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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q

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

For the quarterly period ended March 31, 2020

OR

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

Commission file number 001-33977
logoa14.gif
VISA INC.
(Exact name of Registrant as specified in its charter)
Delaware
 
26-0267673
(State or other jurisdiction
of incorporation or organization)
 
(IRS Employer
Identification No.)
 
 
 
 
P.O. Box 8999
 
94128-8999
San Francisco,
California
 
 
(Address of principal executive offices)
 
(Zip Code)
(650) 432-3200
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share
 
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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No  
As of April 30, 2020, there were 1,687,112,437 shares outstanding of the registrant’s class A common stock, par value $0.0001 per share, 245,513,385 shares outstanding of the registrant’s class B common stock, par value $0.0001 per share, and 10,871,873 shares outstanding of the registrant’s class C common stock, par value $0.0001 per share.


Table of Contents

VISA INC.
TABLE OF CONTENTS
 
 
 
 
 
 
Page
PART I.
 
 
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
PART II.
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 

3

Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1.
Financial Statements (Unaudited)
VISA INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
March 31,
2020
 
September 30,
2019
 
(in millions, except par value data)
Assets
 
 
 
Cash and cash equivalents
$
9,740

 
$
7,838

Restricted cash equivalents—U.S. litigation escrow (Note 4 and Note 5)
1,264

 
1,205

Investment securities (Note 6)
2,411

 
4,236

Settlement receivable
1,432

 
3,048

Accounts receivable
1,516

 
1,542

Customer collateral (Note 4 and Note 9)
1,698

 
1,648

Current portion of client incentives
957

 
741

Prepaid expenses and other current assets
889

 
712

Total current assets
19,907

 
20,970

Investment securities (Note 6)
1,064

 
2,157

Client incentives
3,110

 
2,084

Property, equipment and technology, net
2,776

 
2,695

Goodwill
15,755

 
15,656

Intangible assets, net
27,011

 
26,780

Other assets
3,197

 
2,232

Total assets
$
72,820

 
$
72,574

Liabilities
 
 
 
Accounts payable
$
161

 
$
156

Settlement payable
1,869

 
3,990

Customer collateral (Note 4 and Note 9)
1,698

 
1,648

Accrued compensation and benefits
573

 
796

Client incentives
4,376

 
3,997

Accrued liabilities
1,998

 
1,625

Current maturities of debt (Note 8)
3,999

 

Accrued litigation (Note 14)
1,268

 
1,203

Total current liabilities
15,942

 
13,415

Long-term debt (Note 8)
13,893

 
16,729

Deferred tax liabilities
4,796

 
4,807

Other liabilities
3,604

 
2,939

Total liabilities
38,235

 
37,890

Equity
 
 
 
Preferred stock, $0.0001 par value, 25 shares authorized and 5 shares issued and outstanding as follows:
 
 
 
Series A convertible participating preferred stock, none issued (the “class A equivalent preferred stock”) (Note 10)

 

Series B convertible participating preferred stock, 2 shares issued and outstanding at March 31, 2020 and September 30, 2019 (the “UK&I preferred stock”) (Note 5 and Note 10)
2,285

 
2,285

Series C convertible participating preferred stock, 3 shares issued and outstanding at March 31, 2020 and September 30, 2019 (the “Europe preferred stock”) (Note 5 and Note 10)
3,177

 
3,177

Class A common stock, $0.0001 par value, 2,001,622 shares authorized, 1,693 and 1,718 shares issued and outstanding at March 31, 2020 and September 30, 2019, respectively (Note 10)

 

Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at March 31, 2020 and September 30, 2019 (Note 10)

 

Class C common stock, $0.0001 par value, 1,097 shares authorized, 11 shares issued and outstanding at March 31, 2020 and September 30, 2019 (Note 10)

 

Right to recover for covered losses (Note 5)
(184
)
 
(171
)
Additional paid-in capital
16,385

 
16,541

Accumulated income
13,366

 
13,502

Accumulated other comprehensive income (loss), net:
 
 
 
Investment securities
6

 
6

Defined benefit pension and other postretirement plans
(199
)
 
(192
)
Derivative instruments
78

 
199

Foreign currency translation adjustments
(329
)
 
(663
)
Total accumulated other comprehensive income (loss), net
(444
)
 
(650
)
Total equity
34,585

 
34,684

Total liabilities and equity
$
72,820

 
$
72,574


See accompanying notes, which are an integral part of these unaudited consolidated financial statements.
4

Table of Contents

VISA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2020
 
2019
 
2020
 
2019
 
(in millions, except per share data)
Net revenues
$
5,854

 
$
5,494

 
$
11,908

 
$
11,000

 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
Personnel
940

 
894

 
1,922

 
1,701

Marketing
235

 
241

 
509

 
517

Network and processing
183

 
171

 
364

 
344

Professional fees
103

 
101

 
209

 
192

Depreciation and amortization
192

 
160

 
374

 
319

General and administrative
269

 
264

 
582

 
540

Litigation provision (Note 14)
8

 
22

 
8

 
29

Total operating expenses
1,930

 
1,853

 
3,968

 
3,642

Operating income
3,924

 
3,641

 
7,940

 
7,358

 
 
 
 
 
 
 
 
Non-operating Income (Expense)
 
 
 
 
 
 
 
Interest expense, net
(118
)
 
(140
)
 
(229
)
 
(285
)
Investment income and other
23

 
176

 
92

 
234

Total non-operating income (expense)
(95
)
 
36

 
(137
)
 
(51
)
Income before income taxes
3,829

 
3,677

 
7,803

 
7,307

Income tax provision (Note 13)
745

 
700

 
1,447

 
1,353

Net income
$
3,084

 
$
2,977

 
$
6,356

 
$
5,954

 
 
 
 
 
 
 
 
Basic Earnings Per Share (Note 11)
 
 
 
 
 
 
 
Class A common stock
$
1.39

 
$
1.31

 
$
2.85

 
$
2.61

Class B common stock
$
2.25

 
$
2.13

 
$
4.62

 
$
4.25

Class C common stock
$
5.54

 
$
5.23

 
$
11.40

 
$
10.44

 
 
 
 
 
 
 
 
Basic Weighted-average Shares Outstanding (Note 11)
 
 
 
 
 
 
 
Class A common stock
1,703

 
1,748

 
1,708

 
1,754

Class B common stock
245

 
245

 
245

 
245

Class C common stock
11

 
12

 
11

 
12

 
 
 
 
 
 
 
 
Diluted Earnings Per Share (Note 11)
 
 
 
 
 
 
 
Class A common stock
$
1.38

 
$
1.31

 
$
2.85

 
$
2.61

Class B common stock
$
2.25

 
$
2.13

 
$
4.62

 
$
4.25

Class C common stock
$
5.54

 
$
5.23

 
$
11.38

 
$
10.42

 
 
 
 
 
 
 
 
Diluted Weighted-average Shares Outstanding (Note 11)
 
 
 
 
 
 
 
Class A common stock
2,228

 
2,279

 
2,234

 
2,285

Class B common stock
245

 
245

 
245

 
245

Class C common stock
11

 
12

 
11

 
12




See accompanying notes, which are an integral part of these unaudited consolidated financial statements.
5

Table of Contents

VISA INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2020
 
2019
 
2020
 
2019
 
(in millions)
Net income
$
3,084

 
$
2,977

 
$
6,356

 
$
5,954

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Investment securities:
 
 
 
 
 
 
 
Net unrealized gain (loss)
5

 
7

 
5

 
15

Income tax effect
(1
)
 
(2
)
 
(1
)
 
(4
)
Reclassification adjustments
(2
)
 

 
(2
)
 

Defined benefit pension and other postretirement plans:
 
 
 
 
 
 
 
Net unrealized actuarial gain (loss) and prior service credit (cost)
3

 

 
2

 
(7
)
Income tax effect
(1
)
 

 
(1
)
 
1

Reclassification adjustments
2

 

 
6

 

Income tax effect

 

 
(1
)
 

Derivative instruments:
 
 
 
 
 
 
 
Net unrealized gain (loss)
47

 
59

 
(141
)
 
97

Income tax effect
(8
)
 
(13
)
 
31

 
(23
)
Reclassification adjustments
(13
)
 
(22
)
 
(15
)
 
(47
)
Income tax effect
3

 
4

 
4

 
9

Foreign currency translation adjustments
(139
)
 
(394
)
 
344

 
(681
)
Other comprehensive income (loss), net of tax
(104
)
 
(361
)
 
231

 
(640
)
Comprehensive income
$
2,980

 
$
2,616

 
$
6,587

 
$
5,314




See accompanying notes, which are an integral part of these unaudited consolidated financial statements.
6

Table of Contents

VISA INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
 
Three Months Ended March 31, 2020
 
Preferred Stock
 
Common Stock
 
Preferred Stock
 
Right to Recover for Covered Losses
 
Additional
Paid-In Capital
 
Accumulated
Income
 
Accumulated
Other
Comprehensive
Income (Loss), Net
 
Total
Equity
 
Series B
 
Series C
 
Class A
 
Class B
 
Class C
 
 
(in millions, except per share data)
Balance as of December 31, 2019
2

 
3

 
1,709

 
245

 
11

 
$
5,462

 
$
(175
)
 
$
16,424

 
$
13,899

 
$
(340
)
 
$
35,270

Net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,084

 
 
 
3,084

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(104
)
 
(104
)
Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,980

VE territory covered losses incurred (Note 5)
 
 
 
 
 
 
 
 
 
 
 
 
(9
)
 
 
 
 
 
 
 
(9
)
Conversion of class C common stock upon sales into public market
 
 
 
 
2

 
 
 

(1) 
 
 
 
 
 
 
 
 
 
 

Vesting of restricted stock and performance-based shares
 
 
 
 

(1) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Share-based compensation, net of forfeitures (Note 12)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
99

 
 
 
 
 
99

Restricted stock and performance-based shares settled in cash for taxes
 
 
 
 

(1) 
 
 
 
 
 
 
 
 
(8
)
 
 
 
 
 
(8
)
Cash proceeds from issuance of common stock under employee equity plans
 
 
 
 

(1) 
 
 
 
 
 
 
 
 
54

 
 
 
 
 
54

Cash dividends declared and paid, at a quarterly amount of $0.30 per class A share (Note 10)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(668
)
 
 
 
(668
)
Repurchase of class A common stock (Note 10)
 
 
 
 
(18
)
 
 
 
 
 
 
 
 
 
(184
)
 
(2,949
)
 
 
 
(3,133
)
Balance as of March 31, 2020
2

 
3

 
1,693

 
245

 
11

 
$
5,462

 
$
(184
)
 
$
16,385

 
$
13,366

 
$
(444
)
 
$
34,585

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










See accompanying notes, which are an integral part of these unaudited consolidated financial statements.
7

Table of Contents

VISA INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)
(UNAUDITED)
 
Six Months Ended March 31, 2020
 
Preferred Stock
 
Common Stock
 
Preferred Stock
 
Right to Recover for Covered Losses
 
Additional
Paid-In Capital
 
Accumulated
Income
 
Accumulated
Other
Comprehensive
Income (Loss), Net
 
Total
Equity
 
Series B
 
Series C
 
Class A
 
Class B
 
Class C
 
 
(in millions, except per share data)
Balance as of September 30, 2019
2

 
3

 
1,718

 
245

 
11

 
$
5,462

 
$
(171
)
 
$
16,541

 
$
13,502

 
$
(650
)
 
$
34,684

Net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,356

 
 
 
6,356

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
231

 
231

Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,587

Adoption of new accounting standards (Note 1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25

 
(25
)
 

VE territory covered losses incurred (Note 5)
 
 
 
 
 
 
 
 
 
 
 
 
(13
)
 
 
 
 
 
 
 
(13
)
Conversion of class C common stock upon sales into public market
 
 
 
 
3

 
 
 

(1) 
 
 
 
 
 
 
 
 
 
 

Vesting of restricted stock and performance-based shares
 
 
 
 
3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Share-based compensation, net of forfeitures (Note 12)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
215

 
 
 
 
 
215

Restricted stock and performance-based shares settled in cash for taxes
 
 
 
 
(1
)
 
 
 
 
 
 
 
 
 
(155
)
 
 
 
 
 
(155
)
Cash proceeds from issuance of common stock under employee equity plans
 
 
 
 
1

 
 
 
 
 
 
 
 
 
109

 
 
 
 
 
109

Cash dividends declared and paid, at a quarterly amount of $0.30 per class A share (Note 10)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,339
)
 
 
 
(1,339
)
Repurchase of class A common stock (Note 10)
 
 
 
 
(31
)
 
 
 
 
 
 
 
 
 
(325
)
 
(5,178
)
 
 
 
(5,503
)
Balance as of March 31, 2020
2

 
3

 
1,693

 
245

 
11

 
$
5,462

 
$
(184
)
 
$
16,385

 
$
13,366

 
$
(444
)
 
$
34,585

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










See accompanying notes, which are an integral part of these unaudited consolidated financial statements.
8

Table of Contents

VISA INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)
(UNAUDITED)
 
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 (Loss), Net
 
Total
Equity
 
Series B
 
Series C
 
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 5)
 
 
 
 
 
 
 
 
 
 
 
 
(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 12)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 10)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(569
)
 
 
 
(569
)
Repurchase of class A common stock (Note 10)
 
 
 
 
(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.




See accompanying notes, which are an integral part of these unaudited consolidated financial statements.
9

Table of Contents

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 (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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 5)
 
 
 
 
 
 
 
 
 
 
 
 
(162
)
 
 
 
 
 
 
 
(162
)
Recovery through conversion rate adjustment (Note 5 and Note 10)
 
 
 
 
 
 
 
 
 
 
(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 12)
 
 
 
 



 
 
 
 
 
 
 
 
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 10)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,141
)
 
 
 
(1,141
)
Repurchase of class A common stock (Note 10)
 
 
 
 
(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) 
Increase or decrease is less than one million shares.



See accompanying notes, which are an integral part of these unaudited consolidated financial statements.
10

Table of Contents

VISA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Six Months Ended
March 31,
 
2020
 
2019
 
(in millions)
Operating Activities
 
 
 
Net income
$
6,356


$
5,954

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Client incentives (Note 3)
3,453


2,934

Share-based compensation (Note 12)
215


211

Depreciation and amortization of property, equipment, technology and intangible assets
374


319

Deferred income taxes
(37
)

256

VE territory covered losses incurred (Note 5)
(13
)

(162
)
Other
(84
)

(106
)
Change in operating assets and liabilities: