Visa Inc. Fiscal Second Quarter 2019 Financial Results April 24, 2019
Fiscal Second Quarter 2019 Financial Results2 ©2019 Visa. All rights reserved. This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that relate to, among other things, our future operations, prospects, developments, strategies, business growth and financial outlook for fiscal full-year 2019. Forward-looking statements generally are identified by words such as "believes," "estimates," "expects," "intends," "may," "projects," “outlook”, "could," "should," "will," "continue" and other similar expressions. All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict. Actual results could differ materially from those expressed in, or implied by, our forward-looking statements due to a variety of factors, including, but not limited to: • increased oversight and regulation of the global payments industry and our business; • impact of government-imposed restrictions on international payment systems; • outcome of tax, litigation and governmental investigation matters; • increasingly intense competition in the payments industry, including competition for our clients and merchants; • proliferation and continuous evolution of new technologies and business models; • our ability to maintain relationships with our clients, merchants and other third parties; • brand or reputational damage; • management changes; • impact of global economic, political, market and social events or conditions; • exposure to loss or illiquidity due to settlement guarantees; • uncertainty surrounding the impact of the United Kingdom’s withdrawal from the European Union; • a disruption, failure, breach or cyber-attack of our networks or systems; • our ability to successfully integrate and manage our acquisitions and other strategic investments; and • other factors described in our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended September 30, 2018, 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. Forward-Looking Statements
Fiscal Second Quarter 2019 Financial Results3 ©2019 Visa. All rights reserved. Fiscal Second Quarter 2019 Results Q2 2019 (Ending March 31, 2019) in billions, except percentages and per share data USD YoY Change Net Revenues $5.5 8% Net Income $3.0 14% Earnings Per Share $1.31 17% Note: Refer to the accompanying financial tables for further details. • Payments volume and processed transactions growth remained healthy; cross-border growth slowed in-line with expectations • Increased earnings per share outlook for the fiscal full-year 2019 based on strong performance in the first half • Returned $2.6B of capital to shareholders in the form of share repurchases and dividends
Fiscal Second Quarter 2019 Financial Results4 ©2019 Visa. All rights reserved. Quarter ended December Payments Volume* US$ in billions, nominal, except percentages INTL 1,164 INTL 1,218 INTL 682 INTL 704 INTL 483 INTL 514 U.S. 886 U.S. 979 U.S. 478 U.S. 519 U.S. 408 U.S. 461 2,051 2,197 1,160 1,223 891 974 INTL = International Total Visa Inc. Credit Debit YoY Change (constant) 11% 9% 13% YoY Change (nominal) 5% 9%7% Note: On occasion, previously submitted volume information may be updated to reflect revised client submissions or other adjustments. Prior-period updates, other than the change to the payments volume definition, are not material. Figures may not recalculate exactly due to rounding. Percentage changes and totals are calculated based on unrounded numbers. Constant-dollar growth rates exclude the impact of foreign currency fluctuations against the U.S. dollar in measuring performance. 2017 2018 *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 in Form 8-K filed on January 30, 2019 for more details on the impact from this update in payments volume definition.
Fiscal Second Quarter 2019 Financial Results5 ©2019 Visa. All rights reserved. Quarter ended March Current quarter payments volume and other select metrics are provided in the operational performance data supplement in the earnings release to provide more recent operating data. Service revenues continue to be recognized based on payments volume in the prior quarter. Payments Volume* US$ in billions, nominal, except percentages YoY Change (constant) 8% 7% 10% YoY Change (nominal) 2% 5%4% Note: On occasion, reported payments volume information may be updated to reflect revised client submissions or other adjustments. Prior-period updates, other than the change to the payments volume definition, are not material. Figures may not recalculate exactly due to rounding. Percentage changes and totals are calculated based on unrounded numbers. Constant-dollar growth rates exclude the impact of foreign currency fluctuations against the U.S. dollar in measuring performance. INTL 420 INTL 09 U.S. 575 U.S. 631 U.S. 277 U.S. 313 INTL 1,156 INTL 1,158 INTL 673 INTL 669 INTL 482 INTL 489 U.S. 862 U.S. 930 U.S. 446 U.S. 473 U.S. 417 U.S. 457 2,018 2,089 1,119 1,143 899 946 INTL = International Total Visa Inc. Credit Debit 2018 2019 *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 in Form 8-K filed on January 30, 2019 for more details on the impact from this update in payments volume definition.
Fiscal Second Quarter 2019 Financial Results6 ©2019 Visa. All rights reserved. Quarter ended March Transactions in millions, except percentages Note: Total transactions represent payments and cash transactions as reported by Visa clients on their operating certificates. On occasion, previously submitted transaction information may be updated to reflect revised client submissions or other adjustments. Prior-period updates are not material. Figures may not recalculate exactly due to rounding. Percentage changes and totals are calculated based on unrounded numbers. Processed transactions represent transactions involving cards and other form factors carrying the Visa, Visa Electron, Interlink, V PAY and PLUS cards processed on Visa’s networks. Credit 38% YoY Change 9% 11% Debit 62% Credit 38% 66% Debit 67% Debit 34% Credit 33% Credit 43,382 47,365 29,321 32,544 Processed TransactionsTotal Transactions 2018 2019
Fiscal Second Quarter 2019 Financial Results7 ©2019 Visa. All rights reserved. Quarter ended December Total Cards in millions, except percentages 3,248 1,084 2,165 3,358 1,118 2,239 Total Visa Inc. Credit Debit Note: The data presented is based on results reported quarterly by Visa clients on their operating certificates. Estimates may be utilized if data is unavailable. On occasion, previously submitted card information may be updated to reflect revised client submissions or other adjustments. Prior-period updates are not material. Figures may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers. YoY Change 3% 3%3% 2017 2018
Fiscal Second Quarter 2019 Financial Results8 ©2019 Visa. All rights reserved. 6,362 (1,289) 5,073 6,972 (1,478) 5,494 Gross Revenues Client Incentives Net Revenues Fiscal 2018 Fiscal 2019 Revenue – Q2 2019 US$ in millions, except percentages YoY Change 15% 8%10% Note: Figures may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers. 20.3% 21.2% Client Incentives as a % of Gross Revenues 0.9ppt
Fiscal Second Quarter 2019 Financial Results9 ©2019 Visa. All rights reserved. Revenue Detail – Q2 2019 US$ in millions, except percentages 2,253 2,127 1,752 230 2,417 2,432 1,796 327 Service Revenues Data Processing Revenues International Transaction Revenues Other Revenues Fiscal 2018 Fiscal 2019 YoY Change 14% 3%7% 42% Note: Figures may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.
Fiscal Second Quarter 2019 Financial Results10 ©2019 Visa. All rights reserved. Operating Margin – Q2 2019 US$ in millions, except percentages Note: Operating margin is calculated as operating income divided by net operating revenues. Figures may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers. 8% 9%7% 0.5ppt YOY Change 5,073 1,737 3,336 5,494 1,853 3,641 Net Revenues Operating Expenses Operating Income Fiscal 2018 Fiscal 2019 66% 66% Operating Margin
Fiscal Second Quarter 2019 Financial Results11 ©2019 Visa. All rights reserved. Operating Expenses – Q2 2019 US$ in millions, except percentages Note: Figures may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers. 824 261 169 108 153 222 0 894 241 171 101 160 264 22 Personnel Marketing Network & Processing Professional Fees Depreciation & Amortization General & Administrative Litigation Provision Fiscal 2018 Fiscal 2019 YoY Change 1% (7)%8% 19%4%(8)% NM NM- Not meaningful
Fiscal Second Quarter 2019 Financial Results12 ©2019 Visa. All rights reserved. Other Financial Results and Highlights • Cash, cash equivalents and investment securities of $15.0 billion as of March 31, 2019 • Adjusted free cash flow of $1.9 billion for the fiscal second quarter • Capital expenditures of $156 million during the fiscal second quarter • During the three months ended March 31, 2019, the Company recognized $84 million of investment gains recorded in non-operating income. Several private companies in which the Company has strategic investments executed transactions or funding rounds during the quarter, which established new and higher valuations. The Company adopted the accounting standard, ASU 2016-01 in fiscal year 2019 that requires companies to recognize unrealized gains and losses in their income statement each quarter. See appendix for reconciliation of adjusted free cash flow to the closest comparable U.S. GAAP financial measure.
Fiscal Second Quarter 2019 Financial Results13 ©2019 Visa. All rights reserved. Financial Outlook for Fiscal Full-Year 2019 Annual net revenue growth Low double-digits on a nominal basis, with approximately 1 percentage point of negative foreign currency impact and de minimus impact from the new revenue accounting standard Client incentives as a percentage of gross revenues 22% to 23% range for the second half of the fiscal year and low end of 22% to 23% range for the full fiscal year Annual operating expense growth Mid-single digit decrease on a GAAP basis and mid-to-high single digit increase adjusted for special items in fiscal 2018 (see note below). GAAP and non-GAAP growth includes an approximately 1.5 to 2 percentage point increase from the new revenue accounting standard Effective tax rate Approximately 20% Annual diluted class A common stock earnings per share growth Low twenties on a GAAP nominal dollar basis and high-end of mid-teens on an adjusted, non-GAAP nominal dollar basis (see note below). Both include approximately 1.5 percentage points of negative foreign currency impact Note: Annual adjusted operating expense growth is derived from adjusted full-year 2018 operating expenses of $6.9 billion. Annual adjusted diluted class A common stock earnings per share growth is derived from adjusted full-year 2018 earnings per share results of $4.61. Refer to the accompanying financial tables for details and a reconciliation of the adjusted fiscal full- year 2018 results.
Appendix
Fiscal Second Quarter 2019 Financial Results15 ©2019 Visa. All rights reserved. Calculation of Adjusted Free Cash Flow A- Management believes that presentation of adjusted free cash flow is useful to measure the Company’s generation of cash available to first re-invest in the business and then return excess cash to shareholders through stock buybacks and cash dividends. During the three months ended March 31, 2019, the Company generated adjusted free cash flow of $1.9 billion, and returned $2.6 billion(1) to investors through stock buybacks of $2.0 billion and dividends paid of $569 million. During the six months ended March 31, 2019, the Company generated adjusted free cash flow of $5.0 billion, and returned $5.5 billion(1) to investors through stock buybacks of $4.4 billion and dividends paid of $1.1 billion. The Company defines adjusted free cash flow as cash provided by operating activities adjusted to reflect capital investments made in the business. Adjusted free cash flow is a non-GAAP performance measure and should not be relied upon as a substitute for measures calculated in accordance with U.S. GAAP. The following table reconciles as-reported net cash provided by operating activities to non-GAAP adjusted free cash flow. US$ in millions Three Months Ended March 31, 2019 Six Months Ended March 31, 2019 Net cash provided by operating activities $2,064 $5,358 Less: capital expenditures (156) (313) Adjusted free cash flow $1,908 $5,045 (1) Funds returned to investors were greater than adjusted free cash flow funded by liquidity sources available to the Company such as cash on hand and the Company’s investment portfolio.