Visa Inc. Posts Strong Fiscal First Quarter 2012 Earnings Results and Authorizes New $500 Million Share Repurchase Program

Published on Wednesday, 08 February 2012 16:35 Written by TradersHuddle Staff

SAN FRANCISCO, Feb. 8, 2012 /PRNewswire/ --

• Quarterly net income of $1.0 billion or $1.49 per share of diluted class A common stock
• Total as-converted class A common stock was reduced by 16.2 million shares, which was funded from $1.6 billion of the Company's operating cash on hand
• Authorized a new $500 million class A share repurchase program

Visa Inc. (NYSE: V) today announced financial results for the Company's fiscal first quarter 2012 ended December 31, 2011. Net income for the quarter was $1.0 billion, or $1.49 per share of diluted class A common stock, an increase of 21% over the prior year.   The weighted-average number of diluted class A common stock outstanding was 690 million.  

Net operating revenue in the first quarter of fiscal 2012 was $2.5 billion, an increase of 14% over the prior year and driven by strong double-digit growth in service revenues, data processing revenues and international transaction revenues. Currency fluctuations contributed a positive 1% towards quarterly net operating revenues.

"Visa's core businesses drove a strong start to fiscal 2012.  We achieved solid financial and operational performance as we continued to benefit from the secular shift to electronic payments.  Consumers' desire to use our products is evident in the strong growth we see outside the U.S. and the resiliency we are seeing in the U.S. in the wake of debit regulation," said Joe Saunders, chairman and chief executive officer.  "We are in the midst of executing on our strategy to address the new landscape in the United States and we are pleased with the early results of our efforts."

"We remain intensely focused on further growing our international business, partnering with financial institutions, merchants, technology providers and governments," said Saunders.  "At the same time, we are moving forward on our innovation strategy and are working side by side with our financial institution and merchant clients to deliver the products and solutions that best drive our mutual success."

Fiscal First Quarter 2012 Financial Highlights:

Payments volume growth, on a constant dollar basis, for the three months ended September 30, 2011, on which fiscal first quarter service revenue is recognized, was a positive 13% over the prior year at $971 billion.

Payments volume growth, on a constant dollar basis, for the three months ended December 31, 2011, was a positive 11% over the prior year at $994 billion.

Cross-border volume growth, on a constant dollar basis, was a positive 13% for the three months ended December 31, 2011.

Total processed transactions, which represent transactions processed by VisaNet, for the three months ended December 31, 2011, were 13.6 billion, a positive 8% increase over the prior year.

Fiscal first quarter 2012 service revenues were $1.2 billion, an increase of 14% versus the prior year, and are recognized based on payments volume in the prior quarter. All other revenue categories are recognized based on current quarter activity. Data processing revenues rose 13% over the prior year to $951 million. International transaction revenues, which are driven by cross-border activity, grew 19% over the prior year to $748 million. Other revenues, which include the Visa Europe licensing fee, were $178 million, an 11% increase over the prior year. Client incentives, which are a contra revenue item, were $481 million and represent 16% of gross revenues.

Total operating expenses were $929 million for the quarter, a 7% increase over the prior year.  

Cash, cash equivalents, restricted cash, and available-for-sale investment securities were $7.9 billion at December 31, 2011.

Visa's effective tax rate was 36% for the quarter ended December 31, 2011.

Notable Events:

Total as-converted class A common stock was reduced by 16.2 million shares during the three months ended December 31, 2011, which was funded from $1.6 billion of our operating cash on hand. Of the $1.6 billion, $75 million was used to repurchase class A common stock in the open market. In addition, we deposited $1.57 billion from our operating cash into the litigation escrow account previously established under the retrospective responsibility plan. This deposit has the same economic effect on earnings per share as repurchasing the Company's class A common stock as it reduces the as-converted class B common stock share count. The deposit reduced by an equivalent amount funds previously allocated to the amended July 2011 share repurchase program, which had no remaining authorized funds as of December 31, 2011.

Today, the Company announced that its Board of Directors has authorized a new $500 million class A share repurchase program. The authorization will be in place through February 1, 2013, and is subject to further change at the discretion of the Board.

On January 31, 2012, the Company held its 2012 annual meeting of stockholders. Stockholders approved all the proposals enumerated in the Company's proxy statement.

The Board of Directors declared a quarterly dividend in the aggregate amount of $0.22 per share of class A common stock (determined in the case of class B and class C common stock on an as-converted basis) payable on March 6, 2012, to all holders of record of the Company's class A, class B and class C common stock as of February 17, 2012.

Financial Outlook:

Visa Inc. updates its financial outlook for the following metrics through 2012:

• Annual net revenue growth in the low double digits; and
• Adjusted annual diluted class A common stock earnings per share growth in the high teens.

Visa Inc. affirms its financial outlook for the following metrics for 2012:

• Client incentives as a percent of gross revenues: 17% to 18% range;
• Marketing expenses: Under $1 billion;  
• Annual operating margin of about 60%;
• Adjusted tax rate: 33% to 34% range*;
• Capital expenditures $350 million to $400 million range; and
• Annual free cash flow greater than $4 billion.

* Financial Outlook excludes the impact of possible non-cash revaluation of deferred tax liabilities, which could decrease the GAAP tax rate to 30 to 31%.  These deferred tax liabilities are primarily associated with indefinite-lived intangible assets recorded as part of Visa's October 2007 reorganization.   

Fiscal First Quarter 2012 Earnings Results Conference Call Details:

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

About Visa

Visa is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and territories to fast, secure and reliable digital currency. Underpinning digital currency is one of the world's most advanced processing networks—VisaNet—that is capable of handling more than 20,000 transaction messages a second, with fraud protection for consumers and guaranteed payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, ahead of time with prepaid or later with credit products. For more information, visit www.corporate.visa.com.

Forward Looking Statements:

This press release 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 "continue," "could," "may," "potential," and similar references to the future. Examples of such forward-looking statements include, but are not limited to, statements we make about our strategy and its execution and about our revenue, earnings per share, incentive payments, expenses, operating margin, tax rate, capital expenditures and 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 new laws, regulations and marketplace barriers, including:
  • rules capping debit interchange reimbursement fees under the U.S. Wall Street Reform and Consumer Protection Act, or the Reform Act;
  • rules under the Reform Act expanding issuers' and retailers' choice among debit payment networks;
  • increased regulation outside the United States and in other product categories; and
  • rules about consumer privacy and data use and security;
• developments in current or future litigation or government enforcement, including interchange, antitrust and tax disputes;
• economic factors, such as:
  • an increase or spread of the current European crisis involving sovereign debt and the euro;
  • other global economic, political and health conditions;
  • cross-border activity and currency exchange rates; and
  • material changes in our clients' performance compared to our estimates;
• industry developments, such as competitive pressure, rapid technological developments, and disintermediation from the payments value stream;
• system developments, such as:
  • disruption of our transaction processing systems or the inability to process transactions efficiently;
  • account data breaches or increased fraudulent or other illegal activities 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 recent acquisitions successfully or to effectively launch new products and businesses;
• changes in accounting principles or treatments; and

the other factors discussed in our most recent Annual Report on Form 10−K. 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.

Contacts:

Investor Relations: Jack Carsky or Anson Villaluz, 415-932-2213, This e-mail address is being protected from spambots. You need JavaScript enabled to view it.

Media Relations: Will Valentine, 415-932-2564, This e-mail address is being protected from spambots. You need JavaScript enabled to view it.

Operational Performance Data

The tables below provide information regarding the available operational results for the 3 months ended December 31, 2011, as well as the prior four quarterly reporting periods and the 12 months ended December 31, 2011 and 2010, for cards carrying the Visa, Visa Electron and Interlink brands.  Also included is a table with information on the number of billable transactions processed on Visa Inc.'s CyberSource network.  

1. Branded Volume and Transactions

The tables present total volume, payments volume, and cash volume, and the number of payments transactions, cash transactions, accounts and cards for cards carrying the Visa, Visa Electron and Interlink brands. Card counts include PLUS proprietary cards. Nominal and constant dollar growth rates over prior years are provided for volume-based data.