impact to all contracts not completed as of October 1, 2018:

Fiscal Year 2018 Closing Balance Sheet Cumulative Transition Adjustment for New Revenue Standard Fiscal Year 2019 Opening Balance Sheet
(in millions)
Assets
Current portion of client incentives $ 340
$ 199
$ 539
Client incentives 538
614
1,152
Liabilities
Client incentives 2,834
241
3,075
Accrued liabilities 1,160
6
1,166
Deferred tax liabilities 4,618
108
4,726
Other liabilities 2,666
58
2,724
Equity
Accumulated income 11,318
400
11,718

In January 2016, the FASB issued ASU 2016-01, which amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including the requirement to measure certain equity investments at fair value with changes in fair value recognized in net income. The Company adopted the standard effective October 1, 2018, using the modified retrospective transition method for marketable equity securities and the prospective method for non-marketable equity securities. The Company has elected to use the measurement alternative for non-marketable equity securities, defined as cost adjusted for changes from observable transactions for identical or similar investments of the same issuer, less impairment. The adoption did not have a material impact on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, which requires the recognition of lease assets and lease liabilities arising from operating leases on the balance sheet. Subsequently, the FASB also issued a series of amendments to this new ~~lease~~leases standard that address the transition methods available and clarify the guidance for lessor costs and other aspects of the new ~~lease~~leases standard. The Company ~~will adopt~~adopted the standard effective October 1, 2019 ~~and expects to adopt~~ using the modified retrospective transition method ~~without restating~~with comparative ~~periods.~~periods continuing to be reported using the prior leases standard. The Company elected to apply the package of practical expedients permitted under the transition guidance, allowing the Company to carry forward the historical assessment of whether a contract was or contains a lease, lease classification and capitalization of initial direct costs. The adoption did not have a material impact on the consolidated financial statements.

In accordance with ASU 2016-02, the Company determines if an arrangement is a lease at its inception. Right-of-use (“ROU”) assets, and corresponding lease liabilities, are recognized at the commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As a majority of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. The Company does not record a ROU asset and corresponding liability for leases with terms of 12 months or less.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company does not include renewals in the determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. The Company does not combine lease payments with non-lease components for any of its leases. Operating leases are recorded as ROU assets, which are included in other assets. The current portion of lease liabilities are included in accrued liabilities and the long-term portion is included in other liabilities on the consolidated balance sheet. The Company’s lease cost consists of amounts recognized under lease agreements in the results of operations adjusted for impairment and sublease income.

In February 2018, the FASB issued ASU 2018-02, which allows a reclassification from accumulated other comprehensive income to retained earnings for adjustments to tax effects that were originally recorded in other comprehensive income due to changes in the U.S. federal corporate income tax rate resulting from the enactment of the U.S. tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Company adopted the ASU effective October 1, 2019. The adoption did not have a material impact on the consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in the existing guidance for income taxes and making other minor improvements. The amendments in the ASU are effective for the Company on October 1, 2021. The Company does not plan to early adopt the ASU at this time. The adoption is not expected to have a material impact on the consolidated financial statements.

In ~~October 2016,~~January 2020, the FASB issued ASU ~~2016-16,~~2020-01, which ~~requires~~clarifies that ~~entities recognize~~an entity should consider observable transactions that require it to either apply or discontinue the ~~income tax consequences~~equity method of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The Company adopted the standard effective October 1, 2018. The adoption did not have a material impact on the consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, which requires that a statement of cash flows includes the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. The Company adopted the standard effective October 1, 2018. The adoption impacted the presentation of transactions related to the U.S. litigation escrow account and customer collateral on the consolidated statements of cash flows. The prior period statement of cash flows have been retrospectively adjusted to reflect the impact of this ASU, which had no impact on the Company’s balance sheets, statements of operations or statements of comprehensive income for any period.

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

In March 2017, the FASB issued ASU 2017-07, which requires that the service cost component of net periodic pension and postretirement benefit cost be presented in the same line item as other employee compensation costs, while the other components be presented separately as non-operating income (expense). In addition, only the service cost component is eligible for capitalization, when applicable. Retrospective application is requiredaccounting for the change in income statement presentation while the change in capitalized benefit cost is required to be applied prospectively. The Company adopted the standard effective October 1, 2018, which did not have a material impact on the consolidated financial statements. The service cost componentpurposes of net periodic pension and postretirement benefit cost is presented in personnel expenses while the other components are presented in other non-operating expense on the Company’s consolidated statement of operations. The Company did not apply the standard retrospectively for the change in income statement presentation as the impact would have been immaterial.

~~In May 2017, the FASB issued ASU 2017-09, which amends the scope of modification accounting for share-based payment arrangements. Specifically, an entity would not apply modification accounting if~~applying the fair value ~~vesting conditions, and classification of~~measurement alternative. The amendments in the ~~awards~~ASU are effective for the ~~same immediately before and after the modification. The~~ Company ~~adopted the standard effective~~on October 1, ~~2018.~~2021. The adoption ~~did~~is not ~~have a material impact on the consolidated financial statements.~~

~~In August 2017, the FASB issued ASU 2017-12, which improves the financial reporting of hedging instruments~~expected to better portray the economic results of an entity’s risk management activities in its financial statements. Visa early adopted the standard effective January 1, 2019, which did not have a material impact on the consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted the standard effective October 1, 2018. The adoption did not have a material impact on the consolidated financial statements.

Note 2—Revenues

~~Impact of the New Revenue Standard~~

The following tables summarize the impact of the new revenue standard on the Company’s consolidated statement of operations for the three and six months ended March 31, 2019 and the consolidated balance sheet as of March 31, 2019:

For the Three Months Ended
March 31, 2019

For the Six Months Ended
March 31, 2019
As Reported Impact of the New Revenue Standard Results Under Prior Revenue Standard As Reported Impact of the New Revenue Standard Results Under Prior Revenue Standard
(in millions)
Net revenues $ 5,494
$ (39 ) $ 5,455
$ 11,000
$ (91 ) $ 10,909

Operating Expenses
Marketing 241
(39 ) 202
517
(69 ) 448
Professional fees 101
(3 ) 98
192
(6 ) 186
General and administrative 264
(7 ) 257
540
(10 ) 530
Total operating expenses 1,853
(49 ) 1,804
3,642
(85 ) 3,557
Operating income 3,641
10
3,651
7,358
(6 ) 7,352

Income before income taxes 3,677
10
3,687
7,307
(6 ) 7,301
Income tax provision 700
2
702
1,353
1
1,354
Net income 2,977
8
2,985
5,954
(7 ) 5,947

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

March 31, 2019
As Reported Impact of the New Revenue Standard Results Under Prior Revenue Standard
(in millions)
Assets
Current portion of client incentives $ 589
$ (262 ) $ 327
Client incentives 1,664
(725 ) 939
Liabilities
Accounts payable 119
13
132
Client incentives 3,484
(401 ) 3,083
Accrued liabilities 1,207
(8 ) 1,199
Deferred tax liabilities 4,911
(105 ) 4,806
Other liabilities 2,669
(79 ) 2,590
Equity
Accumulated income 12,513
(407 ) 12,106

~~Disaggregation of Revenues~~

The nature, amount, timing and uncertainty of the Company’s revenues and cash flows and how they are affected by economic factors are most appropriately depicted through the Company’s revenue categories and geographical markets. The following tables disaggregate the Company’s net revenues by revenue category and by geography for the three ~~and six~~ months ended~~March~~ December 31, 2019 and 2018:


	Three Months Ended March 31,						Six Months Ended March 31,						Three Months Ended December 31,
	2019			2018			2019			2018			2019			2018
	(in millions)												(in millions)
Service revenues	$	2,417		$	2,253		$	4,759		$	4,399		$	2,555		$	2,342
Data processing revenues	2,432			2,127			4,902			4,274			2,864			2,470
International transaction revenues	1,796			1,752			3,647			3,418			2,018			1,851
Other revenues	327			230			626			459			365			299
Client incentives	(1,478		)	(1,289		)	(2,934		)	(2,615		)	(1,748		)	(1,456		)
Net revenues	$	5,494		$	5,073		$	11,000		$	9,935		$	6,054		$	5,506



	Three Months Ended December 31,
	2019		2018
	(in millions)
U.S.	$	2,717	$	2,508
International	3,337		2,998
Net revenues	$	6,054	$	5,506

Three Months Ended
March 31, Six Months Ended
March 31,
2019 2018 2019 2018
(in millions)
U.S. $ 2,479
$ 2,297
$ 4,987
$ 4,562
International 3,015
2,776
6,013
5,373
Net revenues $ 5,494
$ 5,073
$ 11,000
$ 9,935

~~Revenue recognition.~~ The Company's net revenues are comprised principally of the following categories: service revenues, data processing revenues, international transaction revenues, and other revenues, reduced by costs incurred under client incentives arrangements. As a payment network service provider, the Company’s obligation to the customer is to stand ready to provide continuous access to our payment network over the contractual term. Consideration is variable based primarily upon the amount and type of transactions and payments volume on Visa’s products. The Company recognizes revenues, net of sales and other similar taxes, as the payment network services are performed. Fixed fees for payment network services are generally recognized ratably over the related service period. The Company has elected the optional exemption to not disclose the remaining performance obligations related to payment network services.

1411

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~Service revenues~~ consist of revenues earned for services provided in support of client usage of Visa products. Current quarter service revenues are primarily assessed using a calculation of current pricing applied to the prior quarter's payments volume. The Company also earns revenues from assessments designed to support ongoing acceptance and volume growth initiatives, which are recognized in the same period the related volume is transacted.

~~Data processing revenues~~ consist of revenues earned for authorization, clearing, settlement, network access and other maintenance and support services that facilitate transaction and information processing among the Company's clients globally. Data processing revenues are recognized in the same period the related transactions occur or services are performed.

~~International transaction revenues~~ are earned for cross-border transaction processing and currency conversion activities. Cross-border transactions arise when the country of origin of the issuer is different from that of the merchant. International transaction revenues are primarily generated by cross-border payments and cash volume.

~~Other revenues~~ consist mainly of license fees for use of the Visa brand, fees for account holder services, licensing and certification and other activities related to the Company's acquired entities. Other revenues also include optional services or product enhancements, such as extended account holder protection and concierge services. Other revenues are recognized in the same period the related transactions occur or services are performed.

~~Client incentives.~~ The Company enters into long-term contracts with financial institution clients, merchants and strategic partners for various programs designed to increase revenues recognized by growing payments volume, increasing Visa product acceptance, winning merchant routing transactions over to Visa's network and driving innovation. These incentives are primarily accounted for as reductions to revenues or as operating expenses if the payment is in exchange for a distinct good or service provided by the customer. The Company generally capitalizes upfront and fixed incentive payments under these agreements and amortizes the amounts as a reduction to revenues ratably over the contractual term. Incentives that are earned by the customer based on performance targets are recorded as reductions to revenues based on management's estimate of each client's future performance. These accruals are regularly reviewed and estimates of performance are adjusted, as appropriate, based on changes in performance expectations, actual client performance, amendments to existing contracts or the execution of new contracts.

Note 3—Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

The Company’s cash and cash equivalents include cash and certain highly liquid investments with original maturities of 90 days or less from the date of purchase. Cash equivalents are primarily recorded at cost, which approximates fair value due to their generally short maturities. The Company defines restricted cash and restricted cash equivalents as cash and cash equivalents that cannot be withdrawn or used for general operating activities.

The Company reconciles cash, cash equivalents, restricted cash and restricted cash equivalents reported in the consolidated balance sheets that aggregate to the beginning and ending balances shown in the consolidated statements of cash flows as follows:



	December 31, 2019		September 30, 2019
	(in millions)
Cash and cash equivalents	$	8,768	$	7,838
Restricted cash and restricted cash equivalents:
U.S. litigation escrow	1,634		1,205
Customer collateral	1,698		1,648
Prepaid expenses and other current assets	163		141
Cash, cash equivalents, restricted cash and restricted cash equivalents	$	12,263	$	10,832

March 31, September 30,
2019 2018 2018 2017
(in millions)
Cash and cash equivalents $ 7,648
$ 8,142
$ 8,162
$ 9,874
Restricted cash and restricted cash equivalents:
U.S. litigation escrow 899
884
1,491
1,031
Customer collateral 1,735
1,250
1,324
1,106
Cash, cash equivalents, restricted cash and restricted cash equivalents $ 10,282
$ 10,276
$ 10,977
$ 12,011

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Note 4—U.S. and Europe Retrospective Responsibility Plans

U.S. Retrospective Responsibility Plan

Under the terms of the U.S. retrospective responsibility plan, the Company maintains an escrow account from which settlements of, or judgments in, certain litigation referred to as the “U.S. covered litigation” are paid. The escrow funds are held in money market investments along with interest income earned, less applicable taxes, and are classified as restricted cash equivalents on the consolidated balance sheets. ~~The balance~~

On December 13, 2019, the district court entered the final judgment order approving the Amended Settlement Agreement with the Damages Class plaintiffs in the Interchange Multidistrict Litigation proceedings. A takedown payment of ~~the escrow account~~approximately $467 million was ~~$899 million at March 31,~~received on December 27, 2019, and ~~$1.5 billionat September 30, 2018.~~deposited into the Company’s litigation escrow account. The ~~Company paid $600 million from~~deposit into the litigation escrow account and reestablishment of a prior accrual to address opt-out claims was recorded during the three months ended ~~March~~December 31, 2019. ~~See~~ ~~Note 13—Legal Matters~~.

The accrual related to the U.S. covered litigation could be either higher or lower than the litigation escrow account balance. ~~The Company did not record an additional accrual for the U.S. covered litigation during the six months ended March 31, 2019.~~ See Note 13—Legal Matters.

The following table sets forth the changes in the restricted cash equivalents—U.S. litigation escrow account:



	Three Months Ended December 31,
	2019			2018
	(in millions)
Balance at beginning of period	$	1,205		$	1,491
Return of takedown payment to the litigation escrow account	467			0
Payments to opt-out merchants⁽¹⁾ and interest earned on escrow funds	(38		)	5
Balance at end of period	$	1,634		$	1,496


⁽¹⁾	These payments are associated with the Interchange Multidistrict Litigation. See Note 13—Legal Matters.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Europe Retrospective Responsibility Plan

Visa Inc., Visa International and Visa Europe are parties to certain existing and potential litigation relating to the setting of multilateral interchange fee rates in the Visa Europe territory (the “VE territory covered litigation”). Under the terms of the Europe retrospective responsibility plan, the Company is entitled to recover certain losses resulting from VE territory covered litigation (the “VE territory covered losses”) through a periodic adjustment to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock. VE territory covered losses are recorded in “right to recover for covered losses” within equity before the corresponding adjustment to the applicable conversion rate is effected. Adjustments to the conversion rate may be executed once in any six-month period unless a single, individual loss greater than €20 million is incurred, in which case, the six-month limitation does not apply. When the adjustment to the conversion rate is made, the amount previously recorded in “right to recover for covered losses” as contra-equity is then recorded against the book value of the preferred stock within stockholders’ equity.

~~During the six months ended March 31, 2019, the Company recovered $6 million of VE territory covered losses through~~ See Note 13—Legal Matters. There were no adjustments to the ~~class A common stock~~ conversion rates ~~applicable to~~during the UK&I and Europe preferred stock. The conversion rates applicable to the UK&I and Europe preferred stock were reduced from 12.955 and 13.888, respectively, as of September 30, 2018 to 12.939 and 13.886, respectively, as of Marchthree months endedDecember 31, ~~2019.~~2019.

The following table sets forth the activities related to VE territory covered losses in preferred stock and “right to recover for covered losses” within equity during the six months ended March 31, 2019. VE territory covered losses incurred reflect settlements with merchants and additional legal costs. See ~~Note 13—Legal Matters~~.

Preferred Stock Right to Recover for Covered Losses
UK&I Europe
(in millions)
Balance as of September 30, 2018 $ 2,291
$ 3,179
$ (7 )
VE territory covered losses incurred —
—
(162 )
Recovery through conversion rate adjustment (5 ) (1 ) 6
Balance as of March 31, 2019 $ 2,286
$ 3,178
$ (163 )

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~The following table~~⁽¹⁾ sets forth the as-converted value of the preferred stock available to recover VE territory covered losses compared to the book value of preferred shares recorded in stockholders’ equity within the Company’s consolidated balance sheets as of ~~March~~December 31, 2019 and September 30, ~~2018:~~2019:


	March 31, 2019						September 30, 2018						December 31, 2019						September 30, 2019
	As-Converted Value of Preferred Stock⁽²⁾			Book Value of Preferred Stock			As-Converted Value of Preferred Stock⁽³⁾			Book Value of Preferred Stock			As-Converted Value of Preferred Stock^(1),(2)			Book Value of Preferred Stock⁽¹⁾			As-Converted Value of Preferred Stock^(1),(3)			Book Value of Preferred Stock⁽¹⁾
	(in millions)												(in millions)
UK&I preferred stock	$	5,013		$	2,286		$	4,823		$	2,291		$	6,029		$	2,285		$	5,519		$	2,285
Europe preferred stock	6,847			3,178			6,580			3,179			8,236			3,177			7,539			3,177
Total	11,860			5,464			11,403			5,470			14,265			5,462			13,058			5,462
Less: right to recover for covered losses	(163		)	(163		)	(7		)	(7		)	(175		)	(175		)	(171		)	(171		)
Total recovery for covered losses available	$	11,697		$	5,301		$	11,396		$	5,463		$	14,090		$	5,287		$	12,887		$	5,291


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. As-converted and book values are based on unrounded numbers.

⁽²⁾

The as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively, as of ~~March~~December 31, 2019; (b) ~~12.939~~12.936 and ~~13.886,~~13.884, the class A common stock conversion rate applicable to the UK&I and Europe preferred stock as of ~~March~~December 31, 2019, respectively; and (c) ~~$156.19,~~$187.90, Visa’s class A common stock closing stock price as of ~~March~~December 31, 2019.

⁽³⁾

The as-converted value of preferred stock is calculated as the product of: (a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively, as of September 30, ~~2018;~~2019; (b) ~~12.955~~12.936 and ~~13.888,~~13.884, the class A common stock conversion rate applicable to the UK&I and Europe preferred stock as of September 30, ~~2018,~~2019, respectively; and (c) ~~$150.09,~~$172.01, Visa’s class A common stock closing stock price as of September 30, ~~2018.~~2019.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 5—Fair Value Measurements and Investments

Assets and Liabilities Measured at Fair Value on a Recurring Basis



	Fair Value Measurements Using Inputs Considered as
	Level 1				Level 2
	December 31, 2019		September 30, 2019		December 31, 2019		September 30, 2019
	(in millions)
Assets
Cash equivalents and restricted cash equivalents:
Money market funds	$	7,539	$	6,494
U.S. government-sponsored debt securities					$	350	$	150
Investment securities:
Marketable equity securities	154		126
U.S. government-sponsored debt securities					4,565		5,592
U.S. Treasury securities	902		675
Other current and non-current assets:
Derivative instruments					274		437
Total	$	8,595	$	7,295	$	5,189	$	6,179
Liabilities
Accrued compensation and benefits:
Deferred compensation liability	$	141	$	113
Accrued and other liabilities:
Derivative instruments					$	99	$	52
Total	$	141	$	113	$	99	$	52

Fair Value Measurements
Using Inputs Considered as
Level 1 Level 2
March 31,
2019 September 30,
2018 March 31,
2019 September 30,
2018
(in millions)
Assets
Cash equivalents and restricted cash equivalents:
Money market funds $ 6,089
$ 6,252

U.S. government-sponsored debt securities $ 200
$ 1,048
Investment securities:
Marketable equity securities 157
113

U.S. government-sponsored debt securities 5,482
5,008
U.S. Treasury securities 1,743
2,508

Other current and non-current assets:
Derivative instruments 166
78
Total $ 7,989
$ 8,873
$ 5,848
$ 6,134
Liabilities
Accrued and other liabilities:
Derivative instruments $ 44
$ 22
Total $ —
$ —
$ 44
$ 22

There were no0 transfers between Level 1 and Level 2 assets during the ~~six~~three months ended ~~March~~December 31, 2019.

Level 1 assets. Money market funds, ~~publicly-traded~~marketable equity securities and U.S. Treasury securities are classified as Level 1 within the fair value hierarchy, as fair value is based on quoted prices in active markets. The Company’s deferred compensation liability is measured at fair value based on marketable equity securities held under the deferred compensation plan.

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Level 2 assets and liabilities. The fair value of U.S. government-sponsored debt securities, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly. Derivative instruments are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. There were no substantive changes to the valuation techniques and related inputs used to measure fair value during the ~~six~~three months ended ~~March~~December 31, 2019.

~~Marketable equity securities.~~ Marketable equity securities are publicly traded and measured at fair value within Level 1 of the fair value hierarchy, as fair value is based on quoted prices in active markets. On October 1, 2018, the Company adopted ASU 2016-01 which changed the Company’s accounting for marketable equity securities. Beginning on October 1, 2018, unrealized gains and losses from changes in fair value of marketable equity securities are recognized in non-operating income (expense).

U.S. government-sponsored debt securities and U.S. Treasury securities. The Company considers U.S. government-sponsored debt securities and U.S. Treasury securities to be available-for-sale and held ~~$7.2~~$5.5 billion and ~~$7.5~~$6.3 billion of these investment securities as of ~~March~~December 31, 2019 and September 30, ~~2018,~~2019, respectively. All of the Company’s long-term available-for-sale investment securities are due within one to five years.

~~Derivative instruments.~~ ~~During the three months ended March 31, 2019, the Company entered into interest rate and cross-currency swap agreements on a portion~~

Table of the Company’s outstanding 3.15% Senior Notes due December 2025. The Company designated the interest rate swap as a fair value hedge and the cross-currency swap as a net investment hedge. Gains and losses related to changes in fair value hedges are recognized in non-operating income (expense) along with a corresponding loss or gain related to the change in value of the underlying hedged item in the same line in the consolidated statement of operations. The effective portions of net investment hedges are recorded in other comprehensive income. Amounts excluded from the effectiveness testing of net investment hedges are recognized in non-operating income (expense). Cash flows associated with derivatives designated as a fair value hedge may be included in operating, investing or financing activities on the consolidated statement of cash flows, depending on the classification of the items being hedged. Cash flows associated with financial instruments designated as net investment hedges are classified as an investing activity. There were no swap agreements outstanding as of September 30, 2018.Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Assets Measured at Fair Value on a Non-recurring Basis

Non-marketable equity securities. The Company’s non-marketable equity securities are investments in privately held companies without readily determinable market values. These investments are classified as Level 3 due to the absence of quoted market prices, the inherent lack of liquidity and the fact that inputs used to measure fair value are unobservable and require management’s judgment. On October 1, 2018, the Company adopted ASU 2016-01 which changed the Company’s accounting for non-marketable equity securities. Beginning on October 1, 2018, the Company’s policy is to adjust the carrying value of its non-marketable equity securities to fair value when transactions for identical or similar investments of the same issuer are observable in the market. All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in non-operating income (expense).

~~Non-marketable equity securities totaled $438 million and $137 million at March 31, 2019 and September 30, 2018, respectively, and are classified in other assets on the consolidated balance sheets.~~ During the three ~~and six~~ months ended ~~March~~December 31, 2019, ~~$66~~$9 million of upward adjustments and no0 downward adjustments were ~~made to~~included in the carrying value of non-marketable equity securities. During the ~~six~~three months ended ~~March~~December 31, 2019 and 2018, there were no0 significant ~~impairments~~impairments. The following table summarizes the total carrying value of the Company’s non-marketable equity ~~securities.~~securities held as of December 31, 2019 including cumulative unrealized gains and losses:



	December 31, 2019
	(in millions)
Initial cost basis	$	595
Upward adjustments	119
Downward adjustments (including impairment)	(4		)
Carrying amount, end of period	$	710

Non-financial assets and liabilities. Long-lived assets such as goodwill, indefinite-lived intangible assets, finite-lived intangible assets and property, equipment and technology are considered non-financial assets. The Company does not have any non-financial liabilities measured at fair value on a non-recurring basis. Finite-lived intangible assets primarily consist of customer relationships and trade names, ~~and reseller relationships,~~ all of which were obtained through acquisitions.

If the Company were required to perform a quantitative assessment for impairment testing of goodwill and indefinite-lived intangible assets, the fair values would generally be estimated using an income approach. As the assumptions employed to measure these assets on a non-recurring basis are based on management’s judgment using internal and external data, these fair value determinations are classified as Level 3 in the fair value hierarchy. The

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Company completed its annual impairment review of its indefinite-lived intangible assets and goodwill as of February 1, 2019, and concluded that there was no0 impairment. No recent events or changes in circumstances indicate that impairment existed at ~~March~~December 31, 2019.

Gains and Losses on Marketable and Non-marketable Equity Securities

~~The Company recognized net realized gains of $15 millionfor both~~Gains and losses on the ~~three and six months ended March 31, 2019 on its~~Company’s equity securities sold during the periods. The Company recognized net unrealized gains of $79 million and $59 million for the three and six months ended March 31, 2019, respectively, on equity securities held as of the end of the periods.are summarized below.



	Three Months Ended December 31,
	2019		2018
	(in millions)
Net gain (loss) on equity securities sold during the period	$	4	$	0
Unrealized gain (loss) on equity securities held as of the end of the period	14		(20		)
Total gain (loss) recognized in non-operating income (expense), net	$	18	$	(20	)

Other Fair Value Disclosures

Long-term debt. Debt instruments are measured at amortized cost on the Company’s consolidated balance sheets. The fair value of the debt instruments, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar, not identical, assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from independent pricing sources, then confirmed or revised accordingly. If measured at fair value in the financial statements, these instruments would be classified as Level 2 in the fair value hierarchy. The carrying value and estimated fair value of long-term debt was ~~$16.6~~$16.7 billion and ~~$17.3~~$18.3 billion, respectively, as of ~~March~~December 31, 2019. The carrying value and estimated fair value of long-term debt ~~were both $16.6~~was $16.7 billion and $18.4 billion, respectively, as of September 30, ~~2018.~~2019.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other financial instruments not measured at fair value. The following financial instruments are not measured at fair value on the Company’s unaudited consolidated balance sheet at ~~March~~December 31, 2019, but disclosure of their fair values is required: ~~time deposits recorded in prepaid expenses and other current assets,~~ settlement receivable and payable, accounts receivable and customer collateral. The estimated fair value of such instruments at ~~March~~December 31, 2019 approximates their carrying value due to their generally short maturities. If measured at fair value in the financial statements, these financial instruments would be classified as Level 2 in the fair value hierarchy.

Note 6—~~Debt~~Leases

The Company entered into various operating lease agreements primarily for real estate. The Company's leases have original lease periods expiring between fiscal 2020 and 2030. Many leases include 1 or more options to renew. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. Payments under the Company’s lease arrangements are generally fixed. At December 31, 2019, the Company had ~~outstanding debt as follows:~~no finance leases.

March 31,
2019 September 30, 2018 Effective Interest Rate
(in millions, except percentages)
2.20% Senior Notes due December 2020 $ 3,000
$ 3,000
2.30 %
2.15% Senior Notes due September 2022 1,000
1,000
2.30 %
2.80% Senior Notes due December 2022 2,250
2,250
2.89 %
3.15% Senior Notes due December 2025 4,000
4,000
3.26 %
2.75% Senior Notes due September 2027 750
750
2.91 %
4.15% Senior Notes due December 2035 1,500
1,500
4.23 %
4.30% Senior Notes due December 2045 3,500
3,500
4.37 %
3.65% Senior Notes due September 2047 750
750
3.73 %
Total senior notes 16,750
16,750

Unamortized discounts and debt issuance costs (114 ) (120 )
Hedge accounting fair value adjustments (6 ) —

Total long-term debt $ 16,630
$ 16,630

~~The Company recognized interest expense for its senior notes of $119 million and $137 million for~~During the three months ended ~~March~~December 31, 2019, ~~and 2018, respectively, and$245 million and $275 million for the six months ended March~~total operating lease cost was $26 million. At December 31, 2019, the weighted average remaining lease term for operating leases was approximately 7 years and ~~2018, respectively. Interest expense~~the weighted average discount rate for ~~the three and six months ended March~~operating leases was 2.31%.

At December 31, 2019, ~~includes adjustments related~~the present value of future minimum lease payments was as follows:



	December 31, 2019
	(in millions)
Remainder of 2020	$	82
2021	108
2022	93
2023	86
2024	73
Thereafter	186
Total undiscounted lease payments	628
Less: imputed interest	(54		)
Present value of lease liabilities	$	574

At December 31, 2019, the Company had additional operating leases that had not yet commenced with lease obligations of $507 million. These operating leases will commence between fiscal 2020 and 2023 with non-cancellable lease terms of 5 to ~~the Company’s hedging program. Effective interest rates disclosed in the table above do not reflect hedge accounting adjustments.~~15 years.

1916

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 7—Debt

The Company had outstanding debt as follows:



	December 31, 2019			September 30, 2019			Effective Interest Rate⁽¹⁾
	(in millions, except percentages)
2.20% Senior Notes due December 2020	$	3,000		$	3,000		2.30	%
2.15% Senior Notes due September 2022	1,000			1,000			2.30	%
2.80% Senior Notes due December 2022	2,250			2,250			2.89	%
3.15% Senior Notes due December 2025	4,000			4,000			3.26	%
2.75% Senior Notes due September 2027	750			750			2.91	%
4.15% Senior Notes due December 2035	1,500			1,500			4.23	%
4.30% Senior Notes due December 2045	3,500			3,500			4.37	%
3.65% Senior Notes due September 2047	750			750			3.73	%
Total senior notes	16,750			16,750
Unamortized discounts and debt issuance costs	(105		)	(108		)
Hedge accounting fair value adjustments⁽²⁾	43			87
Less: current maturities of long-term debt	(3,000		)	0
Total long-term debt	$	13,688		$	16,729


⁽¹⁾	Effective interest rates disclosed do not reflect hedge accounting adjustments.


⁽²⁾	Represents the change in fair value of interest rate swap agreements entered into on a portion of the outstanding Senior Notes.

Note 8—Settlement Guarantee Management

The Company indemnifies its clients for settlement losses suffered due to failure of any other client to fund its settlement obligations in accordance with the Visa operating rules. This indemnification creates settlement risk for the Company due to the difference in timing between the date of a payment transaction and the date of subsequent settlement.

Historically, the Company has experienced minimal losses as a result of its settlement risk guarantee. However, the Company’s future obligations, which could be material under its guarantees, are not determinable as they are dependent upon future events.

The Company’s settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in time, which vary significantly day to day. The Company’s maximum daily settlement exposure was ~~$92.0~~$97.3 billion and the average daily settlement exposure was ~~$55.3~~$59.2 billion during the ~~six~~three months ended ~~March~~December 31, ~~2019~~.2019.

The Company maintains and regularly reviews global settlement risk policies and procedures to manage settlement exposure, which may require clients to post collateral if certain credit standards are not met. At ~~March~~December 31, 2019 and September 30, ~~2018,~~2019, the Company held collateral as follows:



	December 31, 2019		September 30, 2019
	(in millions)
Restricted cash and restricted cash equivalents	$	1,698	$	1,648
Pledged securities at market value	241		259
Letters of credit	1,325		1,293
Guarantees	506		477
Total	$	3,770	$	3,677

March 31,
2019 September 30,
2018
(in millions)
Cash equivalents $ 1,735
$ 1,708
Pledged securities at market value 307
192
Letters of credit 1,337
1,382
Guarantees 574
860
Total $ 3,953
$ 4,142

~~Note 8—Pension and Other Postretirement Benefits~~

The Company sponsors various qualified and non-qualified defined benefit pension and other postretirement benefit plans that provide for retirement and medical benefits for all eligible employees residing in the United States. The Company also sponsors other pension benefit plans that provide benefits for internationally-based employees at certain non-U.S. locations. The components of net periodic benefit cost presented below include the U.S. pension plans and the non-U.S. pension plans, comprising only the Visa Europe plans. Disclosures relating to other U.S. postretirement benefit plans and other non-U.S. pension benefit plans are not included as they are immaterial, individually and in aggregate.

Pension Benefits
U.S. Plans Non-U.S. Plans
Three Months Ended
March 31, Three Months Ended
March 31,
2019 2018 2019 2018
(in millions)
Service cost $ —
$ —
$ 1
$ 1
Interest cost 8
8
4
3
Expected return on plan assets (18 ) (18 ) (5 ) (5 )
Total net periodic benefit cost (income) $ (10 ) $ (10 ) $ —
$ (1 )

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Pension Benefits
U.S. Plans Non-U.S. Plans
Six Months Ended
March 31, Six Months Ended
March 31,
2019 2018 2019 2018
(in millions)
Service cost $ —
$ —
$ 2
$ 2
Interest cost 16
16
7
6
Expected return on plan assets (36 ) (35 ) (9 ) (10 )
Total net periodic benefit cost (income) $ (20 ) $ (19 ) $ —
$ (2 )

Note 9—Stockholders’ Equity

As-converted class A common stock. The following table⁽¹⁾ presents the number of shares of each series and class of stock and the number of shares of class A common stock on an as-converted basis:



	December 31, 2019				September 30, 2019
	Shares Outstanding	Conversion Rate Into Class A Common Stock		As-converted Class A Common Stock⁽¹⁾	Shares Outstanding	Conversion Rate Into Class A Common Stock		As-converted Class A Common Stock⁽¹⁾
	(in millions, except conversion rates)
UK&I preferred stock	2	12.9360		32	2	12.9360		32
Europe preferred stock	3	13.8840		44	3	13.8840		44
Class A common stock⁽²⁾	1,709	—		1,709	1,718	—		1,718
Class B common stock	245	1.6228	⁽³⁾	398	245	1.6228	⁽³⁾	398
Class C common stock	11	4.0000		44	11	4.0000		45
Total				2,227				2,237

March 31, 2019 September 30, 2018

Shares
Outstanding

Conversion Rate Into
Class A
Common Stock

As-converted Class A
Common
Stock⁽²⁾

Shares
Outstanding

Conversion Rate Into
Class A
Common Stock

As-converted Class A
Common
Stock⁽²⁾

(in millions, except conversion rates)
UK&I preferred stock 2
12.9390
32
⁽³⁾
2
12.9550
32
⁽³⁾
Europe preferred stock 3
13.8860
44
⁽³⁾
3
13.8880
44
⁽³⁾
Class A common stock⁽⁴⁾
1,741
—
1,741
1,768
—
1,768

Class B common stock 245
1.6298
⁽⁵⁾
400
245
1.6298
⁽⁵⁾
400

Class C common stock 12
4.0000
46
12
4.0000
47

Total 2,263
2,291


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding.


⁽²⁾	As-converted class A common stock is calculated based on unrounded numbers.


⁽³⁾⁽²⁾	~~The reduction in equivalent number of shares of class A common stock was less than one million shares during the six months ended March 31, 2019.~~


⁽⁴⁾	Class A common stock shares outstanding reflect repurchases that settled on or before ~~March~~December 31, 2019 and September 30, ~~2018.~~2019.


⁽⁵⁾⁽³⁾	The class B to class A common stock conversion rate is presented on a rounded basis. Conversion calculations for dividend payments are based on a conversion rate rounded to the tenth decimal.

Reduction in as-converted shares. Under the terms of the Europe retrospective responsibility plan, the Company is entitled to recover VE territory covered losses through periodic adjustments to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock. The recovery has the same economic effect on earnings per share as repurchasing the Company’s class A common stock, because it reduces the UK&I and Europe preferred stock conversion rates and consequently, reduces the as-converted class A common stock share count.

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~The following table presents effective price per share and recovery of VE territory covered losses through~~ There were no conversion rate ~~adjustments:~~adjustments in the three months ended December 31, 2019. See Note 4—U.S. and Europe Retrospective Responsibility Plans.

Six Months Ended
March 31, 2019 Twelve Months Ended
September 30, 2018
Preferred Stock
UK&I Europe UK&I Europe
(in millions, except per share data)
Effective price per share⁽¹⁾
$ 137.19
$ 137.19
$ 113.05
$ 112.92
Recovery through conversion rate adjustment $ 5
$ 1
$ 35
$ 21



⁽¹⁾	Effective price per share for the quarter is calculated using the volume-weighted average price of the Company’s class A common stock over a pricing period in accordance with the Company’s current certificates of designations for its series B and C convertible participating preferred stock. Effective price per share for the fiscal year is calculated using the weighted-average effective prices of the respective adjustments made during the year.

Common stock repurchases. The following table⁽¹⁾ presents share repurchases in the open market for the following periods:


	Three Months Ended March 31,				Six Months Ended March 31,				Three Months Ended December 31,
	2019		2018		2019		2018		2019		2018
	(in millions, except per share data)								(in millions, except per share data)
Shares repurchased in the open market⁽²⁾⁽¹⁾	14		17		31		33		13		17
Average repurchase price per share⁽³⁾⁽²⁾	$	144.94	$	120.26	$	141.08	$	115.41	$	179.27	$	138.11
Total cost(2)	$	1,938	$	2,072	$	4,331	$	3,850	$	2,370	$	2,393

⁽¹⁾

~~Figures in the table may not recalculate exactly due to rounding.~~ Shares repurchased in the open market reflect repurchases that settled during the three ~~and six~~ months ended ~~March~~December 31, 2019 and 2018. These amounts include repurchases traded but not yet settled on or before September 30, 2018 and 2017 for six months, respectively, and December 31, 2018 and 2017 for three months, respectively. Also, these amounts exclude repurchases traded but not yet settled on or before March 31, 2019 and 2018, respectively.


⁽²⁾	All shares repurchased in the open market have been retired and constitute authorized but unissued shares.


⁽³⁾⁽²⁾	Figures in the table may not recalculate exactly due to rounding. Average repurchase price per share and total cost is calculated based on unrounded numbers.

In January 2019, the Company’s board of directors authorized an ~~additional~~ $8.5 billion share ~~repurchase~~purchase program. As of ~~March~~December 31, 2019, the Company’s January 2019 share repurchase program had remaining authorized funds of ~~$8.4~~$1.7 billion for share repurchase. ~~All~~In January 2020, the Company’s board of directors authorized an additional $9.5 billion share repurchase ~~programs authorized prior to January 2019~~program. These authorizations have ~~been completed.~~no expiration date.

Dividends. On ~~April 16, 2019,~~January 28, 2020, the Company’s board of directors declared a quarterly cash dividend of ~~$0.25~~$0.30 per share of class A common stock (determined in the case of class B and C common stock and UK&I and Europe preferred stock on an as-converted basis). The cash dividend will be paid on ~~June 4, 2019,~~March 3, 2020, to all holders of record as of ~~May 17, 2019.~~February 14, 2020. The Company declared and paid ~~$569~~$671 million and ~~$490~~$572 million during the three months ended ~~March 31, 2019 and 2018, respectively, and $1.1 billion and $948 million during the six months ended March~~December 31, 2019 and 2018, respectively, in dividends to holders of the Company’s common and preferred stocks.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 10—Earnings Per Share

Basic earnings per share is computed by dividing net income available to each class of shares by the weighted-average number of shares of common stock outstanding and participating securities during the period. Net income is allocated to each class of common stock and participating securities based on its proportional ownership on an as-converted basis. The weighted-average number of shares outstanding of each class of common stock reflects changes in ownership over the periods presented. See Note 9—Stockholders’ Equity.

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Diluted earnings per share is computed by dividing net income available by the weighted-average number of shares of common stock outstanding, participating securities and, if dilutive, potential class A common stock equivalent shares outstanding during the period. Dilutive class A common stock equivalents may consist of: (1) shares of class A common stock issuable upon the conversion of UK&I and Europe preferred stock and class B and C common stock based on the conversion rates in effect through the period, and (2) incremental shares of class A common stock calculated by applying the treasury stock method to the assumed exercise of employee stock options, the assumed purchase of stock under the Company’s Employee Stock Purchase Plan and the assumed vesting of unearned performance shares.

The following table⁽¹⁾ presents earnings per share for the three months ended ~~March~~December 31, 2019:



	Basic Earnings Per Share					Diluted Earnings Per Share
	(in millions, except per share data)
	Income Allocation (A)⁽¹⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)⁽²⁾		Income Allocation (A)⁽¹⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)⁽²⁾
Class A common stock	$	2,506	1,713	$	1.46	$	3,272	2,240	⁽³⁾	$	1.46
Class B common stock	583		245	$	2.37	582		245		$	2.37
Class C common stock	65		11	$	5.85	65		11		$	5.84
Participating securities⁽⁴⁾	118		Not presented	Not presented		117		Not presented		Not presented
Net income	$	3,272

Basic Earnings Per Share Diluted Earnings Per Share
(in millions, except per share data)

Income
Allocation
(A)⁽²⁾

Weighted-
Average
Shares
Outstanding (B)

Earnings per
Share =
(A)/(B)

Income
Allocation
(A)⁽²⁾

Weighted-
Average
Shares
Outstanding (B)

Earnings per
Share =
(A)/(B)
Class A common stock $ 2,287
1,748
$ 1.31
$ 2,977
2,279
⁽³⁾
$ 1.31
Class B common stock 523
245
$ 2.13
$ 523
245
$ 2.13
Class C common stock 61
12
$ 5.23
$ 61
12
$ 5.23
Participating securities⁽⁴⁾
106
Not presented
Not presented
$ 106
Not presented
Not presented
Net income $ 2,977

The following table⁽¹⁾ ~~presents earnings per share for the six months ended March 31, 2019:~~

Basic Earnings Per Share Diluted Earnings Per Share
(in millions, except per share data)

Income
Allocation
(A)⁽²⁾

Weighted-
Average
Shares
Outstanding (B)

Earnings per
Share =
(A)/(B)

Income
Allocation
(A)⁽²⁾

Weighted-
Average
Shares
Outstanding (B)

Earnings per
Share =
(A)/(B)
Class A common stock $ 4,577
1,754
$ 2.61
$ 5,954
2,285
⁽³⁾
$ 2.61
Class B common stock 1,044
245
$ 4.25
$ 1,043
245
$ 4.25
Class C common stock 122
12
$ 10.44
$ 122
12
$ 10.42
Participating securities⁽⁴⁾
211
Not presented
Not presented
$ 211
Not presented
Not presented
Net income $ 5,954

~~The following table~~⁽¹⁾ presents earnings per share for the three months ended ~~March~~December 31, ~~2018~~:2018:



	Basic Earnings Per Share					Diluted Earnings Per Share
	(in millions, except per share data)
	Income Allocation (A)⁽¹⁾		Weighted- Average Shares Outstanding (B)	Earnings per Share = (A)/(B)⁽²⁾		Income Allocation (A)⁽¹⁾		Weighted- Average Shares Outstanding (B)		Earnings per Share = (A)/(B)⁽²⁾
Class A common stock	$	2,290	1,760	$	1.30	$	2,977	2,291	⁽³⁾	$	1.30
Class B common stock	521		245	$	2.12	520		245		$	2.12
Class C common stock	61		12	$	5.20	61		12		$	5.20
Participating securities⁽⁴⁾	105		Not presented	Not presented		105		Not presented		Not presented
Net income	$	2,977

Basic Earnings Per Share Diluted Earnings Per Share
(in millions, except per share data)

Income
Allocation
(A)⁽²⁾

Weighted-
Average
Shares
Outstanding (B)

Earnings per
Share =
(A)/(B)

Income
Allocation
(A)⁽²⁾

Weighted-
Average
Shares
Outstanding (B)

Earnings per
Share =
(A)/(B)
Class A common stock $ 2,007
1,798
$ 1.12
$ 2,605
2,337
⁽³⁾
$ 1.11
Class B common stock 452
245
$ 1.84
$ 451
245
$ 1.84
Class C common stock 55
12
$ 4.46
$ 55
12
$ 4.46
Participating securities⁽⁴⁾
91
Not presented
Not presented
$ 91
Not presented
Not presented
Net income $ 2,605

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~The following table~~⁽¹⁾ ~~presents earnings per share for the six months ended March 31, 2018~~:

Basic Earnings Per Share Diluted Earnings Per Share
(in millions, except per share data)

Income
Allocation
(A)⁽²⁾

Weighted-
Average
Shares
Outstanding (B)

Earnings per
Share =
(A)/(B)

Income
Allocation
(A)⁽²⁾

Weighted-
Average
Shares
Outstanding (B)

Earnings per
Share =
(A)/(B)
Class A common stock $ 3,952
1,805
$ 2.19
$ 5,127
2,345
⁽³⁾
$ 2.19
Class B common stock 886
245
$ 3.61
$ 885
245
$ 3.60
Class C common stock 110
13
$ 8.76
$ 109
13
$ 8.74
Participating securities⁽⁴⁾
179
Not presented
Not presented
$ 178
Not presented
Not presented
Net income $ 5,127


⁽¹⁾	~~Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers.~~

⁽²⁾

Net income is allocated based on proportional ownership on an as-converted basis. The weighted-average number of shares of as-converted class B common stock used in the income allocation was 398 million and 400 million for the three ~~and six~~ months ended ~~March~~December 31, 2019 and ~~405 million for the three and six months ended March 31, 2018.~~2018, respectively. The weighted-average number of shares of as-converted class C common stock used in the income allocation was 44 million and 47 million for the three ~~and six~~ months ended ~~March~~December 31, 2019 and ~~49 million and 50 million for the three and six months ended March 31,~~ 2018, respectively. The weighted-average number of shares of preferred stock included within participating securities was 32 million of as-converted UK&I preferred stock for the three ~~and six~~ months ended ~~March~~December 31, 2019 and ~~2018, and~~2018. The weighted-average number of shares of preferred stock included within participating securities was 44 million of as-converted Europe preferred stock for the three ~~and six~~ months ended ~~March~~December 31, 2019 and 2018.


⁽²⁾	Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers.

⁽³⁾

Weighted-average diluted shares outstanding are calculated on an as-converted basis and include incremental common stock equivalents, as calculated under the treasury stock method. The computation includes approximately 3 million common stock equivalents for the three ~~and six~~ months ended ~~March~~December 31, 2019 and ~~4 million common stock equivalents for the three and six months ended March 31,~~ 2018, because their effect would have been dilutive. The computation excludes 1 million of common stock equivalents for the three ~~and six~~ months ended ~~March~~December 31, 2019 and ~~2 million of common stock equivalents for the three and six months ended March 31,~~ 2018, because their effect would have been anti-dilutive.

⁽⁴⁾

Participating securities include preferred stock outstanding and unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, such as the Company’s UK&I and Europe preferred stock, restricted stock ~~awards, restricted stock~~ units and earned performance-based shares. Participating securities’ income is allocated based on the weighted-average number of shares of as-converted stock.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 11—Share-based Compensation

The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan, or the EIP, during the ~~six~~three months ended ~~March~~December 31, ~~2019~~:2019:


	Granted	Weighted-Average Grant Date Fair Value		Weighted-Average Exercise Price		Granted	Weighted-Average Grant Date Fair Value		Weighted-Average Exercise Price
Non-qualified stock options	1,109,645	$	25.89	$	134.76	1,247,982	$	29.37	$	182.50
Restricted stock units (“RSUs”)	2,616,550	$	135.19
Restricted stock units						2,189,944	$	182.62
Performance-based shares⁽¹⁾	540,538	$	153.42			470,128	$	211.08


⁽¹⁾	Represents the maximum number of performance-based shares which could be earned.

The Company’s non-qualified stock options and RSUs are equity awards with service-only conditions and are accordingly expensed on a straight-line basis over the vesting period. The Company’s performance-based shares are equity awards with service, market and performance conditions that are accounted for using the graded-vesting method. The Company recorded share-based compensation cost related to the EIP of ~~$106~~$111 million and ~~$201~~$95 million for the three ~~and six~~ months ended ~~March~~December 31, 2019 ~~respectively,~~ and ~~$82 million and $146 millionfor the three and six months ended March 31,~~ 2018, respectively, net of estimated forfeitures, which are adjusted as appropriate.

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Note 12—Income Taxes

The effective income tax ~~rate was 19%~~rates were 18% for the three and six months ended March 31, 2019, and 19% and 21% for the three and six months ended March 31, 2018, respectively. The effective tax rate for the six months ended March 31, 2019 differs from the effective tax rate in the same prior-year period primarily due to the effects of U.S. tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), enacted on December 22, 2017, as discussed below:

The Tax Act reduced the statutory federal corporate income tax rate from 35% to 21% effective January 1, 2018. In fiscal 2018, the Company’s statutory federal corporate rate was a blended rate of 24.5%. Federal tax expense for the six months ended March 31, 2019 was determined at a 21% tax rate compared to the 24.5% tax rate in the prior-year period;

The Tax Act enacted a new deduction for foreign-derived intangible income (“FDII”) and a new tax on global intangible low-tax income (“GILTI”). Both FDII and GILTI became effective for the Company on October 1, 2018; and

~~The absence of the following items recorded during the six months ended March 31, 2018:~~


▪	~~an $80 million benefit due to a non-recurring audit settlement during the three months ended March 31, 2018;~~


▪	a $1.1 billion non-recurring, non-cash benefit from the remeasurement of deferred tax balances recorded in the three months ended December 31, 2017, in connection with the reduction in U.S. federal tax rate enacted by the Tax Act; and


▪	~~a $1.1 billion one-time transition tax expense on certain untaxed foreign earnings recorded in the three months ended December 31, 2017, in connection with the requirement enacted by the Tax Act~~.

The Company previously recorded provisional amounts for the transition tax and the tax effects of various other tax provisions enacted by the Tax Act. As permitted by ASU 2018-05, the Company completed the determination of the accounting impacts of the transition tax and the tax effects of these various tax provisions inboth the three months ended December 31, 2019 and 2018. ~~The adjustments to the provisional amounts were not material. In addition, the Company adopted the accounting policy of accounting for taxes on GILTI in the period that it is subject to such tax.~~

During the three ~~and six~~ months ended ~~March~~December 31, 2019, the Company’s gross unrecognized tax benefits increased by ~~$108~~$63 million, ~~and $146~~of which $13 million ~~respectively. The Company's unrecognized tax benefits that, if recognized,~~ would favorably impact the effective tax rate, ~~increased by $44 million and $83 million, respectively.~~if recognized. The change in unrecognized tax benefits is primarily related to various tax positions across several jurisdictions. During the three ~~and six~~ months ended ~~March~~December 31, 2019 and 2018, there were no significant changes in interest and penalties related to uncertain tax positions.

The Company’s tax filings are subject to examination by the U.S. federal, state and foreign taxing authorities. The timing and outcome of the final resolutions of the various ongoing income tax examinations are highly uncertain. It is not reasonably possible to estimate the increase or decrease in unrecognized tax benefits within the next twelve months.

Note 13—Legal Matters

The Company is party to various legal and regulatory proceedings. Some of these proceedings involve complex claims that are subject to substantial uncertainties and unascertainable damages. Accordingly, except as disclosed, the Company has not established reserves or ranges of possible loss related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable loss and/or the amount or range of losses are not reasonably estimable. Although the Company believes that it has strong defenses for the litigation and regulatory proceedings described below, it could, in the future, incur judgments or fines or enter into settlements of claims that could have a material adverse effect on the Company’s financial position, results of operations or cash flows. From time to time, the Company may engage in settlement discussions or mediations with respect to one or more of its outstanding litigation matters, either on its own behalf or collectively with other parties.

~~Table of Contents~~

~~VISA INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

The litigation accrual is an estimate and is based on management’s understanding of its litigation profile, the specifics of each case, advice of counsel to the extent appropriate and management’s best estimate of incurred loss as of the balance sheet date.

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the activity related to accrued litigation:



	Three Months Ended December 31,
	2019			2018
	(in millions)
Balance at beginning of period	$	1,203		$	1,434
Provision for uncovered legal matters	0			7
Provision for covered legal matters	1			90
Reestablishment of prior accrual related to interchange multidistrict litigation	467			0
Payments for legal matters	(42		)	(42		)
Balance at end of period	$	1,629		$	1,489

Six Months Ended
March 31,
2019 2018
(in millions)
Balance at beginning of period $ 1,434
$ 982
Provision for uncovered legal matters 35
—
Provision for covered legal matters 159
1
Payments for legal matters (714 ) (153 )
Balance at end of period $ 914
$ 830

Accrual Summary—U.S. Covered Litigation

Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings that are covered by the U.S. retrospective responsibility plan, which the Company refers to as the U.S. covered litigation. See further discussion below under U.S. Covered Litigation and Note 4—U.S. and Europe Retrospective Responsibility Plans. An accrual for the U.S. covered litigation and a charge to the litigation provision are recorded when a loss is deemed to be probable and reasonably estimable. In making this determination, the Company evaluates available information, including but not limited to actions taken by the litigation committee. The total accrual related to the U.S. covered litigation could be either higher or lower than the escrow account balance.

The following table summarizes the accrual activity related to U.S. covered litigation:



	Three Months Ended December 31,
	2019			2018
	(in millions)
Balance at beginning of period	$	1,198		$	1,428
Reestablishment of prior accrual related to interchange multidistrict litigation	467			0
Payments for U.S. covered litigation	(41		)	0
Balance at end of period	$	1,624		$	1,428

Six Months Ended
March 31,
2019 2018
(in millions)
Balance at beginning of period $ 1,428
$ 978
Payments for U.S. covered litigation (600 ) (150 )
Balance at end of period $ 828
$ 828
In fiscal 2019, the Company paid $600 million from its litigation escrow account into a settlement fund established pursuant to the Amended Settlement Agreement with the Damages Class plaintiffs in the Interchange Multidistrict Litigation. Under the Amended Settlement Agreement, if class members opt out of the Damages Class, the defendants are entitled to receive takedown payments of up to $700 million (up to $467 million for Visa), based on the percentage of payment card sales volume attributable to merchants who have chosen to opt out. On December 13, 2019, the district court entered a final judgment order approving the Amended Settlement Agreement with the Damages Class plaintiffs. A takedown payment of approximately $467 million was received on December 27, 2019, and deposited into the Company’s litigation escrow account. The deposit into the litigation escrow account and reestablishment of a prior accrual to address opt-out claims was recorded during the three months ended December 31, 2019. See further discussion below under U.S. Covered Litigation.

Accrual Summary—VE Territory Covered Litigation

Visa Inc., Visa International and Visa Europe are parties to certain legal proceedings that are covered by the Europe retrospective responsibility plan. Unlike the U.S. retrospective responsibility plan, the Europe retrospective responsibility plan does not have an escrow account that is used to fund settlements or judgments. The Company is entitled to recover VE territory covered losses through periodic adjustments to the conversion rates applicable to the UK&I preferred stock and Europe preferred stock. An accrual for the VE territory covered losses and a reduction to stockholders’ equity will be recorded when the loss is deemed to be probable and reasonably estimable. See further discussion below under VE Territory Covered Litigation and Note 4—U.S. and Europe Retrospective Responsibility Plans.

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VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the accrual activity related to VE territory covered litigation:



	Three Months Ended December 31,
	2019			2018
	(in millions)
Balance at beginning of period	$	5		$	0
Provision for VE territory covered litigation	1			90
Payments for VE territory covered litigation	(1		)	(35		)
Balance at end of period	$	5		$	55

Six Months Ended
March 31,
2019 2018
(in millions)
Balance at beginning of period $ —
$ 1
Accrual for VE territory covered litigation 159
1
Payments for VE territory covered litigation (98 ) (2 )
Balance at end of period $ 61
$ —

U.S. Covered Litigation

Interchange Multidistrict Litigation (MDL) – Putative Class Actions

On ~~December 6, 2018, the district court held a hearing on the Damages Class plaintiffs’ motion for preliminary approval of the Amended Settlement Agreement, and on January 24,~~November 20, 2019, the district court ~~granted preliminary approval.~~

~~Settlement discussions with plaintiffs purporting to act on behalf of the putative Injunctive Relief Class are ongoing. On January 16, 2019,~~denied the bank ~~defendants moved~~defendants’ motion to dismiss the claims brought against them by the putative Injunctive Relief Class.

On December 13, 2019, the district court granted final approval of the 2018 Amended Settlement Agreement relating to claims by the Damages Class, ~~on the grounds that plaintiffs lack standing and fail to state a claim against the bank defendants.~~which was subsequently appealed.

VE Territory Covered Litigation

UKEurope Merchant Litigation

Since July 2013, in excess of ~~450~~500 Merchants (the capitalized term “Merchant,” when used in this section, means a merchant together with subsidiary/affiliate companies that are party to the same claim) have commenced proceedings against Visa Europe, Visa Inc. and other Visa ~~International~~subsidiaries in the UK, Germany and Belgium primarily relating to interchange rates in Europe and in some cases relating to fees charged by Visa and certain Visa rules. As of the filing date, Visa Europe, Visa Inc. and other Visa ~~International~~subsidiaries have settled the claims asserted by over 100 Merchants, leaving more than ~~350~~400 Merchants with outstanding claims. In addition, over 30 additional Merchants have threatened to commence similar proceedings. Standstill agreements have been entered into with respect to some of those threatened Merchant claims, several of which have been settled.

~~On November 29, 2018, Visa was granted permission~~Other Litigation

Canadian Merchant Litigation

Between August 2019 and January 2020, the Courts of Appeal in British Columbia, Quebec, Ontario and Saskatchewan rejected the appeals filed by Wal-Mart Canada and Home Depot of Canada Inc. In January 2020, Wal-Mart Canada and Home Depot of Canada Inc. filed applications to appeal ~~aspects~~the decisions of the ~~Court of Appeal’s judgment~~British Columbia, Quebec and Ontario courts to the Supreme Court of Canada. An appeal to the ~~United Kingdom, including~~Alberta Court of Appeal remains pending.

Nuts for Candy

On December 31, 2019, plaintiff filed a motion to dismiss and for attorneys’ fees and costs based on the ~~question~~settlement reached between the parties and the grant of ~~whether Visa’s UK interchange restricted competition~~final approval of the 2018 Amended Settlement Agreement as discussed above in Interchange Multidistrict Litigation (MDL) - Putative Class Actions.

~~Other~~Euronet Litigation

~~European Commission Proceedings~~

~~Inter-regional Interchange Investigation.~~ On December ~~4, 2018,~~13, 2019, Euronet 360 Finance Limited, Euronet Polska Spolka z.o.o. and Euronet Services spol. s.r.o. (“Euronet”) served a claim in the ~~European Commission (EC) announced formal public consultation (known as “market testing”) of commitments proposed~~UK alleging that certain rules affecting ATM access fees in Poland, the Czech Republic and Greece by Visa ~~pursuant~~Inc. and Mastercard Incorporated, and certain of their subsidiaries, breach various competition laws. Euronet seeks damages, costs, and injunctive relief to ~~Article 9 of Council Regulation (EC) No 1/2003 in order for~~prevent the ~~EC to conclude its investigation. Subject to market testing,~~defendants from enforcing the EC intends to adopt a decision declaring the commitments to be binding on Visa and concluding that there are no longer grounds for action by the EC and without any finding of infringement of the law by Visa. If accepted by the EC, the proposed commitments require Visa to cap its inter-regional multilateral interchange rates at 1.50% credit and 1.15% debit for “Card-Not-Present” transactions and 0.30% credit and 0.20% debit for “Card Present” transactions on consumer debit and credit cards issued outside of the European Economic Area when used at merchants located inside of the European Economic Area. The commitments would last for a period of five years following implementation. No fine will be imposed against Visa, and the commitments are proposed without prejudice to Visa’s position that its conduct did not infringe any law. The EC’s market testing was completed in January 2019, and the EC is expected to decide whether to formally adopt the proposed commitments in the first half of calendar year 2019.aforementioned rules.

2722

Table of Contents

VISA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~Canadian Merchant Litigation~~Note 14—Subsequent Events

~~Wal-Mart Canada and/or Home Depot of Canada Inc. have filed notices of appeal of the British Columbia, Ontario, Saskatchewan, Quebec and Alberta decisions approving the settlements.~~

~~EMV Chip Liability Shift~~

Plaintiffs filed a renewed motion for class certification on July 16, 2018, following an earlier denial of the motion without prejudice. Plaintiffs’ renewed motion was terminated without prejudice to reinstatement on October 17, 2018, but was subsequently reinstated and is currently pending.

~~Kroger~~

~~The litigation was stayed until February 2, 2019. Visa and Kroger have reached an agreement in principle to resolve this lawsuit.~~

~~Nuts for Candy~~

~~On October 18, 2018, the court stayed the Nuts for Candy case pending the district court’s decision on preliminary approval of the Amended Settlement Agreement discussed above under~~ ~~Interchange Multidistrict Litigation (MDL) – Putative Class Actions~~, and pending final approval of that agreement if preliminary approval is granted. Preliminary approval was granted on January 24, 2019, which extended the stay in the Nuts for Candy case pending final approval of the Amended Settlement Agreement.

~~Ohio Attorney General Civil Investigative Demand~~

On January ~~8, 2019,~~13, 2020, the ~~State~~Company entered into a definitive agreement to acquire Plaid, Inc. for $5.3 billion. The Company will pay approximately $4.9 billion of ~~Ohio Office~~cash and $0.4 billion of retention equity and deferred equity consideration. This acquisition is subject to customary closing conditions, including certain regulatory approvals, and is expected to close in the ~~Attorney General informed Visa that the investigation has been terminated.~~

next three to six months.



ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

This management’s discussion and analysis provides a review of the results of operations, financial condition and the liquidity and capital resources of Visa Inc. and its subsidiaries (“Visa,” “we,” “us,” “our” or the “Company”) on a historical basis and outlines the factors that have affected recent earnings, as well as those factors that may affect future earnings. The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes included elsewhere in this report.

Forward-Looking Statements

This Quarterly Report on Form 10-Q 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 and growth of our business; anticipated expansion of our products in certain countries; industry developments; anticipated benefits of our acquisitions; expectations regarding litigation matters, investigations and proceedings; timing and amount of stock repurchases; sufficiency of sources of liquidity and funding; effectiveness of our risk management programs; and expectations regarding the impact of recent accounting pronouncements on our consolidated financial statements. Forward-looking statements generally are identified by words such as “believes,” “estimates,” “expects,” “intends,” “may,” “projects,” “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. We describe risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, any of these forward-looking statements in our SEC filings, including our Annual Report on Form 10-K, for the year ended September 30, ~~2018~~2019 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.

Overview

Visa is a global payments technology company that enables fast, secure and reliable electronic payments across more than 200 countries and territories. We facilitate global commerce through the transfer of value and information among a global network of consumers, merchants, financial institutions, businesses, strategic partners and government entities. Our advanced transaction processing network, VisaNet, enables authorization, clearing and settlement of payment transactions and allows us to provide our financial institution and merchant clients a wide range of products, platforms and value-added services.

Financial overview.~~Our~~financial results for the six months ended March 31, 2018 reflected the impact of certain significant items that we believe were not indicative of our operating performance in these or future periods, as they were either non-recurring or had no cash impact. There were no comparable adjustments recorded for the three and six months ended March 31, 2019 and the three months ended March 31, 2018. Our as-reported U.S. GAAP and ~~adjusted~~ non-GAAP net income and diluted earnings per share ~~for these periods were~~are as follows:

Three Months Ended
March 31, 2019
vs.
2018 Six Months Ended
March 31, 2019
vs.
2018
(in millions, except percentages and per share data) 2019 2018
%
Change⁽¹⁾
2019 2018
%
Change⁽¹⁾
Net income, as reported $ 2,977
$ 2,605
14 % $ 5,954
$ 5,127
16 %
Diluted earnings per share, as reported $ 1.31
$ 1.11
17 % $ 2.61
$ 2.19
19 %
Net income, as adjusted⁽²⁾
$ 2,977
$ 2,605
14 % $ 5,954
$ 5,141
16 %
Diluted earnings per share, as adjusted⁽²⁾
$ 1.31
$ 1.11
17 % $ 2.61
$ 2.19
19 %



	Three Months Ended December 31,				2019 vs 2018
	2019		2018		% Change⁽¹⁾
	(in millions, except percentages and per share data)
Net income, as reported	$	3,272	$	2,977	10	%
Diluted earnings per share, as reported	$	1.46	$	1.30	12	%
Non-GAAP net income⁽²⁾	$	3,272	$	2,980	10	%
Non-GAAP diluted earnings per share⁽²⁾	$	1.46	$	1.30	12	%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.


⁽²⁾	For a full reconciliation of our ~~adjusted~~non-GAAP financial results, see tables in~~Adjusted~~ Non-GAAP financial results below.

Highlights for the first ~~half~~quarter of fiscal ~~2019~~.2020. Our business is affected by overall economic conditions and consumer spending. Our business performance during the ~~six~~three months ended ~~March~~December 31, 2019 reflects continued global consumer spending growth amidst uneven global economic conditions. We recorded net revenues of ~~$5.5 billion and $11.0~~$6.1 billion for the three ~~and six~~ months ended ~~March~~December 31, 2019, ~~respectively,~~ an increase of ~~8% and 11%, respectively,~~10% over the prior-year comparable ~~periods,~~period, reflecting continued growth in nominal payments volume, nominal cross-border volume and processed transactions. ~~The effect of exchange~~Exchange rate movements in the three ~~and six~~ months ended ~~March~~December 31, 2019, as partially mitigated by our hedging program, ~~resulted in approximately negative one-and-a-half percentage point and negative one percentage point impact to~~negatively impacted our net revenues growth ~~respectively.~~by approximately one percentage point.

Total operating expenses were ~~$1.9 billion and $3.6~~$2.0 billion for the three ~~and six~~ months ended ~~March~~December 31, 2019, ~~respectively,~~ an increase of 7%14% on a GAAP and ~~11%~~an increase of 13% on a non-GAAP basis, respectively, over the prior-year comparable period. The increase ~~in the period~~ was primarily due to higher personnel, ~~marketing~~professional fees, depreciation and amortization and general and administrative expenses, as we continue to invest ~~to support~~in our business growth.

~~Adjusted~~Non-GAAP financial results. ~~Our~~We use non-GAAP financial ~~results for the six months ended March 31, 2018 reflected the impact~~measures of our performance which exclude certain ~~significant~~ items ~~that~~which we believe ~~were~~are not ~~indicative~~representative of our continuing operations and may distort our longer-term operating trends. We consider non-GAAP measures useful to investors because they provide greater transparency into management’s view and assessment of our ongoing operating ~~performance~~performance. Starting in ~~these or future periods, as they were either non-recurring or had no cash impact. As such,~~fiscal 2020, we ~~believe~~revised our non-GAAP methodology to exclude the ~~presentation~~impact of ~~adjusted financial results excluding the following items provides a clearer understanding~~gains and losses on our equity investments, amortization of acquired intangible assets and acquisition-related costs for acquisitions that closed in fiscal 2019 and subsequent periods. Prior year amounts have been restated to conform to our ~~operating performance for the periods presented.~~current presentation.

•

Gains and losses on equity investments. Gains and losses on equity investments include periodic non-cash fair value adjustments and gains and losses upon sale of an investment.These long-term investments are strategic in nature and are primarily private company investments. Gains and losses and the related tax impacts associated with these investments are tied to the performance of thecompanies that we invest inand therefore do not correlate to the underlying performance of our business. During the three months ended December 31, 2019 and 2018, we recorded net realized and unrealized gains of $13 million and losses of $4 million, respectively, and related tax expense of $3 million and tax benefit of $1 million, respectively.

•

Amortization of acquired intangible assets. Amortization of acquired intangible assets consists of amortization of intangible assets such as developed technology, customer relationships and brands acquired in connection with business combinations executed beginning in fiscal 2019. Amortization charges for our acquired intangible assets are non-cash and are significantly affected by the timing, frequency and size of our acquisitions, rather than our core operations. As such, we have excluded this amount and the related tax impact to facilitate an evaluation of our current operating performance and comparison to our past operating performance. During the three months ended December 31, 2019, we recorded amortization of acquired intangible assets of $11

million and related tax benefit of $3 million. There were no comparable ~~adjustments recorded for the three and six months ended March 31, 2019 and~~amounts during the three months ended ~~March 31, 2018.~~

~~Remeasurement of deferred tax balances.~~ ~~During the six months ended March~~December 31, 2018 since we are only adjusting for transactions that closed in ~~connection with the Tax Act’s reduction of the corporate~~fiscal 2019 and subsequent periods.

•

Acquisition-related costs. Acquisition-related costs consist primarily of one-time transaction and integration costs associated with our business combinations. These costs include professional fees, technology integration fees, restructuring activities and other direct costs related to the purchase and integration of acquired entities. It also includes retention equity and deferred equity compensation when they are agreed upon as part of the purchase price of the transaction but are required to be recognized as expense post-combination. We have excluded these amounts and the related tax impacts as the expenses are recognized for a limited duration and do not reflect the underlying performance of our business. During the three months ended December 31, 2019, we recorded acquisition-related costs of $2 million. There were no comparable amounts during the three months ended December 31, 2018 since we are only adjusting for transactions that closed in fiscal 2019 and subsequent periods.

Non-GAAP operating expense, non-operating income (expense), income tax provision, effective income tax rate, ~~we remeasured our~~ net ~~deferred tax liabilities as of the enactment date, resulting in the recognition of a non-recurring, non-cash~~ income ~~tax benefit of $1.1 billion. See~~ ~~Note 12—Income Taxes~~ ~~to our unaudited consolidated financial statements.~~

~~Transition tax on foreign earnings.~~ ~~During the six months ended March 31, 2018, in connection with the Tax Act’s requirement that we include certain untaxed foreign~~and diluted earnings ~~of non-U.S. subsidiaries in our fiscal 2018 taxable income, we recorded a one-time transition tax estimated to be approximately $1.1 billion. See~~ ~~Note 12—Income Taxes~~ ~~to our unaudited consolidated financial statements.~~

~~Adjusted financial results are non-GAAP financial measures and~~per share should not be relied upon as substitutes for, or considered in isolation from, measures calculated in accordance with U.S. GAAP. The following ~~table reconciles~~tables reconcile our as-reported financial measures, calculated in accordance with U.S. GAAP, to our respective non-GAAP ~~adjusted~~ financial measures for the ~~six~~three months ended ~~March 31, 2018~~. ~~There were no comparable adjustments recorded for the three and six months ended March~~December 31, 2019 and ~~the three months ended March 31,~~ 2018.

Six Months Ended March 31, 2018
(in millions, except per share data) Income Tax Provision Net Income
Diluted Earnings Per Share⁽¹⁾
As reported $ 1,329
$ 5,127
$ 2.19
Remeasurement of deferred tax balances 1,133
(1,133 ) (0.48 )
Transition tax on foreign earnings (1,147 ) 1,147
0.49
As adjusted $ 1,315
$ 5,141
$ 2.19



	Three Months Ended December 31, 2019
	Operating Expenses			Non-operating Income (Expense)			Income Tax Provision			Effective Income Tax Rate⁽¹⁾		Net Income			Diluted Earnings Per Share⁽¹⁾
	(in millions, except percentages and per share data)
As reported	$	2,038		$	(42	)	$	702		17.7	%	$	3,272		$	1.46
(Gains) Losses on equity investments, net	—			(13		)	(3		)			(10		)	—
Amortization of acquired intangible assets	(11		)	—			3					8			—
Acquisition-related costs	(2		)	—			—					2			—
Non-GAAP	$	2,025		$	(55	)	$	702		17.7	%	$	3,272		$	1.46



	Three Months Ended December 31, 2018
	Operating Expenses		Non-operating Income (Expense)			Income Tax Provision		Effective Income Tax Rate⁽¹⁾		Net Income		Diluted Earnings Per Share⁽¹⁾
	(in millions, except percentages and per share data)
As reported	$	1,789	$	(87	)	$	653	18.0	%	$	2,977	$	1.30
(Gains) Losses on equity investments, net	—		4			1				3		—
Non-GAAP	$	1,789	$	(83	)	$	654	18.0	%	$	2,980	$	1.30


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. ~~Diluted~~Effective income tax rate, diluted earnings per share and ~~its~~their respective ~~total~~totals are calculated based on unrounded numbers.

Common stock repurchases. During the three months ended ~~March~~December 31, 2019, we repurchased 1413 million shares of our class A common stock in the open market using ~~$1.9~~$2.4 billion of cash on hand. ~~In January 2019, our board of directors authorized an additional $8.5 billion share repurchase program.~~ As of ~~March~~December 31, 2019, we had remaining authorized funds of ~~$8.4~~$1.7 billion for share repurchase. In January 2020, our board of directors authorized an additional $9.5 billion share repurchase program. See Note 9—Stockholders’ Equity to our unaudited consolidated financial statements.

Acquisition. On January 13, 2020, we entered into a definitive agreement to acquire Plaid, Inc. for $5.3 billion. We will pay approximately $4.9 billion of cash and $0.4 billion of retention equity and deferred equity consideration. This acquisition is subject to customary closing conditions, including certain regulatory approvals, and is expected to close in the next three to six months.

Payments volume and transaction counts. Payments volume is the primary driver for our service revenues, and the number of processed transactions is the primary driver for our data processing revenues. During the three months ended December 31, 2018, we updated our definition of payments volume to now include all disbursement volume related to Visa Direct, in addition to the funding volume previously included. All prior periods presented have been adjusted accordingly. Please refer to the Operational Performance Data section of Exhibit 99.1 to our Current Report on Form 8-K filed on January 30, 2019 for more details on the impact from this update in payments volume definition.

Nominal payments volume in the United States posted ~~low double-digit~~high single-digit growth for the three ~~and six~~ months ended ~~December 31, 2018~~September 30, 2019⁽¹⁾, driven mainly by consumer debit and commercial. Nominal international payments volume growth was negatively impacted by movements in ~~the~~ U.S. dollar exchange rates. On a constant-dollar basis, which excludes the impact of exchange rate movements, our international payments volume growth rate for the three ~~and six~~ months ended ~~December 31, 2018~~September 30, 2019 was ~~11%~~10%. Growth in processed transactions reflects the ongoing worldwide shift to electronic payments.

The following table⁽²⁾ presents nominal payments and cash volume:


	United States						International						Visa Inc.						United States						International						Visa Inc.
	Three Months Ended December 31,⁽¹⁾						Three Months Ended December 31,⁽¹⁾						Three Months Ended December 31,⁽¹⁾						Three Months Ended September 30,⁽¹⁾						Three Months Ended September 30,⁽¹⁾						Three Months Ended September 30,⁽¹⁾
	2018		2017		% Change		2018		2017		% Change		2018		2017		% Change		2019		2018		% Change⁽²⁾		2019		2018		% Change⁽²⁾		2019		2018		% Change⁽²⁾
	(in billions, except percentages)																		(in billions, except percentages)
Nominal payments volume
Consumer credit	$	399	$	374	7	%	$	639	$	620	3	%	$	1,038	$	994	4	%	$	404	$	382	6	%	$	646	$	616	5	%	$	1,050	$	997	5	%
Consumer debit⁽³⁾	422		374		13	%	480		452		6	%	902		826		9	%	448		408		10	%	500		458		9	%	948		867		9	%
Commercial⁽⁴⁾	158		139		14	%	99		92		7	%	257		231		11	%	170		155		10	%	101		93		9	%	271		248		10	%
Total nominal payments volume	$	979	$	886	10	%	$	1,218	$	1,164	5	%	$	2,197	$	2,051	7	%
Total nominal payments volume⁽²⁾																			$	1,023	$	945	8	%	$	1,247	$	1,167	7	%	$	2,270	$	2,112	7	%
Cash volume	142		137		3	%	587		626		(6	)%	729		764		(5	)%	148		145		2	%	565		578		(2	)%	712		723		(1	)%
Total nominal volume⁽⁵⁾	$	1,121	$	1,024	10	%	$	1,805	$	1,791	1	%	$	2,926	$	2,814	4	%

	United States						International						Visa Inc.
	Six Months Ended December 31,⁽¹⁾						Six Months Ended December 31,⁽¹⁾						Six Months Ended December 31,⁽¹⁾
	2018		2017		% Change		2018		2017		% Change		2018		2017		% Change
	(in billions, except percentages)
Nominal payments volume
Consumer credit	$	781	$	722	8	%	$	1,256	$	1,212	4	%	$	2,037	$	1,934	5	%
Consumer debit⁽³⁾	830		731		14	%	939		879		7	%	1,769		1,610		10	%
Commercial⁽⁴⁾	313		274		14	%	191		178		7	%	504		452		12	%
Total nominal payments volume	$	1,924	$	1,726	11	%	$	2,386	$	2,269	5	%	$	4,310	$	3,996	8	%
Cash volume	286		279		3	%	1,165		1,242		(6	)%	1,451		1,521		(5	)%
Total nominal volume⁽⁵⁾	$	2,210	$	2,005	10	%	$	3,551	$	3,511	1	%	$	5,761	$	5,516	4	%
Total nominal volume^(2),(5)																			$	1,170	$	1,090	7	%	$	1,812	$	1,745	4	%	$	2,982	$	2,834	5	%

The following table⁽²⁾ presents nominal and constant payments and cash volume growth:


	International				Visa Inc.				International				Visa Inc.				International				Visa Inc.
	Three Months Ended December 31, 2018 vs. 2017⁽¹⁾				Three Months Ended December 31, 2018 vs. 2017⁽¹⁾				Six Months Ended December 31, 2018 vs. 2017⁽¹⁾				Six Months Ended December 31, 2018 vs. 2017⁽¹⁾				Three Months Ended September 30, 2019 vs. 2018⁽¹⁾				Three Months Ended September 30, 2019 vs. 2018⁽¹⁾
	Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal		Constant⁽⁶⁾		Nominal⁽²⁾		Constant^(2),(6)		Nominal		Constant^(2),(6)
Payments volume growth
Consumer credit growth	3	%	9	%	4	%	8	%	4	%	10	%	5	%	9	%	5	%	7	%	5	%	7	%
Consumer debit growth⁽³⁾	6	%	12	%	9	%	13	%	7	%	12	%	10	%	13	%	9	%	13	%	9	%	11	%
Commercial growth⁽⁴⁾	7	%	14	%	11	%	14	%	7	%	15	%	12	%	14	%	9	%	12	%	10	%	11	%
Total payments volume growth(2)	5	%	11	%	7	%	11	%	5	%	11	%	8	%	11	%	7	%	10	%	7	%	9	%
Cash volume growth	(6	)%	2	%	(5	)%	2	%	(6	)%	2	%	(5	)%	2	%	(2	)%	(1	)%	(1	)%	—	%
Total volume growth(2)	1	%	8	%	4	%	8	%	1	%	8	%	4	%	9	%	4	%	6	%	5	%	7	%

⁽¹⁾

Service revenues in a given quarter are assessed based on nominal payments volume in the prior quarter. Therefore, service revenues reported for the three ~~and six~~ months ended ~~March~~December 31, 2019 and 2018 were based on nominal payments volume reported by our financial institution clients for the three ~~and six~~ months ended ~~December 31,~~September 30, 2019 and 2018, ~~and 2017,~~ respectively.


⁽²⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes and totals are calculated based on unrounded numbers.


⁽³⁾	Includes consumer prepaid volume and Interlink volume.


⁽⁴⁾	Includes large, ~~middle~~medium and small business credit and debit, as well as commercial prepaid volume.

⁽⁵⁾

Total nominal volume is the sum of total nominal payments volume and cash volume. Total nominal payments volume is the total monetary value of transactions for goods and services that are purchased on cards and other form factors carrying the Visa, Visa Electron, Interlink and V PAY brands. Cash volume generally consists of cash access transactions, balance access transactions, balance transfers and convenience checks. Total nominal volume is provided by our financial institution clients, subject to review by Visa. On occasion, previously presented volume information may be updated. Prior-period updates, other than the change to the payments volume definition, are not material.


⁽⁶⁾	Growth on a constant-dollar basis excludes the impact of foreign currency fluctuations against the U.S. dollar.

The following table⁽¹⁾ provides the number of transactions involving cards and other form factors carrying the Visa, Visa Electron, Interlink, V PAY and PLUS cards processed on Visa’s networks during the periods presented:


	Three Months Ended March 31,				Six Months Ended March 31,				Three Months Ended December 31,
	2019	2018	% Change		2019	2018	% Change		2019	2018	% Change⁽¹⁾
	(in millions, except percentages)
Visa processed transactions	32,544	29,321	11	%	66,476	59,829	11	%	37,775	33,931	11	%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Percentage change is calculated based on unrounded numbers.

Results of Operations

Net Revenues

The following table sets forth our net revenues earned in the U.S. and internationally:


	Three Months Ended March 31,				2019 vs. 2018				Six Months Ended March 31,				2019 vs. 2018				Three Months Ended December 31,				2019 vs. 2018
	2019		2018		$ Change		% Change⁽¹⁾		2019		2018		$ Change		% Change⁽¹⁾		2019		2018		$ Change		% Change⁽¹⁾
	(in millions, except percentages)																(in millions, except percentages)
U.S.	$	2,479	$	2,297	$	182	8	%	$	4,987	$	4,562	$	425	9	%	$	2,717	$	2,508	$	209	8	%
International	3,015		2,776		239		9	%	6,013		5,373		640		12	%	3,337		2,998		339		11	%
Net revenues	$	5,494	$	5,073	$	421	8	%	$	11,000	$	9,935	$	1,065	11	%	$	6,054	$	5,506	$	548	10	%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.

The increase in net revenues reflects the continued growth in nominal payments volume, nominal cross-border volume and processed transactions. The increase in revenues was partially offset by the increase in client incentives.

Our net revenues are impacted by the overall strengthening or weakening of the U.S. dollar as payments volume and related revenues denominated in local currencies are converted to U.S. dollars. ~~The effect of exchange~~Exchange rate movements in the three ~~and six~~ months ended ~~March~~December 31, 2019, as partially mitigated by our hedging program, ~~resulted in approximately negative one-and-a-half percentage point and negative one percentage point impact to~~negatively impacted our net revenues growth ~~respectively.~~by approximately one percentage point.

The following table sets forth the components of our net revenues:


	Three Months Ended March 31,						2019 vs. 2018					Six Months Ended March 31,						2019 vs. 2018					Three Months Ended December 31,						2019 vs. 2018
	2019			2018			$ Change			% Change⁽¹⁾		2019			2018			$ Change			% Change⁽¹⁾		2019			2018			$ Change			% Change⁽¹⁾
	(in millions, except percentages)																						(in millions, except percentages)
Service revenues	$	2,417		$	2,253		$	164		7	%	$	4,759		$	4,399		$	360		8	%	$	2,555		$	2,342		$	213		9	%
Data processing revenues	2,432			2,127			305			14	%	4,902			4,274			628			15	%	2,864			2,470			394			16	%
International transaction revenues	1,796			1,752			44			3	%	3,647			3,418			229			7	%	2,018			1,851			167			9	%
Other revenues	327			230			97			42	%	626			459			167			36	%	365			299			66			22	%
Client incentives	(1,478		)	(1,289		)	(189		)	15	%	(2,934		)	(2,615		)	(319		)	12	%	(1,748		)	(1,456		)	(292		)	20	%
Net revenues	$	5,494		$	5,073		$	421		8	%	$	11,000		$	9,935		$	1,065		11	%	$	6,054		$	5,506		$	548		10	%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.

~~Service revenues~~ ~~increased primarily due to 7% and 8% growth in nominal payments volume during the three and six-month comparable periods, respectively.~~

~~Data processing revenues~~ increased mainly due to overall growth in processed transactions of 11% during the three and six-month comparable periods as well as select pricing modifications effective after the second quarter of fiscal 2018.


•	Service revenues increased primarily due to 7% growth in nominal payments volume as well as select pricing modifications effective in 2019.


•	Data processing revenues increased mainly due to overall growth in processed transactions of 11%,select pricing modifications effective in 2019, as well as faster growth of our value-added services, favorable business mix and acquisition-related revenue.


•	International transaction revenues increased due to a 7% growth in nominal cross-border volumes and select pricing modifications effective in 2019. These increases were partially offset by lower volatility in a broad range of currencies.


•	Other revenues increased primarily due to higher revenues from value-added services.


•	Client incentives increased mainly due to incentives recognized on long-term customer contracts that were initiated or renewed in 2019 and overall growth in global payments volume. The amount of client incentives we record in future periods will vary based on changes in performance expectations, actual client performance, amendments to existing contracts or execution of new contracts.

~~International transaction revenues~~ increased during the three and six-month comparable periods primarily due to select pricing modifications effective after the second quarter of fiscal 2018 as well as changes in the mix of our international transaction revenues. International transaction revenues also reflected a 2% decline and 1% growth in nominal cross-border volumes during the three and six-month comparable periods, respectively.

~~Other revenues~~ increased during the three and six-month comparable periods primarily due to changes in the classification and timing of recognition of revenue as a result of the adoption of the new revenue standard as well as an increase in revenues from license fees and optional services.

~~Client incentives~~ increased during the three and six-month comparable periods mainly due to incentives recognized on long-term customer contracts that were initiated or renewed after the second quarter of fiscal 2018 and overall growth in global payments volume. Client incentives also increased due to changes in classification and timing of recognition as a result of the adoption of the new revenue standard. The amount of client incentives we record in future periods will vary based on changes in performance expectations, actual client performance, amendments to existing contracts or execution of new contracts.

Operating Expenses

The following table sets forth components of our total operating expenses:


	Three Months Ended March 31,				2019 vs. 2018					Six Months Ended March 31,				2019 vs. 2018					Three Months Ended December 31,				2019 vs. 2018
	2019		2018		$ Change			% Change⁽¹⁾		2019		2018		$ Change			% Change⁽¹⁾		2019		2018		$ Change			% Change⁽¹⁾
	(in millions, except percentages)																		(in millions, except percentages)
Personnel	$	894	$	824	$	70		8	%	$	1,701	$	1,503	$	198		13	%	$	982	$	807	$	175		22	%
Marketing	241		261		(20		)	(8	)%	517		484		33			7	%	274		276		(2		)	(1	)%
Network and processing	171		169		2			1	%	344		329		15			5	%	181		173		8			5	%
Professional fees	101		108		(7		)	(7	)%	192		200		(8		)	(4	)%	106		91		15			16	%
Depreciation and amortization	160		153		7			4	%	319		298		21			7	%	182		159		23			15	%
General and administrative	264		222		42			19	%	540		458		82			18	%	313		276		37			13	%
Litigation provision	22		—		22			NM		29		—		29			NM		—		7		(7		)	(94	)%
Total operating expenses	$	1,853	$	1,737	$	116		7	%	$	3,642	$	3,272	$	370		11	%	$	2,038	$	1,789	$	249		14	%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.


•	Personnel expenses increased primarily due to continued increase in headcount and higher incentive compensation, reflecting our strategy to invest in future growth.


•	Professional feesexpenses increased mainly due to costs incurred in connection with our merger and acquisition activities.


•	Depreciation and amortization expenses increased primarily due to additional depreciation from our on-going investments, including acquisitions.


•	General and administrative expenses increased mainly due to higher product enhancements costs in support of our business growth and higher indirect taxes.

~~Personnel expenses~~ ~~increased primarily due to an increase in headcount reflecting our strategy to invest for future growth.~~

~~Marketing expenses~~ in 2018 included spend for the Winter Olympics in PyeongChang, which did not recur in 2019. This decrease in 2019 was partially offset in the three-month comparable period and was more than offset in the six-month comparable period by changes in the classification and timing of recognition of certain marketing expenses as a result of the adoption of the new revenue standard.

~~General and administrativeexpenses~~ increased mainly due to higher product enhancement costs in support of our business growth, changes in the classification and timing of recognition of certain general and administrative expenses as a result of the adoption of the new revenue standard and higher indirect taxes.

Non-operating Income (Expense)

The following table sets forth the components of our non-operating income (expense).:


	Three Months Ended March 31,						2019 vs. 2018				Six Months Ended March 31,						2019 vs. 2018				Three Months Ended December 31,						2019 vs. 2018
	2019			2018			$ Change		% Change⁽¹⁾		2019			2018			$ Change		% Change⁽¹⁾		2019			2018			$ Change		% Change⁽¹⁾
	(in millions, except percentages)																				(in millions, except percentages)
Interest expense, net	$	(140	)	$	(153	)	$	13	(9	)%	$	(285	)	$	(307	)	$	22	(7	)%	$	(111	)	$	(145	)	$	34	(23	)%
Investment income and other	176			34			142		410	%	234			100			134		133	%	69			58			11		19	%
Total non-operating income (expense)	$	36		$	(119	)	$	155	(130	)%	$	(51	)	$	(207	)	$	156	(75	)%	$	(42	)	$	(87	)	$	45	(52	)%


⁽¹⁾	Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.

Interest expense decreased in the three and six months ended March 31, 2019 primarily as a result of entering into derivative instruments in fiscal 2019 that lowered the cost of borrowing on a portion of our outstanding debt.

~~Investment income and other increased in the three and six months ended March 31, 2019 primarily due to gains on our equity investments as well as higher interest income on our cash and investments.~~

~~Effective Income Tax Rate~~

The effective income tax rate was 19% for the three and six months ended March 31, 2019, and 19% and 21% for the three and six months ended March 31, 2018, respectively. The effective tax rate for the six months ended March 31, 2019 differs from the effective tax rate in the same prior-year period primarily due to the effects of the Tax Act enacted on December 22, 2017, as discussed below:

The Tax Act reduced the statutory federal corporate income tax rate from 35% to 21% effective January 1, 2018. In fiscal 2018, our statutory federal corporate rate was a blended rate of 24.5%. Federal tax expense for the six months ended March 31, 2019 was determined at a 21% tax rate compared to the 24.5% tax rate in the prior-year period;

~~The absence of the following items recorded during the six months ended March 31, 2018:~~


▪ •	~~an $80 million benefit due to~~ Interest expense, net decreased primarily as a ~~non-recurring audit settlement during~~result of entering into derivative instruments in 2019 that lowered the ~~three months ended March 31, 2018;~~cost of borrowing on a portion of our outstanding debt.


▪	a $1.1 billion non-recurring, non-cash benefit from the remeasurement of deferred tax balances recorded in the three months ended December 31, 2017, in connection with the reduction in U.S. federal tax rate enacted by the Tax Act; and


▪•	~~a $1.1 billion one-time transition tax expense~~Investment income and other increased primarily due to gains on ~~certain untaxed foreign earnings recorded in the three months ended December 31, 2017, in connection with the requirement enacted by the Tax Act~~.our equity investments.

We previously recorded provisional amounts for the transition tax and the tax effects of various other tax provisions enacted by the Tax Act. As permitted by ASU 2018-05, we completed the determination of the accounting impacts of the transition tax and the tax effects of these various tax provisions in the three months ended December 31, 2018. The adjustments to the provisional amounts were not material. In addition, we adopted the accounting policy of accounting for taxes on GILTI in the period that it is subject to such tax.

~~Adjusted effective income tax rate.~~ Our financial results for the six months ended March 31, 2018 reflect the impact of certain significant items that we believe were not indicative of our operating performance during the period, as they were either non-recurring or had no cash impact. As such, we have presented our adjusted effective income tax rate for the period in the table below, which we believe provides a clearer understanding of our operating performance for the reported period. There were no comparable adjustments recorded for the three and six months ended March 31, 2019 or the three months ended March 31, 2018. See ~~Overview—Adjusted financial results~~ ~~within this~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~ ~~for descriptions of the adjustments in the tables below.~~

Six Months Ended
March 31, 2018
Income Before Income Taxes Income Tax Provision
Effective Income Tax Rate⁽¹⁾
(in millions, except percentages)
As reported $ 6,456
$ 1,329
20.6 %
Remeasurement of deferred tax balances —
1,133

Transition tax on foreign earnings —
(1,147 )
As adjusted $ 6,456
$ 1,315
20.4 %


⁽¹⁾	~~Figures in the table may not recalculate exactly due to rounding. Effective income tax rate is calculated based on unrounded numbers.~~

Liquidity and Capital Resources

Cash Flow Data

The following table summarizes our cash flow activity for the periods presented:



	Three Months Ended December 31,
	2019			2018
	(in millions)
Total cash provided by (used in):
Operating activities	$	3,875		$	3,294
Investing activities	562			(70		)
Financing activities	(3,133		)	(3,018		)
Effect of exchange rate changes on cash and cash equivalents	127			(68		)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents	$	1,431		$	138

Six Months Ended
March 31,
2019 2018
(in millions)
Total cash provided by (used in):
Operating activities $ 5,358
$ 5,729
Investing activities (396 ) (1,137 )
Financing activities (5,486 ) (6,533 )
Effect of exchange rate changes on cash and cash equivalents (171 ) 206
Decrease in cash, cash equivalents, restricted cash and restricted cash equivalents $ (695 ) $ (1,735 )

Operating activities. Cash provided by operating activities for the ~~six~~three months ended ~~March~~December 31, 2019 was ~~lower~~higher than the prior-year comparable period due to continued growth in our underlying business and receipt of the $467 million takedown payment associated with the Interchange Multidistrict Litigation. See Note 13—Legal Matters to our unaudited consolidated financial statements.

Investing activities. Cash provided by investing activities for the three months ended December 31, 2019 increased primarily due to fewer purchases of investment securities as compared to the prior-year period.

Financing activities. Cash used in financing activities for the three months ended December 31, 2019was slightly higher than the prior-year comparable period primarily due to higher payments from the litigation escrow account in the current year and the first installment payment of the transition tax in connection with the Tax Act, partially offset by continued growth in our underlying business.

~~Investing activities.~~ Cash used in investing activities for the six months ended March 31, 2019 was lower than the prior-year comparable period as prior-year purchases of investment securities reflected additional investment of net proceeds received from fixed-rate senior notes issued in September 2017.

~~Financing activities.~~ ~~Cash used in financing activities for the six months ended March 31, 2019~~was lower than the prior-year comparable period primarily due to the repayment of the Senior Notes due 2017 in the prior year. This decrease was partially offset by an increase in the repurchases of our class A common stock and higher dividends ~~paid in the current year.~~paid. See Note 9—Stockholders’ Equity to our unaudited consolidated financial statements.

Sources of Liquidity

Our primary sources of liquidity are cash on hand, cash flow from operations, our investment portfolio and access to various equity and borrowing arrangements. Funds from operations are maintained in cash and cash equivalents and short-term or long-term available-for-sale investment securities based upon our funding requirements, access to liquidity from these holdings and the returns that these holdings provide. Based on our current cash flow forecasts of our short-term and long-term liquidity needs, we believe that our current and projected sources of liquidity will be sufficient to meet our projected liquidity needs for more than the next 12 months. We will continue to assess our liquidity position and potential sources of supplemental liquidity in view of our operating performance, current economic and capital market conditions and other relevant circumstances.

~~Credit Ratings~~

~~During the six months ended March 31, 2019, our credit ratings by Standard and Poor’s were upgraded to the following as compared to September 30, 2018:~~



	~~Standard and Poor’s~~
	~~March 31, 2019~~		~~September 30, 2018~~
~~Debt type~~	~~Rating~~	~~Outlook~~	~~Rating~~	~~Outlook~~
~~Short-term unsecured debt~~	~~A-1+~~	~~Stable~~	~~A-1~~	~~Positive~~
~~Long-term unsecured debt~~	~~AA-~~	~~Stable~~	A+	~~Positive~~

Various factors affect our credit ratings, including changes in our operating performance, the economic environment, conditions in the electronic payment industry, our financial position and changes in our business strategy. We do not currently foresee any reasonable circumstances under which our credit ratings would be significantly downgraded. If a significant downgrade were to occur, it could adversely impact, among other things, our future borrowing costs and access to capital markets.

Uses of Liquidity

There has been no significant change to our primary uses of liquidity since September 30, ~~2018,~~2019, except as discussed below.

Common stock repurchases. During the ~~six~~three months ended ~~March~~December 31, 2019, we repurchased 3113 million shares of our class A common stock using ~~$4.3~~$2.4 billion of cash on hand. ~~In January 2019, our board of directors authorized an additional $8.5 billion share repurchase program.~~ As of ~~March~~December 31, 2019, we had remaining authorized funds of ~~$8.4~~$1.7 billion for share repurchase. ~~All~~In January 2020, our board of directors authorized an additional $9.5 billion share repurchase ~~programs authorized prior to January 2019 have been completed.~~program. See Note 9—Stockholders’ Equity to our unaudited consolidated financial statements.

Dividends. During the ~~six~~three months ended ~~March~~December 31, 2019, we declared and paid ~~$1.1~~$0.7 billion in dividends to holders of our common and preferred stock. On ~~April 16, 2019,~~January 28, 2020, our board of directors declared a cash dividend in the amount of ~~$0.25~~$0.30 per share of class A common stock (determined in the case of class B and C common stock and UK&I and Europe preferred stock on an as-converted basis), which will be paid on ~~June 4, 2019,~~March 3, 2020, to all holders of record as of ~~May 17, 2019.~~February 14, 2020. See Note 9—Stockholders’ Equity to our unaudited consolidated financial statements. We expect to continue paying quarterly dividends in cash, subject to approval by the board of directors. All three series of preferred stock and class B and C common stock will share ratably on an as-converted basis in such future dividends.

~~Deferred purchase consideration.~~On June 21, 2016, we acquired 100% of the share capital of Visa Europe. In connection with the purchase, we will pay an additional €1.0 billion, plus 4% compound annual interest, on the third anniversary of the closing of Visa Europe acquisition.

~~Derivative Financial Instruments~~

~~In March 2019, we entered into interest rate and cross-currency swap agreements on a portion of our outstanding 3.15%~~ Senior Notes. In December 2015, we issued fixed-rate senior notes in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years. A principal payment of $3.0 billion is due on December 2025 that allows us to manage our interest rate exposure through a combination of fixed and floating rates and reduce our overall cost of borrowing on our debt. Together these swap agreements effectively convert a portion of our U.S. dollar denominated fixed-rate payments into euro denominated floating-rate payments.14, 2020, for which we have sufficient liquidity. See Note ~~5—Fair Value Measurements and Investments~~7—Debt to our unaudited consolidated financial statements.

~~Fair Value Measurements—Financial Instruments~~

~~As of March 31, 2019, our financial instruments measured at fair value on~~Acquisition. On January 13, 2020, we entered into a ~~recurring basis included $13.8~~definitive agreement to acquire Plaid, Inc. for $5.3 billion. We will pay approximately $4.9 billion of ~~assets~~cash and ~~$44 million~~$0.4 billion of ~~liabilities. See~~ ~~Note 5—Fair Value Measurements~~retention equity and ~~Investments~~deferred equity consideration. This acquisition is subject to ~~our unaudited consolidated financial statements.~~customary closing conditions, including certain regulatory approvals, and is expected to close in the next three to six months. We intend to fund the acquisition with cash, cash equivalents and investments, as well as through the issuance of new indebtedness.



ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk

There ~~has~~have been no significant ~~change~~changes to our market risks since September 30, ~~2018, except as discussed below.~~

In March 2019, we entered into interest rate and cross-currency swap agreements on a portion of our outstanding senior notes that allows us to manage our interest rate exposure through a combination of fixed and floating rates and reduce our overall cost of borrowing. Together these swap agreements effectively convert a portion of our U.S. dollar denominated fixed-rate payments into euro denominated floating-rate payments. By entering into interest rate swaps, we have assumed risks associated with market interest rate fluctuations. See ~~Note 5—Fair Value Measurements and Investments~~ ~~to our unaudited consolidated financial statements.~~2019.



ITEM 4.	Controls and Procedures

Disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) of Visa Inc. at the end of the period covered by this report and, based on such evaluation, have concluded that the disclosure controls and procedures of Visa Inc. were effective at the reasonable assurance level as of such date.

Changes in internal control over financial reporting. During the six months ended March 31, 2019, the Company implemented a new client incentives accounting system along with enhancements and modifications to existing internal controls and procedures to comply with the new revenue standard. There have been no ~~other~~ changes in the internal control over financial reporting of Visa Inc. that occurred during the fiscal period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION



ITEM 1.	Legal Proceedings.

Refer to Note 13—Legal Matters to the unaudited consolidated financial statements included in this Form 10-Q for a description of the Company’s current material legal proceedings.



ITEM 1A.	Risk Factors.

For a discussion of the Company’s risk factors, see the information under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended September 30, ~~2018,~~2019, filed with the SEC on November ~~16, 2018.~~14, 2019.



ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

ISSUER PURCHASES OF EQUITY SECURITIES

The table below sets forth our purchases of common stock during the quarter ended ~~March~~December 31, ~~2019~~:2019:

Period
Total Number
of Shares
Purchased

Average Price
Paid per Share

Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs^(1),(2)

Approximate Dollar Value
of Shares that May Yet Be Purchased
Under the Plans or Programs^(1),(2)
January 1-31, 2019 3,695,067
$ 135.30
3,695,067
$ 9,810,395,582
February 1-28, 2019 3,985,003
$ 143.38
3,985,003
$ 9,238,959,974
March 1-31, 2019 6,335,657
$ 152.57
6,335,657
$ 8,272,205,975
Total 14,015,727
$ 145.40
14,015,727



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs^(1),(2)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs^(1),(2)
	(in millions, except per share data)
October 1-31, 2019	5	$	175.46	5	$	3,090
November 1-30, 2019	4	$	180.21	4	$	2,390
December 1-31, 2019	4	$	184.73	4	$	1,655
Total	13	$	179.71	13


⁽¹⁾	The figures in the table reflect transactions according to the trade dates. For purposes of our unaudited consolidated financial statements included in this Form 10-Q, the impact of these repurchases is recorded according to settlement dates.

⁽²⁾

Our board of directors from time to time authorizes the repurchase of shares of our common stock up to a certain monetary limit. In January 2019 and January 2020, our board of directors authorized a share repurchase ~~program~~programs for $8.5 ~~billion.~~billion and $9.5 billion, respectively. These authorizations have no expiration date. ~~All share repurchase programs authorized prior to January 2019 have been completed.~~



ITEM 3.	Defaults Upon Senior Securities.

None.



ITEM 4.	Mine Safety Disclosures.

Not applicable.



ITEM 5.	Other Information.

None.



ITEM 6.	Exhibits.

EXHIBIT INDEX



		Incorporated by Reference
Exhibit Number	Description of Documents	Schedule/ Form	File Number	Exhibit	Filing Date

~~31.1+~~10.1+	~~Certification~~Form of ~~Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~Indemnification Agreement

~~31.2+~~31.1+	Certification of Chief ~~Financial~~Executive Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~32.1+~~31.2+	Certification of Chief ~~Executive~~Financial Officer pursuant to ~~18 U.S.C. Section 1350,~~Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section ~~906~~302 of the Sarbanes-Oxley Act of 2002

~~32.2+~~32.1+	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2+	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS+	XBRL Instance Document

101.SCH+	XBRL Taxonomy Extension Schema Document

101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB+	XBRL Taxonomy Extension Label Linkbase Document

101.PRE+	XBRL Taxonomy Extension Presentation Linkbase Document



+	Filed or furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		VISA INC.

Date:	~~April 26, 2019~~January 31, 2020	By:	/s/ Alfred F. Kelly, Jr.
		Name:	Alfred F. Kelly, Jr.
		Title:	Chairman and Chief Executive Officer (Principal Executive Officer)

Date:	~~April 26, 2019~~January 31, 2020	By:	/s/ Vasant M. Prabhu
		Name:	Vasant M. Prabhu
		Title:	Vice Chairman and Chief Financial Officer (Principal Financial Officer)

Date:	~~April 26, 2019~~January 31, 2020	By:	/s/ James H. Hoffmeister
		Name:	James H. Hoffmeister
		Title:	Global Corporate Controller and Chief Accounting Officer (Principal Accounting Officer)

4134



	Three Months Ended March 31, 2019
	Preferred Stock		Common Stock						Preferred Stock		Right to Recover for Covered Losses			Additional Paid-In Capital			Accumulated Income			Accumulated Other Comprehensive Income			Total Equity
	UK&I	Europe	Class A			Class B	Class C
	(in millions, except per share data)
Balance as of December 31, 2018	2	3	1,754			245	12		$	5,464	$	(92	)	$	16,540		$	11,908		$	275		$	34,095
Net income																	2,977						2,977
Other comprehensive income (loss), net of tax																				(361		)	(361		)
Comprehensive income																							2,616
Adoption of new accounting standards (Note 1)																	(8		)	—			(8		)
VE territory covered losses incurred (Note 4)											(71		)										(71		)
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 11)														111									111
Restricted stock and performance-based shares settled in cash for taxes			—		⁽¹⁾									(2		)							(2		)
Cash proceeds from issuance of common stock under employee equity plans			—		⁽¹⁾									41									41
Cash dividends declared and paid, at a quarterly amount of $0.25 per Class A share (Note 9)																	(569		)				(569		)
Repurchase of class A common stock (Note 9)			(14	)										(143		)	(1,795		)				(1,938		)
Balance as of March 31, 2019	2	3	1,741			245	12		$	5,464	$	(163	)	$	16,547		$	12,513		$	(86	)	$	34,275



	Six Months Ended March 31, 2019
	Preferred Stock		Common Stock					Preferred Stock			Right to Recover for Covered Losses			Additional Paid-In Capital			Accumulated Income			Accumulated Other Comprehensive Income			Total Equity
	UK&I	Europe	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		$	34,006
Net income																	5,954						5,954
Other comprehensive income (loss), net of tax																				(640		)	(640		)
Comprehensive income																							5,314
Adoption of new accounting standards (Note 1)											��						385			7			392
VE territory covered losses incurred (Note 4)											(162		)										(162		)
Recovery through conversion rate adjustment (Note 4 and Note 9)								(6		)	6												—
Conversion of class C common stock upon sales into public market			1			—	⁽¹⁾																—
Vesting of restricted stock and performance-based shares			3																				—
Share-based compensation, net of forfeitures (Note 11)														211									211
Restricted stock and performance-based shares settled in cash for taxes			(1	)										(103		)							(103		)
Cash proceeds from issuance of common stock under employee equity plans			1											89									89
Cash dividends declared and paid, at a quarterly amount of $0.25 per Class A share (Note 9)																	(1,141		)				(1,141		)
Repurchase of class A common stock (Note 9)			(31	)										(328		)	(4,003		)				(4,331		)
Balance as of March 31, 2019	2	3	1,741		245	12		$	5,464		$	(163	)	$	16,547		$	12,513		$	(86	)	$	34,275



	Three Months Ended March 31, 2018
	Preferred Stock		Common Stock						Preferred Stock		Right to Recover for Covered Losses			Additional Paid-In Capital			Accumulated Income			Accumulated Other Comprehensive Income		Total Equity
	UK&I	Europe	Class A			Class B	Class C
	(in millions, except per share data)
Balance as of December 31, 2017	2	3	1,805			245	12		$	5,476	$	(5	)	$	16,761		$	9,966		$	1,203	$	33,401
Net income																	2,605					2,605
Other comprehensive income (loss), net of tax																				525		525
Comprehensive income																						3,130
VE territory covered losses incurred (Note 4)											(1		)									(1		)
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 11)			—		⁽¹⁾									85								85
Restricted stock and performance-based shares settled in cash for taxes			—		⁽¹⁾									—								—
Cash proceeds from issuance of common stock under employee equity plans			1											50								50
Cash dividends declared and paid, at a quarterly amount of $0.210 per Class A share (Note 9)																	(490		)			(490		)
Repurchase of class A common stock (Note 9)			(17	)										(183		)	(1,889		)			(2,072		)
Balance as of March 31, 2018	2	3	1,790			245	12		$	5,476	$	(6	)	$	16,713		$	10,192		$	1,728	$	34,103



	Six Months Ended March 31, 2018
	Preferred Stock		Common Stock						Preferred Stock			Right to Recover for Covered Losses			Additional Paid-In Capital			Accumulated Income			Accumulated Other Comprehensive Income		Total Equity
	UK&I	Europe	Class A			Class B	Class C
	(in millions, except per share data)
Balance as of September 30, 2017	2	3	1,818			245	13		$	5,526		$	(52	)	$	16,900		$	9,508		$	878	$	32,760
Net income																		5,127					5,127
Other comprehensive income (loss), net of tax																					850		850
Comprehensive income																							5,977
VE territory covered losses incurred (Note 4)												(4		)									(4		)
Recovery through conversion rate adjustment (Note 4 and Note 9)									(50		)	50											—
Conversion of class C common stock upon sales into public market			2				(1	)															—
Vesting of restricted stock and performance-based shares			2																				—
Share-based compensation, net of forfeitures (Note11)			—		⁽¹⁾										153								153
Restricted stock and performance-based shares settled in cash for taxes			(1	)											(88		)						(88		)
Cash proceeds from issuance of common stock under employee equity plans			2												103								103
Cash dividends declared and paid, at a quarterly amount of $0.195 per Class A share in the first quarter and $0.210 per Class A share in the second quarter (Note 9)																		(948		)			(948		)
Repurchase of class A common stock (Note 9)			(33	)											(355		)	(3,495		)			(3,850		)
Balance as of March 31, 2018	2	3	1,790			245	12		$	5,476		$	(6	)	$	16,713		$	10,192		$	1,728	$	34,103



	Fiscal Year 2018 Closing Balance Sheet		Cumulative Transition Adjustment for New Revenue Standard		Fiscal Year 2019 Opening Balance Sheet
	(in millions)
Assets
Current portion of client incentives	$	340	$	199	$	539
Client incentives	538		614		1,152
Liabilities
Client incentives	2,834		241		3,075
Accrued liabilities	1,160		6		1,166
Deferred tax liabilities	4,618		108		4,726
Other liabilities	2,666		58		2,724
Equity
Accumulated income	11,318		400		11,718



	For the Three Months Ended March 31, 2019							For the Six Months Ended March 31, 2019
	As Reported		Impact of the New Revenue Standard			Results Under Prior Revenue Standard		As Reported		Impact of the New Revenue Standard			Results Under Prior Revenue Standard
	(in millions)
Net revenues	$	5,494	$	(39	)	$	5,455	$	11,000	$	(91	)	$	10,909

Operating Expenses
Marketing	241		(39		)	202		517		(69		)	448
Professional fees	101		(3		)	98		192		(6		)	186
General and administrative	264		(7		)	257		540		(10		)	530
Total operating expenses	1,853		(49		)	1,804		3,642		(85		)	3,557
Operating income	3,641		10			3,651		7,358		(6		)	7,352

Income before income taxes	3,677		10			3,687		7,307		(6		)	7,301
Income tax provision	700		2			702		1,353		1			1,354
Net income	2,977		8			2,985		5,954		(7		)	5,947



	March 31,				September 30,
	2019		2018		2018		2017
	(in millions)
Cash and cash equivalents	$	7,648	$	8,142	$	8,162	$	9,874
Restricted cash and restricted cash equivalents:
U.S. litigation escrow	899		884		1,491		1,031
Customer collateral	1,735		1,250		1,324		1,106
Cash, cash equivalents, restricted cash and restricted cash equivalents	$	10,282	$	10,276	$	10,977	$	12,011



	March 31, 2019			September 30, 2018			Effective Interest Rate
	(in millions, except percentages)
2.20% Senior Notes due December 2020	$	3,000		$	3,000		2.30	%
2.15% Senior Notes due September 2022	1,000			1,000			2.30	%
2.80% Senior Notes due December 2022	2,250			2,250			2.89	%
3.15% Senior Notes due December 2025	4,000			4,000			3.26	%
2.75% Senior Notes due September 2027	750			750			2.91	%
4.15% Senior Notes due December 2035	1,500			1,500			4.23	%
4.30% Senior Notes due December 2045	3,500			3,500			4.37	%
3.65% Senior Notes due September 2047	750			750			3.73	%
Total senior notes	16,750			16,750
Unamortized discounts and debt issuance costs	(114		)	(120		)
Hedge accounting fair value adjustments	(6		)	—
Total long-term debt	$	16,630		$	16,630



	Pension Benefits
	U.S. Plans						Non-U.S. Plans
	Three Months Ended March 31,						Three Months Ended March 31,
	2019			2018			2019			2018
	(in millions)
Service cost	$	—		$	—		$	1		$	1
Interest cost	8			8			4			3
Expected return on plan assets	(18		)	(18		)	(5		)	(5		)
Total net periodic benefit cost (income)	$	(10	)	$	(10	)	$	—		$	(1	)



	Six Months Ended March 31, 2019				Twelve Months Ended September 30, 2018
	Preferred Stock
	UK&I		Europe		UK&I		Europe
	(in millions, except per share data)
Effective price per share⁽¹⁾	$	137.19	$	137.19	$	113.05	$	112.92
Recovery through conversion rate adjustment	$	5	$	1	$	35	$	21



	Three Months Ended March 31,				2019 vs. 2018		Six Months Ended March 31,				2019 vs. 2018
(in millions, except percentages and per share data)	2019		2018		% Change⁽¹⁾		2019		2018		% Change⁽¹⁾
Net income, as reported	$	2,977	$	2,605	14	%	$	5,954	$	5,127	16	%
Diluted earnings per share, as reported	$	1.31	$	1.11	17	%	$	2.61	$	2.19	19	%
Net income, as adjusted⁽²⁾	$	2,977	$	2,605	14	%	$	5,954	$	5,141	16	%
Diluted earnings per share, as adjusted⁽²⁾	$	1.31	$	1.11	17	%	$	2.61	$	2.19	19	%



	Six Months Ended March 31, 2018
	Income Before Income Taxes		Income Tax Provision			Effective Income Tax Rate⁽¹⁾
	(in millions, except percentages)
As reported	$	6,456	$	1,329		20.6	%
Remeasurement of deferred tax balances	—		1,133
Transition tax on foreign earnings	—		(1,147		)
As adjusted	$	6,456	$	1,315		20.4	%