What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-07-31 compared with 2020-05-04 · 162 added, 108 removed, 209 unchanged (56% of the section changed)

26 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2020 vs.

2019 Nine Months Ended

June 30, 2020 vs.

(in millions, except percentages and per share data)

1 unchanged sentence

Diluted earnings per share, as reported

$ 1.07 $ 1.37 (22) % $ 3.92 $ 3.97 (1) %

Non-GAAP net income (2)

$ 2,347 $ 3,099 (24) % $ 8,717 $ 8,991 (3) %

Non-GAAP diluted earnings per share (2)

$ 1.06 $ 1.37 (23) % $ 3.91 $ 3.95 (1) %

(1) Figures in the table may not recalculate exactly due to rounding.

1 unchanged sentence

(2) For a full reconciliation of our non-GAAP financial results, see tables in Non-GAAP financial results below.

While we have been actively monitoring the worldwide spread of COVID-19, the extent to which COVID-19 will ultimately impact our business is difficult to predict.

Our priority has been the safety of our employees, including comprehensive plans to support employee wellness, as well as support for our clients and the communities affected.

Although most of our staff are now working remotely, our network infrastructure and application performance continue to perform well and our business operations have comprehensive and coordinated plans in place to address business continuity and recovery needs around the world.

We are also in very close and regular contact with clients, partners and governments globally to help them navigate these challenging times.

In the month of March 2020, domestic spending, most notably in travel, restaurants, entertainment and fuel decreased as countries imposed social distancing, shelter-in-place or total lock-down orders.

Declines in cross-border volume as well as processed transactions negatively impacted international transaction and data processing revenues for the three months ended March 31, 2020.

Service revenues for the three months ended March 31, 2020 were not significantly impacted, as they were recognized on the payments volume for the three months ended December 31, 2019.

While we have not incurred operational disruptions thus far from the COVID-19 outbreak, the impact that COVID-19 will have on our business is difficult to predict due to numerous uncertainties, including the severity and duration of the outbreak, actions that may be taken by governmental authorities, the impact to the business of our clients and other factors identified in Part II, Item 1A “Risk Factors” in this Form 10-Q.

COVID-19 continues to have an impact globally.

While we have been actively monitoring the worldwide spread of COVID-19, the extent to which COVID-19 will ultimately impact our business remains difficult to predict.

Our priority remains the safety of our employees, clients and the communities in which we live and operate.

We are taking a measured approach in bringing our employees back in the office and will continue to have most of our employees work remotely for the rest of 2020.

We continue to remain in close and regular contact with our employees, clients, partners and governments globally to help them navigate these challenging times.

Revenues in the third quarter of fiscal 2020 were impacted by declines in volumes and transactions as a result of social distancing, shelter-in-place or total lock-down orders imposed by countries that began in the second quarter of fiscal 2020.

In the quarter, we saw spending improve each month as most countries began to relax these restrictions.

Cross-border volume however, continued to be heavily impacted by the decline in travel, which only improved moderately through the quarter.

While we have taken measures to modify our business practices and reduce operating expenses, including scaling back hiring plans, restricting travel, lowering marketing spend and the use of external resources, the impact that COVID-19 will have on our business remains difficult to predict due to numerous uncertainties, including the transmissibility, severity and duration of the outbreak, the effectiveness of social distancing measures or actions that are voluntarily adopted by the public or required by governments or public health authorities, the development and availability of effective treatments or vaccines, the impact to our employees and our operations, the business of our clients, supplier and business partners and other factors identified in Part II, Item 1A “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed with the SEC on May 4, 2020.

We will continue to evaluate the nature and extent of the impact to our business.

Highlights for the first half of fiscal 2020.

We recorded net revenues of $5.9 billion and $11.9 billion for the three and six months ended March 31, 2020 , respectively, an increase of 7% and 8% , respectively, over the prior-year comparable periods, driven by the year-over-year changes in nominal payments volume, nominal cross-border volume and processed transactions, which were not significantly impacted by COVID-19 until the latter part of March 2020.

Exchange rate movements in the three and six months ended March 31, 2020 , as partially mitigated by our hedging program, negatively impacted our net revenues growth by approximately one percentage point.

Total operating expenses were $1.9 billion and $4.0 billion for the three and six months ended March 31, 2020 , respectively, an increase of 4% and 9% on a GAAP and an increase of 3% and 8% on a non-GAAP basis, respectively, over the prior-year comparable periods.

The increase was primarily due to higher personnel, depreciation and amortization, general and administrative, and networking related expenses, as we continue to invest in our business growth.

Highlights for the first nine months of fiscal 2020.

Net revenues for the three and nine months ended June 30, 2020 were $4.8 billion and $16.7 billion, respectively, and decreased 17% and 1%, respectively, over the prior-year comparable periods, driven by the year-over-year changes in nominal payments volume, nominal cross-border volume and processed transactions, which were impacted by the spread of COVID-19 globally starting in the latter part of March 2020.

Exchange rate movements in the three and nine months ended June 30, 2020, as partially mitigated by our hedging program, negatively impacted our net revenues by approximately one half of a percentage point and one percentage point, respectively.

Total operating expenses for the three months ended June 30, 2020 were $1.8 billion, and decreased 5% over the prior-year comparable period, on both a GAAP and non-GAAP basis, driven by our overall cost reduction strategy.

Total operating expenses for the nine months ended June 30, 2020 were $5.8 billion, on both a GAAP and non-GAAP basis, and increased 4% and 3%, respectively, over the prior-year comparable period, primarily due to higher depreciation and amortization from our ongoing investments and personnel in support of our strategy for future growth.

Non-GAAP financial results.

7 unchanged sentences

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 March 31, 2020 , we recorded net realized and unrealized losses of $2 million .

During the six months ended March 31, 2020, we recorded net realized and unrealized gains of $11 million and related tax expense of $3 million .

During the three and nine months ended June 30, 2020, we recorded net realized and unrealized gains of $51 million and $62 million, respectively, and related tax expense of $11 million and $14 million, respectively.

For the same prior-year comparable periods, we recorded net realized and unrealized gains of $9 million and $89 million, respectively, and related tax expense of $3 million and $21 million, respectively.

3 unchanged sentences

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 and six months ended March 31, 2020 , we recorded amortization of acquired intangible assets of $11 million and $22 million , respectively, and related tax benefit of $2 million and $5 million , respectively.

There were no comparable amounts during the three and six months ended March 31, 2019 since we are only adjusting for transactions that closed in fiscal 2019 and subsequent periods.

During the three and nine months ended June 30, 2020, we recorded amortization of acquired intangible assets of $13 million and $35 million, respectively, and related tax benefit of $3 million and $8 million, respectively.

For the same prior-year comparable periods, we recorded amortization of acquired intangible assets of $2 million.

• Acquisition-related costs.

3 unchanged sentences

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 and six months ended March 31, 2020 , we recorded acquisition-related costs of $5 million and $7 million , respectively, and related tax benefit of $2 million during both the three and six months ended March 31, 2020 .

There were no comparable amounts during the three and six months ended March 31, 2019 since we are only adjusting for transactions that closed in fiscal 2019 and subsequent periods.

During the three months ended June 30, 2020, we recorded acquisition-related costs of $4 million.

During the nine months ended June 30, 2020, we recorded acquisition-related costs of $11 million and related tax benefit of $2 million.

For the same prior-year comparable periods, we recorded acquisition-related costs of $3 million and related tax benefit of $1 million.

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.

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 and six months ended March 31, 2020 and 2019 .

Three Months Ended March 31, 2020

Operating Expenses

Non-operating Income (Expense)

Income Tax Provision

Effective Income Tax Rate (1)

Diluted Earnings Per Share (1)

GAAP, to our respective non-GAAP financial measures for the three and nine months ended June 30, 2020 and 2019.

Three Months Ended June 30, 2020

Operating Expenses Non-operating Income (Expense) Income Tax Provision Effective Income Tax Rate (1)

Net Income Diluted Earnings Per Share (1)

(in millions, except percentages and per share data)

As reported $ 1,838 $ (67) $ 559 19.1 % $ 2,373 $ 1.07

(Gains) Losses on equity investments, net — (51) (11) (40) (0.02)

1 unchanged sentence

Acquisition-related costs (4) — — 4 —

Six Months Ended March 31, 2020

Operating Expenses

Non-operating Income (Expense)

Income Tax Provision

Effective Income Tax Rate (1)

Diluted Earnings Per Share (1)

Non-GAAP $ 1,821 $ (118) $ 551 19.0 % $ 2,347 $ 1.06

Nine Months Ended June 30, 2020

Operating Expenses Non-operating Income (Expense) Income Tax Provision Effective Income Tax Rate (1)

Net Income Diluted Earnings Per Share (1)

(in millions, except percentages and per share data)

As reported $ 5,806 $ (204) $ 2,006 18.7 % $ 8,729 $ 3.92

(Gains) Losses on equity investments, net — (62) (14) (48) (0.02)

1 unchanged sentence

Acquisition-related costs (11) — 2 9 —

Three Months Ended March 31, 2019

Operating Expenses

Non-operating Income (Expense)

Income Tax Provision

Effective Income Tax Rate (1)

Diluted Earnings Per Share (1)

Non-GAAP $ 5,760 $ (266) $ 2,002 18.7 % $ 8,717 $ 3.91

Three Months Ended June 30, 2019

Operating Expenses Non-operating Income (Expense) Income Tax Provision Effective Income Tax Rate (1)

Net Income Diluted Earnings Per Share (1)

(in millions, except percentages and per share data)

As reported $ 1,932 $ (42) $ 765 19.8 % $ 3,101 $ 1.37

(Gains) Losses on equity investments, net — (9) (3) (6) —

Six Months Ended March 31, 2019

Operating Expenses

Non-operating Income (Expense)

Income Tax Provision

Effective Income Tax Rate (1)

Diluted Earnings Per Share (1)

Amortization of acquired intangible assets (2) — — 2 —

Acquisition-related costs (3) — 1 2 —

Non-GAAP $ 1,927 $ (51) $ 763 19.8 % $ 3,099 $ 1.37

Nine Months Ended June 30, 2019

Operating Expenses Non-operating Income (Expense) Income Tax Provision Effective Income Tax Rate (1)

Net Income Diluted Earnings Per Share (1)

(in millions, except percentages and per share data)

As reported $ 5,574 $ (93) $ 2,118 19.0 % $ 9,055 $ 3.97

(Gains) Losses on equity investments, net — (89) (21) (68) (0.03)

Amortization of acquired intangible assets (2) — — 2 —

Acquisition-related costs (3) — 1 2 —

Non-GAAP $ 5,569 $ (182) $ 2,098 18.9 % $ 8,991 $ 3.95

(1) Figures in the table may not recalculate exactly due to rounding.

1 unchanged sentence

Common stock repurchases.

In January 2019, our board of directors authorized an $8.5 billion share repurchase program and in January 2020, authorized an additional $9.5 billion share repurchase program.

During the three months ended March 31, 2020 , we repurchased 18 million shares of our class A common stock in the open market for $3.1 billion .

As of March 31, 2020 , our January 2020 share repurchase program had remaining authorized funds of $8.1 billion for share repurchase.

All share repurchase programs authorized prior to January 2020 have been completed.

In January 2020, our board of directors authorized a $9.5 billion share repurchase program (the “January 2020 Program”).

During the three months ended June 30, 2020, we repurchased 6 million shares of our class A common stock in the open market for $1.1 billion.

As of June 30, 2020, our January 2020 Program had remaining authorized funds of $7.0 billion for share repurchase.

See Note 10—Stockholders’ Equity to our unaudited consolidated financial statements.

8 unchanged sentences

Payments volume is the primary driver for our service revenues, and the number of processed transactions is the primary driver for our data processing revenues.

Nominal payments volume in the United States posted high single-digit growth for the three and six months ended December 31, 2019 (1) , driven mainly by consumer debit and commercial.

Nominal international payments volume growth was negatively impacted by movements in U.S.

Nominal payments volume in the United States posted mid to high single-digit growth for the three and nine months ended March 31, 2020 (1) , respectively, driven mainly by consumer debit and commercial, partially offset by decreased spending beginning in the latter part of March 2020 as countries imposed social distancing, shelter-in-place or total lock-down orders.

Nominal international payments volume declined as a result of decreased spending related to social distancing, shelter-in-place or total lock-down orders and unfavorable movements in U.S.

dollar exchange rates.

On a constant-dollar basis, which excludes the impact of exchange rate movements, our international payments volume growth rate for the three and six months ended December 31, 2019 was 8% and 9% , respectively.

Growth in processed transactions reflects the ongoing worldwide shift to electronic payments, even with the decrease in processed transactions the latter part of March 2020 as COVID-19 spread throughout the world.

On a constant-dollar basis, which excludes the impact of exchange rate movements, our international payments volume growth rate for the three and nine months ended March 31, 2020 was 3% and 7%, respectively.

Processed transactions declined 13% for the three months ended June 30, 2020 as a result of social distancing, shelter-in-place or total lock-down orders.

Processed transactions grew 1% for the nine months ended June 30, 2020, reflecting the ongoing worldwide shift to electronic payments, partially offset by the impact of social distancing, shelter-in-place or total lock-down orders.

The following table presents nominal payments and cash volume:

United States

International

Three Months Ended December 31, (1)

United States International Visa Inc.

Three Months Ended March 31, (1)

2020 2019 % Change (2)

(in billions, except percentages)

1 unchanged sentence

Consumer credit

$ 371 $ 358 4 % $ 566 $ 606 (7) % $ 937 $ 964 (3) %

Consumer debit (3)

452 420 8 % 490 454 8 % 942 874 8 %

Commercial (4)

160 153 5 % 91 92 (2) % 251 245 2 %

Total nominal payments volume (2)

$ 983 $ 930 6 % $ 1,147 $ 1,153 (1) % $ 2,130 $ 2,083 2 %

Cash volume 139 141 (1) % 504 537 (6) % 643 678 (5) %

Total nominal volume (2),(5)

United States

International

Six Months Ended December 31, (1)

$ 1,123 $ 1,071 5 % $ 1,651 $ 1,690 (2) % $ 2,773 $ 2,760 0 %

United States International Visa Inc.

Nine Months Ended March 31, (1)

2020 2019 % Change (2)

(in billions, except percentages)

2 unchanged sentences

Consumer debit (3)

1,358 1,249 9 % 1,526 1,392 10 % 2,883 2,641 9 %

Commercial (4)

502 466 8 % 299 284 5 % 800 749 7 %

Total nominal payments volume (2)

$ 3,059 $ 2,854 7 % $ 3,699 $ 3,533 5 % $ 6,758 $ 6,386 6 %

Cash volume 432 427 1 % 1,645 1,703 (3) % 2,077 2,129 (2) %

Total nominal volume (2),(5)

$ 3,491 $ 3,280 6 % $ 5,344 $ 5,236 2 % $ 8,835 $ 8,516 4 %

The following table presents nominal and constant payments and cash volume growth:

International

Ended December 31,

International Visa Inc.

Ended March 31,

Nominal Constant (6)

Payments volume growth

1 unchanged sentence

Consumer debit growth (3)

8 % 11 % 8 % 9 % 10 % 12 % 9 % 11 %

Commercial growth (4)

(2) % 2 % 2 % 4 % 5 % 8 % 7 % 8 %

Total payments volume growth (2)

(1) % 3 % 2 % 4 % 5 % 7 % 6 % 7 %

Cash volume growth (6) % (3) % (5) % (2) % (3) % (1) % (2) % (1) %

Total volume growth (2)

(2) % 1 % 0 % 3 % 2 % 4 % 4 % 5 %

(1) Service revenues in a given quarter are assessed based on nominal payments volume in the prior quarter.

Therefore, service revenues reported for the three and six months ended March 31, 2020 and 2019 were based on nominal payments volume reported by our financial institution clients for the three and six months ended December 31, 2019 and 2018 , respectively.

Therefore, service revenues reported for the three and nine months ended June 30, 2020 and 2019 were based on nominal payments volume reported by our financial institution clients for the three and nine months ended March 31, 2020 and 2019, respectively.

(2) Figures in the table may not recalculate exactly due to rounding.

10 unchanged sentences

The following table provides the number of transactions involving cards and other form factors carrying the Visa, Visa Electron, Interlink, V PAY and PLUS cards processed on Visa’s networks during the periods presented:

Three Months Ended March 31,

Six Months Ended March 31,

Three Months Ended June 30, Nine Months Ended June 30,

(in millions, except percentages)

6 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2020 vs.

2019 Nine Months Ended

June 30, 2020 vs.

(in millions, except percentages)

$ 2,380 $ 2,587 $ (207) (8) % $ 7,747 $ 7,573 $ 174 2 %

International 2,457 3,253 (796) (24) % 8,998 9,267 (269) (3) %

Net revenues $ 4,837 $ 5,840 $ (1,003) (17) % $ 16,745 $ 16,840 $ (95) (1) %

(1) Figures in the table may not recalculate exactly due to rounding.

Percentage changes are calculated based on unrounded numbers.

Net revenues increased primarily due to the year-over-year changes in payments volume, cross-border volume and processed transactions, which were not significantly impacted by COVID-19 until the latter part of March 2020.

The increase in revenues was also partially offset by the increase in client incentives.

Net revenues decreased primarily due to the year-over-year changes in payments volume, cross-border volume and processed transactions, which were impacted by COVID-19 starting in the latter part of March 2020.

Our net revenues are impacted by the overall strengthening or weakening of the U.S.

dollar as payments volume and related revenues denominated in local currencies are converted to U.S.

The following table sets forth the components of our net revenues:

Three Months Ended

Six Months Ended

June 30, 2020 vs.

2019 Nine Months Ended

June 30, 2020 vs.

(in millions, except percentages)

2 unchanged sentences

International transaction revenues

1,102 1,977 (875) (44) % 4,953 5,624 (671) (12) %

Other revenues 314 342 (28) (8) % 1,071 968 103 11 %

Client incentives (1,513) (1,546) 33 (2) % (4,966) (4,480) (486) 11 %

Net revenues $ 4,837 $ 5,840 $ (1,003) (17) % $ 16,745 $ 16,840 $ (95) (1) %

(1) Figures in the table may not recalculate exactly due to rounding.

Percentage changes are calculated based on unrounded numbers.

Service revenues increased primarily due to 8% growth in nominal payments volume during the three and six month comparable periods as well as select pricing modifications effective in 2019, partially offset by unfavorable business mix.

Service revenues for the three months ended March 31, 2020 were not significantly impacted by COVID-19 as they were recognized on the payments volume for the three months ended December 31, 2019.

Data processing revenues increased mainly due to overall growth in processed transactions of 7% and 9% during the three and six month comparable periods, respectively, select pricing modifications effective in 2019, as well as faster growth of our value-added services and acquisition-related revenue.

The growth of our data processing revenues was negatively impacted in the latter part of March 2020 by the decrease in processed transactions as COVID-19 spread throughout the world.

International transaction revenues increased primarily due to select pricing modifications effective in 2019 .

International transaction revenues also reflected fluctuations in the volatility of a broad range of currencies as well as a 4% decline and 2% growth in nominal cross-border volumes during the three and six month comparable periods, respectively, due to the decrease in cross-border volume through the quarter as COVID-19 spread throughout the world.

Other revenues increased primarily due to higher revenues from value-added services.

Client incentives increased mainly due to incentives recognized on long-term customer contracts that were initiated or renewed in the past 12 months and overall growth in global payments volume.

• Service revenues were flat in the third quarter of fiscal 2020 as COVID-19 spread globally starting in the latter part of March 2020 with a 2% growth in nominal payments volume during the three-month comparable period.

Service revenues grew 6% during the nine-month comparable period, in line with nominal payments volume growth of 6%.

• Data processing revenues were impacted by a decline in processed transactions of 13% and growth of 1% during the three-month and nine-month comparable periods, respectively, as a result of the spread of COVID-19 globally starting in the latter part of March 2020.

Data processing revenues benefited from value-added services, acquisition-related revenues and favorable business mix.

For the nine-month comparable period, data processing revenues also benefited from select pricing modifications effective in 2019.

• International transaction revenues driven by nominal cross-border volumes, excluding transactions within Europe, declined 48% and 16% during the three-month and nine-month comparable periods, respectively, as COVID-19 spread globally starting in the latter part of March 2020.

For the three-month comparable period, international transaction revenues were also impacted by fluctuations in the volatility of a broad range of currencies and favorable business mix.

For the nine-month comparable period, international transaction revenues benefited from select pricing modifications effective in 2019.

• Other revenues decreased in the third quarter of fiscal 2020 primarily due to lower marketing services revenues, lower value-added services revenues tied to travel-related card benefits and non-recurring revenues in the prior year three-month comparable period.

For the nine-month comparable period, other revenues increased primarily due to consulting and marketing services related fees and other value-added services.

• Client incentives decreased during the three-month comparable period in correlation with the decline in payments volumes and revenues.

In the nine-month comparable period, client incentives increased mainly due to incentives recognized on long-term customer contracts that were initiated or renewed in the past 12 months partially offset by the recent decline in global payments volume.

The amount of client incentives we record in future periods will vary based on changes in performance expectations, actual client performance, amendments to existing contracts or execution of new contracts.

2 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2020 vs.

2019 Nine Months Ended

June 30, 2020 vs.

(in millions, except percentages)

Personnel $ 941 $ 872 $ 69 8 % $ 2,863 $ 2,573 $ 290 11 %

Marketing 174 282 (108) (38) % 683 799 (116) (15) %

Network and processing 172 184 (12) (7) % 536 528 8 1 %

1 unchanged sentence

Depreciation and amortization

197 165 32 19 % 571 484 87 18 %

General and administrative

258 315 (57) (18) % 840 855 (15) (2) %

Litigation provision 1 1 — (40) % 9 30 (21) (72) %

2 unchanged sentences

Percentage changes are calculated based on unrounded numbers.

Personnel expenses increased primarily due to continued increase in headcount offset by lower incentive compensation for the three-month comparable period.

For the six-month comparable period, expenses increased due to continued headcount growth in support of our investment strategy for future growth.

Network and processing expenses increased mainly due to continued technology and processing network investments to support growth.

• Personnel expenses increased primarily due to continued increase in headcount in support of our investment strategy for future growth, offset by lower incentive compensation.

• Marketing expenses decreased reflecting our overall cost reduction strategy, the absence of FIFA Women's World Cup in fiscal 2020 and the delay of the Tokyo Olympics to fiscal 2021.

The decrease is offset by an increase in client marketing spend during the nine-month comparable period.

• Professional fees decreased reflecting our overall cost reduction strategy.

• Depreciation and amortization expenses increased primarily due to additional depreciation and amortization from our on-going investments, including acquisitions.

General and administrative expenses increased mainly due to reclassification of certain expenses to general and administrative, higher product enhancements costs in support of our business growth and higher indirect taxes, offset by favorable currency fluctuations.

• General and administrative expenses decreased primarily due to travel restrictions and our overall cost reduction strategy, offset by acquisition related expenses during the nine-months comparable period.

• Litigation provision decreased primarily due to lower accruals for uncovered litigation.

2 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2020 vs.

2019 Nine Months Ended

June 30, 2020 vs.

(in millions, except percentages)

2 unchanged sentences

Total non-operating income (expense)

$ (67) $ (42) $ (25) 59 % $ (204) $ (93) $ (111) 120 %

(1) Figures in the table may not recalculate exactly due to rounding.

Percentage changes are calculated based on unrounded numbers.

Interest expense, net decreased primarily as a result of entering into derivative instruments in fiscal 2019 that lowered the cost of borrowing on a portion of our outstanding debt.

• Interest expense, net increased during the three-month comparable period primarily as a result of the issuance of debt in the third quarter of fiscal 2020, offset by derivative instruments that lowered the cost of borrowing on a portion of our outstanding debt.

Interest expense, net decreased during the nine-month comparable period primarily due to derivative instruments that lowered the cost of borrowing on a portion of our outstanding debt, offset by the issuance of debt in the third quarter of fiscal 2020.

• Investment income and other decreased primarily due to lower gains on our equity investments and lower interest income on our cash and investments.

Effective Income Tax Rate

The effective income tax rates were 19 % for the three and nine months ended June 30, 2020, and 20 % and 19 % for the three and nine months ended June 30, 2019, respectively.

The difference in the effective tax rates between the three-month periods was primarily due to the change in geographic mix of income.

On July 22, 2020, UK enacted a legislation that repealed the previous tax rate reduction from 19% to 17% that was effective on April 1, 2020.

The repeal of the UK tax rate reduction is not expected to significantly increase our ongoing effective tax rate, however, it will result in a one-time non-cash tax expense in the fourth quarter of fiscal 2020, due to the re-measurement of deferred taxes which are primarily related to intangibles recorded in purchase accounting upon the acquisition of Visa Europe in fiscal 2016.

Liquidity and Capital Resources

1 unchanged sentence

The following table summarizes our cash flow activity for the periods presented:

Six Months Ended

Nine Months Ended

(in millions)

3 unchanged sentences

Financing activities (4,723) (9,401)

Effect of exchange rate changes on cash and cash equivalents

Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents

Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents

$ 6,102 $ (308)

Operating activities.

Cash provided by operating activities for the six months ended March 31, 2020 was slightly lower than the prior-year comparable period due to higher client incentives and timing of settlement.

Partially offset by continued growth in our underlying business and receipt of the $467 million takedown payment associated with the Interchange Multidistrict Litigation.

Cash provided by operating activities for the nine months ended June 30, 2020 was lower than the prior-year comparable period due to higher client incentives and timing of settlement.

Partially offset by lower cash paid for taxes and the receipt of the $467 million takedown payment associated with the Interchange Multidistrict Litigation.

See Note 14—Legal Matters to our unaudited consolidated financial statements.

Investing activities.

Cash provided by investing activities for the six months ended March 31, 2020 increased primarily due to higher sales of investment securities and fewer purchases of investment securities as compared to the prior-year period.

Cash provided by investing activities for the nine months ended June 30, 2020 increased primarily due to fewer purchases of investment securities as compared to the prior-year period.

Financing activities.

Cash used in financing activities for the six months ended March 31, 2020 was slightly higher than the prior-year comparable period primarily due to higher share repurchase and higher dividends paid.

Partially offset by proceeds received from the issuance of commercial paper.

Cash used in financing activities for the nine months ended June 30, 2020 was lower than the prior-year comparable period primarily due to proceeds received from the issuance of senior notes and the absence of the deferred purchase consideration payment, made in the prior year.

Partially offset by higher share repurchase and higher dividends paid.

See Note 8—Debt and Note 10—Stockholders’ Equity to our unaudited consolidated financial statements .

7 unchanged sentences

We maintain a commercial paper program to support our working capital requirements and for other general corporate purposes.

The carrying amount outstanding at March 31, 2020 was $1.0 billion , with a weighted-average interest rate of 1.55% and remaining maturities of less than 12 months.

See Note 8—Debt to our unaudited consolidated financial statements.

During the three months ended June 30, 2020, we repaid $1.0 billion of commercial paper that was issued during the three months ended March 31, 2020.

We had no obligations outstanding under the program at June 30, 2020.

Senior notes .

4 unchanged sentences

Common stock repurchases.

In January 2020, our board of directors authorized a $9.5 billion share repurchase program.

During the six months ended March 31, 2020 , we repurchased 31 million shares of our class A common stock for $5.5 billion .

As of March 31, 2020 , our January 2020 share repurchase program had remaining authorized funds of $8.1 billion for share repurchase.

During the nine months ended June 30, 2020, we repurchased 37 million shares of our class A common stock for $6.6 billion.

As of June 30, 2020, our January 2020 Program had remaining authorized funds of $7.0 billion for share repurchase.

See Note 10—Stockholders’ Equity to our unaudited consolidated financial statements.

During the six months ended March 31, 2020 , we declared and paid $1.3 billion in dividends to holders of our common and preferred stock.

On April 21, 2020 , our board of directors declared a cash dividend in the amount of $0.30 per share of class A common stock (determined in the case of class B and C common stock and UK&I and Europe preferred stock on an as-converted basis), which will be paid on June 2, 2020 , to all holders of record as of May 14, 2020 .

During the nine months ended June 30, 2020, we declared and paid $2.0 billion in dividends to holders of our common and preferred stock.

On July 20, 2020, our board of directors declared a cash dividend in the amount of $0.30 per share of class A common stock (determined in the case of class B and C common stock and UK&I and Europe preferred stock on an as-converted basis), which will be paid on September 1, 2020, to all holders of record as of August 14, 2020.

See Note 10—Stockholders’ Equity to our unaudited consolidated financial statements.

2 unchanged sentences

Senior notes .

In December 2015, we issued fixed-rate senior notes in an aggregate principal amount of $16.0 billion, with maturities ranging between 2 and 30 years.

A principal payment of $3.0 billion is due on December 14, 2020, for which we have sufficient liquidity.

A principal payment of $3.0 billion is due on December 14, 2020 on our fixed-rate senior notes issued in December 2015, for which we have sufficient liquidity.

See Note 8—Debt to our unaudited consolidated financial statements.

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis