Visa Inc. Fiscal Third Quarter Financial Results July 27, 2011 Exhibit 99.2 |
Fiscal Third Quarter 2011 Financial Results 2 Forward-Looking Information This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements can be identified by the terms “expect,” “ will,” “continue” and similar references to the future. Examples of such forward-looking statements include, but are not limited to, statements we make about gross and net revenue, incentive payments, expenses, operating margin, tax rate, earnings per share, capital expenditures, free cash flow and the growth of those items. By their nature, forward-looking statements: (i) speak only as of the date they are made, (ii) are neither statements of historical fact nor guarantees of future performance and (iii) are subject to risks, uncertainties, assumptions and changes in circumstances that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements because of a variety of factors, including the following: the impact of timing and new laws, regulations and marketplace barriers, particularly the rules promulgated under the Wall Street Reform and Consumer Protection Act, including those affecting: – rules expanding issuers’ and retailers’ choice among debit payment networks; – rules capping debit interchange rates; – the spread of regulation of debit payments to credit and other product categories; – the spread of U.S. regulations to other countries; – rules about consumer privacy and data use and security; and – designation as a systemically important payment system; • developments in current or future disputes and our ability to absorb their impact, including interchange, currency conversion, and tax; • macroeconomic factors such as: – global economic, political, health, environmental and other conditions; – cross-border activity and currency exchange rates; and – material changes in our clients’ performance compared to our estimates; • industry and systemic developments, such as: – competitive pressure on client pricing and in the payments industry generally; – bank and merchant consolidation and their increased focus on payment card costs; – disintermediation from the payments value stream through government actions or bilateral agreements; – adverse changes in our relationships and reputation; – our clients’ failure to fund settlement obligations we have guaranteed; – disruption of our transaction processing systems or the inability to process transactions efficiently; – rapid technological developments; – account data breaches and increased fraudulent and other illegal activity involving our cards; and – issues arising at Visa Europe, including failure to maintain interoperability between our systems; • costs arising if Visa Europe were to exercise its right to require us to acquire all of its outstanding stock; • loss of organizational effectiveness or key employees; • failure to integrate successfully CyberSource, PlaySpan, Fundamo or other acquisitions; • changes in accounting principles or treatment; and the other factors discussed in our most recent Annual Report on Form 10-K on file with the U.S. Securities and Exchange Commission. You should not place undue reliance on such statements. Unless required to do so by law, we do not intend to update or revise any forward-looking statement, because of new information or future developments or otherwise. |
Solid Fiscal Third Quarter Results • Strong operating revenues of $2.3 billion, up 14% over prior year • Adjusted quarterly net income of $883 million, up 23%, and adjusted diluted earnings per share of $1.26, up 29% over prior year • Continued positive secular trends and spending momentum contributed to double-digit growth year over year in key underlying business drivers for the sixth consecutive quarter • Repurchased 13.7 million shares at an average price of $77.36 for a total cost of $1.1 billion. Fiscal Third Quarter 2011 Financial Results 3 |
Fiscal Third Quarter 2011 Financial Results 4 Quarter ended March US$ in billions, nominal, except percentages Payments Volume ROW = 2010 2011 YOY Change (nominal) 15% 17% 16% YOY Change (constant) 13% 11% 16% Note: Figures may not sum due to rounding. Growth rates calculated based on whole numbers, not rounded numbers. From time to time, previously submitted volume information may be updated. Prior year volume information presented has not been updated, as changes made are not material. Constant dollar growth rates exclude the impact of foreign currency fluctuations against the U.S. dollar in measuring performance. ROW 51 ROW 318 ROW 318 U.S. 427 U.S. 477 ROW 385 U.S. 182 266 ROW U.S. 245 U.S. 278 ROW 68 U.S. 199 745 862 449 517 296 345 Total Visa Inc. Credit Debit Rest of World |
Fiscal Third Quarter 2011 Financial Results 5 ROW 55 Quarter ended June US$ in billions, nominal, except percentages Payments Volume ROW 333 ROW 348 U.S. 469 U.S. 518 ROW 422 U.S. 204 277 ROW U.S. 224 U.S. 266 U.S. 295 ROW 75 Note: Current quarter payments volume and other select metrics are provided in the operational performance data supplement to provide more recent operating data. Service revenues continue to be recognized based on payments volume in the prior quarter. From time to time, reported payments volume information may be updated to reflect revised client submissions or other adjustments. Prior year volume information presented has not been updated, as changes made are not material. Figures may not sum due to rounding. YOY Change (nominal) 19% 15% 17% YOY Change (constant) 13% 13% 14% ROW = Rest of World 2010 2011 Total Visa Inc. Credit Debit 802 941 481 571 321 369 |
Fiscal Third Quarter 2011 Financial Results 6 Quarter ended March US$ in billions, nominal, except percentages Payments Volume Note: Growth rates calculated based on whole numbers, not rounded numbers. From time to time, previously submitted volume information may be updated. Prior year volume information presented has not been updated, as changes made are not material. Constant dollar growth rates exclude the impact of foreign currency fluctuations against the U.S. dollar in measuring performance. 2010 2011 YOY Change (nominal) 12% 18% 32% 11% 34% YOY Change (constant) 12% 12% 26% 7% 31% 427 477 195 230 58 77 43 48 23 30 United States Asia Pacific Latin America and Caribbean Canada Central and Eastern Europe, Middle East and Africa |
Fiscal Third Quarter 2011 Financial Results 7 Quarter ended June US$ in billions, nominal, except percentages Payments Volume YOY Change (nominal) 10% 24% 38% 14% 43% YOY Change (constant) 10% 14% 29% 8% 37% 2010 2011 469 518 198 62 246 86 48 55 24 35 United States Asia Pacific Latin America and Caribbean Canada Central and Eastern Europe, Middle East and Africa Note: Current quarter payments volume and other select metrics are provided in the operational performance data supplement to provide more recent operating data. Service revenues continue to be recognized based on payments volume in the prior quarter. From time to time, reported payments volume information may be updated to reflect revised client submissions or other adjustments. Prior year volume information presented has not been updated, as changes made are not material. Figures may not sum due to rounding. |
Fiscal Third Quarter 2011 Financial Results 8 11,721 16,118 10,648 17,582 13,038 18,046 12,040 19,400 Total Transactions Processed Transactions Total Transactions Processed Transactions Quarter ended March in millions, except percentages Transactions Note: Processed transactions represent transactions involving Visa, Visa Electron, Interlink and Plus cards processed on Visa’s networks. Total transactions represent payments and cash transactions as reported by Visa clients on their operating certificates. From time to time, previously submitted transaction information may be updated. Prior year transaction information presented has not been updated, as changes made are not material. Quarter ended June Debit 65% Credit 35% Credit 36% Debit 64% Credit 35% Debit 65% Credit 35% Debit 65% YOY Change 12% 13% 10% 11% 2010 2011 |
Fiscal Third Quarter 2011 Financial Results 9 Quarter ended March in millions, except percentages Total Cards YOY Change (2)% 6% 2% Note: From time to time, previously submitted card information may be updated. Prior year card information presented has not been updated, as changes made are not material. 2010 2011 Credit Debit Visa Inc. 774 760 1,870 1,825 1,051 1,110 |
Fiscal Third Quarter 2011 Financial Results 10 Revenue – Q3 2011 US$ in millions, except percentages Gross Revenues Incentives Net Operating Revenues YOY Change 14% 14% 14% Note: Growth rates calculated based on whole numbers, not rounded numbers. Fiscal 2010 Fiscal 2011 2,770 2,422 2,029 2,322 (393) (448) |
Fiscal Third Quarter 2011 Financial Results 11 Revenue Detail – Q3 2011 US$ in millions, except percentages Service Revenues Data Processing Revenues International Transaction Revenues Other Revenues YOY Change 21% 12% 15% (10)% Note: Growth rates calculated based on whole numbers, not rounded numbers. Fiscal 2010 Fiscal 2011 873 1,055 792 886 574 662 183 167 |
Fiscal Third Quarter 2011 Financial Results 12 Operating Margin – Q3 2011 US$ in millions, except percentages YOY Change 2 ppt 14% 10% 18% Note: Growth rates calculated based on whole numbers, not rounded numbers. Fiscal 2010 Fiscal 2011 58% 56% Operating Margin 2,029 2,322 892 977 1,137 1,345 Net Operating Revenues Operating Income Total Operating Expenses |
Fiscal Third Quarter 2011 Financial Results 13 US$ in millions, except percentages Personnel Network and Processing Marketing Professional Fees Depreciation and Amortization General and Administrative YOY Change 27% (12)% (9)% 9% 18% 32% Note: Growth rates calculated based on whole numbers, not rounded numbers. Fiscal 2010 Fiscal 2011 Operating Expenses – Q3 2011 285 363 103 277 91 251 77 84 63 74 87 114 |
Fiscal Third Quarter 2011 Financial Results 14 Other Income (Expense) US$ in millions The following table presents components of our other income (expense). Three Months Ended June 30, 2011 Gain on sale of investment in CBSS 85 $ Revaluation of Visa Europe put option 122 Other (1) (9) Total other income 198 $ (1) Amount primarily represents interest expense, other investment income and the accretion associated with litigation settlements to be paid over periods longer than one year. |
Fiscal Third Quarter 2011 Financial Results 15 Other Financial Results • Cash, cash equivalents, restricted cash and available-for-sale investment securities of $6.7 billion at the end of the fiscal third quarter which includes $2.9 billion of restricted cash in the litigation escrow account • Total free cash flow of $1.4 billion for the fiscal third quarter and adjusted free cash flow of $1.3 billion after the Fundamo acquisition • Capital expenditures of $89 million during the fiscal third quarter Note: See appendix for reconciliation of adjusted non-GAAP measures to the closest comparable GAAP measures. |
Fiscal Third Quarter 2011 Financial Results 16 Less than $900 million Marketing expenses Financial Metrics for Fiscal Year 2011 Annual operating margin About 60% Top end of the 16% to 16.5% range Client incentives as % of gross revenues Annual net revenue growth 11% to 15% range |
Fiscal Third Quarter 2011 Financial Results 17 Financial Metrics for Fiscal Year 2011 Capital expenditures Moderately above $300 million Annual diluted class A common stock earnings per share growth 20% + GAAP tax rate, excluding the revaluation of the Visa Europe put option 36.5% to 37% range Annual free cash flow $3 billion + |
Fiscal Third Quarter 2011 Financial Results 18 Financial Metrics for Fiscal Year 2012 Mid to high teens Annual diluted class A common stock earnings per share growth Annual net revenue growth High single to low double digit range |
Appendix Reconciliation of Non-GAAP Measures |
Fiscal Third Quarter 2011 Financial Results Adjusted Net Income and Earnings US$ in millions, except per share data Management believes the presentation of adjusted net income and diluted earnings per share provides a clearer understanding of our operating performance for the periods. The revaluation of the Visa Europe put option resulted in non-cash, non-operating income during the three months ended June 30, 2011. The reduction in the fair value of the put option was primarily the result of declines in our estimated long-term price-to-earnings ratio and does not reflect any change in the likelihood that Visa Europe will exercise its option. Management therefore believes that the resulting non-operating income recorded during the third quarter of fiscal 2011 is not indicative of Visa’s performance in the current or future periods. A1 (1) Non-cash, non-operating income resulting from the revaluation of this financial instrument is not subject to tax. (1) Three Months Ended June 30, 2011 Nine Months Ended June 30, 2011 Net income attributable to Visa Inc. (as reported) 1,005 $ 2,770 $ Revaluation of Visa Europe Put option (122) (122) Adjusted net income attributable to Visa Inc. 883 $ 2,648 $ Weighted average number of diluted shares outstanding (as reported) 704 712 Adjusted diluted earnings per share 1.26 $ 3.72 $ Diluted earnings per share (as reported) 1.43 $ 3.89 $ Impact of the revaluation of Visa Europe put option 0.17 $ 0.17 $ |
Fiscal Third Quarter 2011 Financial Results Calculation of Free Cash Flow US$ in millions (1) Includes changes in client incentives, trade receivables, settlement receivable/payable, and personnel incentives. Calculation of Free Cash Flow US$ in millions Additions (+) / Reductions (-) to Net income attributable to Visa Inc. Net income attributable to Visa Inc. (as reported) 1,005 2,770 Capital Assets + Depreciation and amortization 74 211 - Capital expenditures (89) (15) (236) (25) Litigation + Litigation provision - 6 + Accretion expense 2 9 - Settlement payments (70) (212) + Settlement payments funded by litigation escrow 70 2 210 13 Share-based Compensation + Share-based compensation 32 122 Pension + Pension expense 8 24 - Pension contribution - 8 - 24 Taxes + Income tax expense 539 1,534 - Income taxes paid (236) 303 (1,251) 283 Visa Europe Put Option - Fair Value Adjustment (122) (122) Changes in Working Capital (1) +/- Changes in other working capital accounts 206 51 Total Free Cash Flow 1,419 3,116 Less: PlaySpan and Fundamo Acquisitions - Purchase consideration, net of cash received (106) (268) Adjusted Free Cash Flow 1,313 2,848 Three Months Ended June 30, 2011 Nine Months Ended June 30, 2011 A2 |
Fiscal Third Quarter 2011 Financial Results Impact of PlaySpan Acquisition US$ in millions, except per share data The following table presents the impact of the PlaySpan acquisition on Visa’s adjusted diluted earnings per share. A3 (1) (2) (3) Represents tax rate applicable to PlaySpan. (4) (5) Operating revenues recognized by Visa related to PlaySpan transactions. Amount primarily represents data processing revenues. Operating expenses incurred by Visa related to PlaySpan. Amounts incurred subsequent to the acquisition primarily represent personnel, amortization of intangibles and normal operating expenses. Amount primarily represents professional fees related to closing the transaction and some minor compensation expense, which are non-deductible for tax purposes. See slide A1 for a reconciliation of adjusted diluted earnings per share to GAAP diluted earnings per share. Three Months Ended June 30, 2011 Net income attributable to Visa Inc. (as reported) 1,005 $ Revaluation of Visa Europe put option (122) Adjusted net income attributable to Visa Inc. 883 Taxable PlaySpan adjustments: Less: Operating revenue (1) (6) Addback: Deductible operating expenses (2) 15 Subtotal of taxable adjustments 9 Tax rate (3) 40% Tax impact of adjustments (4) Impact of taxable PlaySpan adjustments 5 Addback: Non-deductible adjustments (4) 3 Impact of PlaySpan 8 Adjusted net income attributable to Visa Inc. 891 $ Weighted average number of diluted shares outstanding (as reported) 704 Adjusted diluted earnings per share, excluding impact of PlaySpan acquisition 1.27 $ Adjusted diluted earnings per share (5) 1.26 $ Impact of PlaySpan acquisition (0.01) $ |
Fiscal Third Quarter 2011 Financial Results Impact of Fundamo Acquisition US$ in millions, except per share data The following table presents the impact of the Fundamo acquisition on Visa’s adjusted diluted earnings per share. (1) (2) See slide A1 for a reconciliation of adjusted diluted earnings per share to GAAP diluted earnings per share. Represents the net operating results of Fundamo recognized by Visa since the acquisition in June 2011. Three Months Ended June 30, 2011 Net income attributable to Visa Inc. (as reported) 1,005 $ Revaluation of Visa Europe Put option (122) Adjusted net income attributable to Visa Inc. 883 After tax impact of Fundamo (1) 4 Adjusted net income attributable to Visa Inc. 887 $ Weighted average number of diluted shares outstanding (as reported) 704 Adjusted diluted earnings per share, excluding impact of Fundamo acquisition 1.27 $ Adjusted diluted earnings per share (2) 1.26 $ Impact of Fundamo acquisition (0.01) $ A4 |