Visa : Q1 2020 Visa Inc Earnings Release

Visa Inc. Reports Fiscal First Quarter 2020 Results

San Francisco, CA, January 30, 2020 - Visa Inc. (NYSE: V)

• GAAP and non-GAAP net income of $3.3B or $1.46 per share
• Net revenues of $6.1B, an increase of 10%
• Growth in underlying business drivers remained strong
• Returned $3.0B of capital to shareholders in the form of share repurchases and dividends
• The board of directors authorized a new $9.5 billion share repurchase program

Q1 2020 Results

(Ended December 31, 2019)

in billions, except		GAAP	Non-GAAP(1)
		YoY		YoY
percentages and	USD		USD
per share data		Change	Change
Net Revenues	$6.1	10%	$6.1	10%
Net Income	$3.3	10%	$3.3	10%
Earnings Per	$1.46	12%	$1.46	12%
Share

Alfred F. Kelly, Jr., Chairman and Chief Executive Officer, Visa Inc., commented on the results:

"Our fiscal first quarter 2020 reflected stable and robust business growth around the world. We continue to have great success in building and renewing partnerships and growing our acceptance network. We are excited about the recent announcement to acquire Plaid which will enhance the growth trajectory of our business well into the future."

1. Non-GAAPresults exclude equity investment gains and losses, amortization of acquired intangible assets and non-recurringacquisition-related costs.

.

Q1 2020 Key Business Drivers

(YoY growth, volume in constant dollars)

Payments Volume	Cross-Border Volume	Processed Transactions
+8%	+9%	+11%

Fiscal First Quarter 2020 - Financial Highlights

GAAP net income in the fiscal first quarter was $3.3 billion or $1.46 per share, increases of 10% and 12%, respectively, over prior year's results. Current and prior year's results included $13 million gains and $4 million losses for equity investments, respectively. Current year's results also included $13 million related to amortization of acquired intangible assets and non-recurring acquisition- related costs. Excluding these items, non-GAAP net income for the quarter was $3.3 billion or $1.46 per share, increases of 10% and 12%, respectively, over prior year's results (refer to the accompanying financial tables for further details and a reconciliation of the non-GAAP measures presented). Non-GAAP earnings per share growth was approximately 14% on a constant-dollar basis. All references to earnings per share assume fully-diluted class A share count.

Net revenues in the fiscal first quarter were $6.1 billion, an increase of 10%, driven by continued growth in payments volume, cross-border volume and processed transactions. Net revenues growth was over 11% on a constant-dollar basis.

Payments volume for the three months ended September 30, 2019, on which fiscal first quarter service revenues are recognized, grew 9% over the prior year on a constant-dollar basis.

Payments volume for the three months ended December 31, 2019, grew 8% over the prior year on a constant-dollar basis.

Cross-border volume growth, on a constant-dollar basis, was 9% for the three months ended December 31, 2019. Excluding cross- border transactions within Europe, which have revenue yields similar to Europe's domestic volume, growth was 9% in the quarter.

Total processed transactions, which represent transactions processed by Visa, for the three months ended December 31, 2019, were 37.8 billion, an 11% increase over the prior year.

Fiscal first quarter service revenues were $2.6 billion, an increase of 9% over 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 16% over the prior year to $2.9 billion. International transaction revenues grew 9% over the prior year to $2.0 billion. Other revenues of $365 million rose 22% over the prior year. Client incentives, which are a contra-revenue item, were $1.7 billion and represented 22.4% of gross revenues.

GAAP operating expenses were $2.0 billion for the fiscal first quarter, a 14% increase over the prior year's results, including the amortization of acquired intangible assets and non-recurringacquisition-related costs. Excluding these operating expense items, non-GAAP operating expenses grew 13% over the prior year, primarily driven by personnel and general and administrative costs.

GAAP non-operating expense was $42 million for the fiscal first quarter, including $13 million of net equity investment gains.

GAAP and non-GAAP effective income tax rate was 17.7% for the quarter ended December 31, 2019.

Cash, cash equivalents and investment securities were $14.4 billion as of December 31, 2019.

The weighted-average number of diluted shares of class A common stock outstanding was 2.24 billion for the quarter ended December 31, 2019.

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Other Notable Items

On October 22, 2019, Visa announced it completed the acquisition of the token services and ticketing businesses of Rambus. These businesses will enable Visa to extend the security and convenience of tokenization to all types of transactions, including the ability to support domestic card networks and account-based and real-time payments systems.

On December 13, 2019, the district court granted final approval of the 2018 settlement agreement relating to claims brought by the damages class plaintiffs in the multi-district litigation. The 2018 damages class settlement agreement included, among other terms, monetary relief for Visa and Mastercard merchants of approximately $5.5 billion. While the district court's order is a significant step toward resolving this long-running litigation, the case is not yet fully resolved as several objectors have filed notices to appeal the district court's decision. In addition, claims by merchants that opted out of the class settlement and by a class of merchants seeking injunctive relief against certain of Visa's rules and practices remain pending.

On January 13, 2020, Visa announced it signed a definitive agreement to acquire Plaid, a network that makes it easy for people to securely connect their financial accounts to the apps they use to manage their financial lives. Visa will pay $4.9 billion cash consideration and $0.4 billion of retention equity and deferred equity consideration.

Starting in fiscal 2020, Visa revised its non-GAAP methodology to exclude the impacts of equity investment gains and losses, amortization of acquired intangible assets for acquisitions in fiscal year 2019 and forward, and non-recurringacquisition-related costs. Prior-yearnon-GAAP results were restated to reflect this change.

During the three months ended December 31, 2019, Visa repurchased 13.0 million shares of class A common stock, at an average price of $179.71 per share, using $2.3 billion of cash on hand. The Company had $1.7 billion of remaining authorized funds for share repurchase as of December 31, 2019. On January 28, 2020, the board of directors authorized a new $9.5 billion class A common stock share repurchase program.

On January 28, 2020, the board of directors declared a quarterly cash dividend of $0.30 per share of class A common stock (determined in the case of class B and C common stock and series B and C convertible participating preferred stock on an as- converted basis) payable on March 3, 2020, to all holders of record as of February 14, 2020.

Visa will host an Investor Day in San Francisco on Tuesday, February 11, 2020 beginning at 8:00 a.m. Pacific Time. Visa's management team will provide a comprehensive update of our strategies and key initiatives. A live webcast and replay of the presentation will be available at http://investor.visa.com.

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Financial Outlook for Fiscal Full-Year 2020

	GAAP	Foreign		Adjusted
	Nominal-Dollar	Currency	Acquisition	Constant-Dollar
	Basis	Impact	Impact	Basis(1)
Annual Net Revenues	Low double-digit	~1%	~0.5%	Low double-digit
Growth	decrease	increase
Client Incentives as a	High end of 22.5% to			High end of 22.5% to
% of Gross Revenues	23.5% range			23.5% range
Annual Operating	Mid-single-digit	~1%	3% - 4%	Mid-to-high
Expense Growth(2)	decrease	increase	single-digit
Effective Tax Rate	19% - 19.5%			19% - 19.5%
Annual Diluted Class A		~1%	~1%
Common Stock Earnings	Mid-teens	Mid-teens
decrease	decrease
Per Share Growth(3)

1. Adjusted financial outlook is on a constant-dollar basis and excludes non-GAAP equity investment gains and losses, amortization of acquired intangible assets for acquisitions in fiscal year 2019 and forward, and non-recurring acquisition- related costs. In addition, it excludes the operating revenues and expenses of the acquired entities that were not in the entire quarter of the previous year and the incremental interest expense or forgone interest income as a result of funding the acquisition through debt or cash, respectively. We believe presenting this adjusted outlook provides investors with additional insight into our expected operating performance for fiscal full-year 2020. The recently announced acquisition of Plaid is not included in our outlook as the transaction has not closed.
2. Annual adjusted operating expense growth is derived from non-GAAPfull-year 2019 operating expenses of $7.6 billion, which excludes $0.4 billion impact of a non-GAAP special item.
3. Annual adjusted diluted class A common stock earnings per share growth is derived from adjusted full-year 2019 earnings per share results of $5.40, which excludes the non-GAAP impacts of a special item (~$0.12 decrease) and equity investment gains and losses (~$0.04 increase).

Fiscal First Quarter 2020 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 athttp://investor.visa.com. A replay of the webcast will be available for 30 days. Investor information, including supplemental financial information, is also available athttp://investor.visa.com.

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Forward-Looking Statements

This press release 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 2020. 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, health 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;
• risks, uncertainties and the failure to achieve the anticipated benefits with respect to 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, 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.

About Visa Inc.

Visa Inc. (NYSE: V) is the world's leader in digital payments. Our mission is to connect the world through the most innovative, reliable and secure payment network - enabling individuals, businesses and economies to thrive. Our advanced global processing network, VisaNet, provides secure and reliable payments around the world, and is capable of handling more than 65,000 transaction messages a second. Our relentless focus on innovation is a catalyst for the rapid growth of digital commerce on any device for everyone, everywhere. As the world moves from analog to digital, Visa is applying our brand, products, people, network and scale to reshape the future of commerce. For more information, visit usa.visa.com/about-visa.html, usa.visa.com/visa- everywhere/blog.html and @VisaNews.

	Contacts	Investor Relations	Media Relations
	Mike Milotich, 650-432-7644,	Will Stickney, 415-805-4892,
		[e-mail]	[e-mail]

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Fiscal First Quarter 2020 - Financial Summary

Q1 FISCAL 2020 INCOME STATEMENT SUMMARY

(in millions, except percentages and per		Three Months Ended	YoY Change
	December 31, 2019
share data)
	GAAP		Non-GAAP	GAAP	Non-GAAP
Revenues
Service revenues	$	2,555	$	2,555	9%	9%
Data processing revenues		2,864		2,864	16%	16%
International transaction revenues		2,018		2,018	9%	9%
Other revenues		365		365	22%	22%
Client incentives		(1,748)		(1,748)	20%	20%
Net revenues		6,054		6,054	10%	10%
Operating Expenses
Personnel		982		982	22%	21%
Marketing		274		274	(1%)	(1%)
Network and processing		181		181	5%	4%
Professional fees		106		104	16%	15%
Depreciation and amortization		182		171	15%	8%
General and administrative		313		313	13%	13%
Litigation provision		-		-	(94%)	(94%)
Total operating expenses		2,038		2,025	14%	13%
Operating income		4,016		4,029	8%	8%
Non-operating expense		(42)		(55)	(52%)	(34%)
Effective tax rate		17.7%		17.7%	(0 ppt)	(0 ppt)
Net income	$	3,272	$	3,272	10%	10%
Earnings per share	$	1.46	$	1.46	12%	12%

Q1 FISCAL 2020 KEY BUSINESS DRIVERS

	YoY Change
	Constant	Nominal
Payments volume		8%	8%
Cross-border volume		9%	7%
Processed transactions		11%	11%

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Visa Inc. Consolidated Balance Sheets (unaudited)

					December 31,				September 30,
					2019					2019
					(in millions, except par value data)
	Assets
	Cash and cash equivalents	$	8,768	$	7,838
	Restricted cash equivalents-U.S. litigation escrow		1,634					1,205
	Investment securities		3,902				4,236
	Settlement receivable		3,273					3,048
	Accounts receivable		1,661					1,542
	Customer collateral		1,698					1,648
	Current portion of client incentives		803				741
	Prepaid expenses and other current assets		580					712
		Total current assets		22,319				20,970
	Investment securities		1,719					2,157
	Client incentives		2,481					2,084
	Property, equipment and technology, net		2,739					2,695
	Goodwill		15,767				15,656
	Intangible assets, net		27,137					26,780
	Other assets		2,619				2,232
		Total assets	$	74,781			$	72,574
	Liabilities
	Accounts payable	$	133		$	156
	Settlement payable		4,277				3,990
	Customer collateral		1,698					1,648
	Accrued compensation and benefits		527				796
	Client incentives		4,270					3,997
	Accrued liabilities		2,045				1,625
	Current maturities of long-term debt		3,000					-
	Accrued litigation		1,629					1,203
		Total current liabilities		17,579				13,415
	Long-term debt		13,688					16,729
	Deferred tax liabilities		4,810					4,807
	Other liabilities		3,434				2,939
		Total liabilities		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")		-				-
		Series B convertible participating preferred stock, 2 shares issued and outstanding at December 31, 2019 and			2,285					2,285
		September 30, 2019 (the "UK&I preferred stock")
		Series C convertible participating preferred stock, 3 shares issued and outstanding at December 31, 2019 and		3,177				3,177
		September 30, 2019 (the "Europe preferred stock")
	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
	Class B common stock, $0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at December		-				-
	31, 2019 and September 30, 2019
	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
	Right to recover for covered losses		(175)				(171)
	Additional paid-in capital		16,424					16,541
	Accumulated income		13,899					13,502
	Accumulated other comprehensive income (loss), net:
		Investment securities		4				6
		Defined benefit pension and other postretirement plans		(203)				(192)
		Derivative instruments		49				199
		Foreign currency translation adjustments		(190)				(663)
		Total accumulated other comprehensive income (loss), net		(340)				(650)
		Total equity		35,270				34,684
		Total liabilities and equity	$	74,781			$	72,574

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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		-				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		702					653
Net income	$	3,272			$	2,977
Basic Earnings Per Share
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
Class A common stock		1,713					1,760
Class B common stock		245					245
Class C common stock		11					12
Diluted Earnings Per Share
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
Class A common stock		2,240					2,291
Class B common stock		245					245
Class C common stock			11					12

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Visa Inc. Consolidated Statements of Cash Flows (unaudited)

Three Months Ended

December 31,

	2019					2018
		(in	millions)
Operating Activities
Net income	$	3,272	$	2,977
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Client incentives		1,748			1,456
Share-based compensation		116				100
Depreciation and amortization of property, equipment, technology and intangible assets		182			159
Deferred income taxes		(47)			139
VE territory covered losses incurred		(4)			(91)
Other		(50)			9
Change in operating assets and liabilities:
Settlement receivable		(183)			(1,551)
Accounts receivable		(107)			(200)
Client incentives		(1,943)			(1,361)
Other assets		123			(37)
Accounts payable		(12)			(46)
Settlement payable		218			1,739
Accrued and other liabilities		136				(54)
Accrued litigation		426			55
Net cash provided by (used in) operating activities		3,875			3,294
Investing Activities
Purchases of property, equipment and technology		(191)			(157)
Investment securities:
Purchases		(400)			(1,124)
Proceeds from maturities and sales		1,202				1,233
Acquisitions, net of cash acquired		(77)			-
Purchases of / contributions to other investments		(9)			(22)
Proceeds / distributions from other investments		1				-
Other investing activities		36			-
Net cash provided by (used in) investing activities		562			(70)
Financing Activities
Repurchase of class A common stock		(2,370)			(2,393)
Dividends paid		(671)			(572)
Cash proceeds from issuance of common stock under employee equity plans		55				48
Restricted stock and performance-based shares settled in cash for taxes		(147)			(101)
Net cash provided by (used in) 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
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period		10,832				10,977
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	12,263		$	11,115
Supplemental Disclosure
Income taxes paid, net of refunds	$	345		$	168
Interest payments on debt	$	234	$	234
Accruals related to purchases of property, equipment and technology	$	66		$	34

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Visa Inc. Fiscal 2020 and 2019 Quarterly Results of Operations (unaudited)

			Fiscal 2020									Fiscal 2019 Quarter Ended
			Quarter Ended
			December 31,				September 30,				June 30,				March 31,				December 31,
			2019				2019					2019					2019					2018
												(in millions)
Net revenues	$	6,054	$	6,137		$	5,840		$	5,494		$	5,506
Operating Expenses
Personnel		982				871					872				894				807
Marketing		274				306					282					241					276
Network and processing		181				193					184					171				173
Professional fees		106				149					113					101					91
Depreciation and amortization		182				172					165				160				159
General and administrative		313				341					315					264					276
Litigation provision		-				370					1					22				7
Total operating expenses		2,038				2,402					1,932					1,853					1,789
Operating income		4,016				3,735					3,908				3,641					3,717
Non-operating Income (Expense)
Interest expense, net		(111)				(120)				(128)				(140)				(145)
Investment income and other		69				96					86				176				58
Total non-operating income (expense)		(42)				(24)				(42)				36				(87)
Income before income taxes		3,974				3,711					3,866				3,677					3,630
Income tax provision		702				686					765					700					653
Net income		$	3,272			$	3,025			$	3,101				$	2,977			$	2,977

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Visa Inc. Reconciliation of Non-GAAP Financial Results (unaudited)

We use non-GAAP financial measures of our performance which exclude certain items which we believe are not 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. Starting in fiscal 2020, we revised our non-GAAP methodology to exclude the impact of 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 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 the companies that we invest in and 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 amounts during the three months ended December 31, 2018 since we are only adjusting for transactions that closed in fiscal 2019 and subsequent periods.
• Acquisition-relatedcosts. 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.

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Visa Inc. Reconciliation of Non-GAAP Financial Results - continued (unaudited)

Non-GAAP operating expense, non-operating income (expense), income tax provision, effective income tax rate, net income and diluted earnings 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 tables reconcile our as-reported financial measures, calculated in accordance with U.S. GAAP, to our respective non-GAAP financial measures for the three months ended December 31, 2019 and 2018.

					Three Months Ended December 31,	2019
					Non-					Effective						Diluted
		Operating			operating		Income Tax				Net			Earnings
				Income			Income Tax					Per
		Expenses			(Expense)			Provision		Rate(1)				Income			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
					Non-					Effective						Diluted
		Operating			operating		Income Tax				Net			Earnings
				Income			Income Tax					Per
		Expenses			(Expense)			Provision		Rate(1)				Income			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. Effective income tax rate, diluted earnings per share and their respective totals are calculated based on unrounded numbers.

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