What changed in this filing

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Item 1. Financial Statements

2021-04-29 compared with 2021-01-29 · 197 added, 81 removed, 635 unchanged (30% of the section changed)

2 unchanged sentences

2021 September 30,

(in millions, except par value data)

(in millions, except per share data)

Cash and cash equivalents $ 16,494 $ 16,289

29 unchanged sentences

Preferred stock, $ 0.0001 par value, 25 shares authorized and 5 shares issued and outstanding as follows:

Series A convertible participating preferred stock, less than one shares issued and outstanding at December 31, 2020 and September 30, 2020 (the “series A preferred stock”) 1,049 2,437

Series B convertible participating preferred stock, 2 shares issued and outstanding at December 31, 2020 and September 30, 2020 (the “UK&I preferred stock”)

Series C convertible participating preferred stock, 3 shares issued and outstanding at December 31, 2020 and September 30, 2020 (the “Europe preferred stock”)

Class A common stock, $ 0.0001 par value, 2,001,622 shares authorized, 1,696 and 1,683 shares issued and outstanding at December 31, 2020 and September 30, 2020, respectively

Class B common stock, $ 0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at December 31, 2020 and September 30, 2020

Class C common stock, $ 0.0001 par value, 1,097 shares authorized, 11 shares issued and outstanding at December 31, 2020 and September 30, 2020

Series A convertible participating preferred stock, less than one shares issued and outstanding at March 31, 2021 and September 30, 2020 (the “series A preferred stock”) 713 2,437

Series B convertible participating preferred stock, 2 shares issued and outstanding at March 31, 2021 and September 30, 2020 (the “UK&I preferred stock”)

Series C convertible participating preferred stock, 3 shares issued and outstanding at March 31, 2021 and September 30, 2020 (the “Europe preferred stock”)

Class A common stock, $ 0.0001 par value, 2,001,622 shares authorized, 1,694 and 1,683 shares issued and outstanding at March 31, 2021 and September 30, 2020, respectively

Class B common stock, $ 0.0001 par value, 622 shares authorized, 245 shares issued and outstanding at March 31, 2021 and September 30, 2020

Class C common stock, $ 0.0001 par value, 1,097 shares authorized, 11 shares issued and outstanding at March 31, 2021 and September 30, 2020

Right to recover for covered losses ( 41 ) ( 39 )

12 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2021 2020 2021 2020

(in millions, except per share data)

36 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2021 2020 2021 2020

(in millions)

3 unchanged sentences

Net unrealized gain (loss) ( 1 ) 5 ( 2 ) 5

Income tax effect — ( 1 ) — ( 1 )

Reclassification adjustments — ( 2 ) — ( 2 )

Defined benefit pension and other postretirement plans:

Net unrealized actuarial gain (loss) and prior service credit (cost)

( 2 ) 3 ( 3 ) 2

Income tax effect 1 ( 1 ) 2 ( 1 )

11 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Three Months Ended December 31, 2020

Three Months Ended March 31, 2021

Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses Additional

5 unchanged sentences

(in millions, except per share data)

Balance as of December 31, 2020 — (1)

2 3 1,696 245 11 $ 3,683 $ ( 34 ) $ 18,063 $ 14,813 $ 1,154 $ 37,679

Net income 3,026 3,026

Other comprehensive income (loss), net of tax

( 782 ) ( 782 )

Comprehensive income 2,244

VE territory covered losses incurred ( 7 ) ( 7 )

Conversion of series A preferred stock upon sales into public market — (1)

5 ( 336 ) 336 —

Conversion of class C common stock upon sales into public market

Vesting of restricted stock and performance-based shares

Share-based compensation, net of forfeitures 153 153

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

Cash proceeds from issuance of class A common stock under employee equity plans 1 47 47

Cash dividends declared and paid, at a quarterly amount of $ 0.32 per class A common stock

( 701 ) ( 701 )

Repurchase of class A common stock ( 8 ) ( 88 ) ( 1,625 ) ( 1,713 )

Balance as of March 31, 2021 — (1)

2 3 1,694 245 11 $ 3,347 $ ( 41 ) $ 18,505 $ 15,513 $ 372 $ 37,696

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

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

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

Six Months Ended March 31, 2021

Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses Additional

Paid-In Capital Accumulated

Income Accumulated

Comprehensive

Income (Loss), Net Total

A Series B Series C Class A Class B Class C

(in millions, except per share data)

Balance as of September 30, 2020 — (1)

13 unchanged sentences

( 1 ) ( 140 ) ( 140 )

Cash proceeds from issuance of class A common stock under employee equity plans — (1)

Cash proceeds from issuance of common stock under employee equity plans

Cash dividends declared and paid, at a quarterly amount of $ 0.32 per class A common stock

1 unchanged sentence

Repurchase of class A common stock ( 17 ) ( 183 ) ( 3,326 ) ( 3,509 )

Balance as of December 31, 2020 — (1)

Balance as of March 31, 2021 — (1)

2 3 1,694 245 11 $ 3,347 $ ( 41 ) $ 18,505 $ 15,513 $ 372 $ 37,696

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

Three Months Ended December 31, 2019

Three Months Ended March 31, 2020

Preferred Stock Common Stock Preferred Stock Right to Recover for Covered Losses Additional

5 unchanged sentences

(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 ( 9 ) ( 9 )

Conversion of class C common stock upon sales into public market

Vesting of restricted stock and performance-based shares

Share-based compensation, net of forfeitures 99 99

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

Cash proceeds from issuance of class A common stock under employee equity plans — (1)

Cash dividends declared and paid, at a quarterly amount of $ 0.30 per class A common stock

( 668 ) ( 668 )

Repurchase of class A common stock ( 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.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

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

Comprehensive

Income (Loss), Net Total

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

9 unchanged sentences

( 1 ) ( 155 ) ( 155 )

Cash proceeds from issuance of class A common stock under employee equity plans 1 55 55

Cash proceeds from issuance of common stock under employee equity plans

Cash dividends declared and paid, at a quarterly amount of $ 0.30 per class A common stock

1 unchanged sentence

Repurchase of class A common stock ( 31 ) ( 325 ) ( 5,178 ) ( 5,503 )

Balance as of December 31, 2019 2 3 1,709 245 11 $ 5,462 $ ( 175 ) $ 16,424 $ 13,899 $ ( 340 ) $ 35,270

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.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(in millions)

31 unchanged sentences

Dividends paid ( 1,404 ) ( 1,339 )

Proceeds from issuance of commercial paper — 1,001

Cash proceeds from issuance of class A common stock under employee equity plans 108 109

3 unchanged sentences

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

( 1,116 ) 1,431

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 19,171 10,832

29 unchanged sentences

Future actual results could differ materially from these estimates.

The worldwide spread of coronavirus (“COVID-19”) has created significant uncertainty in the global economy.

Coronavirus (“COVID-19”) has continued to create significant uncertainty in the global economy.

There have been no comparable recent events that provide guidance as to the effect COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of COVID-19 and the extent to which COVID-19 continues to impact the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.

23 unchanged sentences

The nature, amount, timing and uncertainty of the Company’s revenues and cash flows and how they are affected by economic factors are most appropriately depicted through the Company’s revenue categories and geographical markets.

The following tables disaggregate the Company’s net revenues by revenue category and by geography for the three months ended December 31, 2020 and 2019:

The following tables disaggregate the Company’s net revenues by revenue category and by geography for the three and six months ended March 31, 2021 and 2020:

Three Months Ended

March 31, Six Months Ended

2021 2020 2021 2020

(in millions)

6 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2021 2020 2021 2020

(in millions)

2 unchanged sentences

Net revenues $ 5,729 $ 5,854 $ 11,416 $ 11,908

At December 31, 2020 and September 30, 2020, deferred revenue included in accrued liabilities on the consolidated balance sheets was $ 668 million and $ 533 million, respectively.

Note 4—Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

The Company’s cash and cash equivalents include cash and certain highly liquid investments with original maturities of 90 days or less from the date of purchase.

Cash equivalents are primarily recorded at cost, which approximates fair value due to their generally short maturities.

The Company defines restricted cash and restricted cash equivalents as cash and cash equivalents that cannot be withdrawn or used for general operating activities.

At March 31, 2021 and September 30, 2020, deferred revenue included in accrued liabilities on the consolidated balance sheets was $ 647 million and $ 533 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

Note 4—Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

The Company reconciles cash, cash equivalents, restricted cash and restricted cash equivalents reported in the consolidated balance sheets that aggregate to the beginning and ending balances shown in the consolidated statements of cash flows as follows:

20 unchanged sentences

litigation escrow account:

Three Months Ended

Six Months Ended

(in millions)

2 unchanged sentences

Payments to opt-out merchants (1) and interest earned on escrow funds

( 7 ) ( 408 )

Balance at end of period $ 894 $ 1,264

7 unchanged sentences

When the adjustment to the conversion rate is made, the amount previously recorded in “right to recover for covered losses” as contra-equity is then recorded against the book value of the preferred stock within stockholders’ equity.

During the three months ended December 31, 2020, the Company recovered $ 15 million of VE territory covered losses through adjustments to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock.

During the six months ended March 31, 2021, the Company recovered $ 15 million of VE territory covered losses through adjustments to the class A common stock conversion rates applicable to the UK&I and Europe preferred stock.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The following table sets forth the activities related to VE territory covered losses in preferred stock and “right to recover for covered losses” within stockholders’ equity during the three months ended December 31, 2020.

Preferred Stock Right to Recover for Covered Losses

3 unchanged sentences

Recovery through conversion rate adjustment ( 9 ) ( 6 ) 15

Balance as of December 31, 2020 $ 1,097 $ 1,537 $ ( 34 )

Balance as of March 31, 2021 $ 1,097 $ 1,537 $ ( 41 )

(1) VE territory covered losses incurred reflect settlements with merchants and additional legal costs.

See Note 13—Legal Matters .

The following table sets forth the as-converted value of the preferred stock available to recover VE territory covered losses compared to the book value of preferred shares recorded in stockholders’ equity within the Company’s consolidated balance sheets as of December 31, 2020 and September 30, 2020:

December 31, 2020 September 30, 2020

March 31, 2021 September 30, 2020

As-converted Value of Preferred Stock (1),(2)

11 unchanged sentences

(2) The as-converted value of preferred stock is calculated as the product of:

(a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively, as of December 31, 2020;

(b) 6.368 and 6.853 , the class A common stock conversion rate applicable to the UK&I and Europe preferred stock as of December 31, 2020, respectively;

and (c) $ 218.73 , Visa’s class A common stock closing stock price as of December 31, 2020.

(a) 2 million and 3 million shares of the UK&I and Europe preferred stock outstanding, respectively, as of March 31, 2021;

(b) 6.368 and 6.853 , the class A common stock conversion rate applicable to the UK&I and Europe preferred stock as of March 31, 2021, respectively;

and (c) $ 211.73 , Visa’s class A common stock closing stock price as of March 31, 2021.

(3) The as-converted value of preferred stock is calculated as the product of:

9 unchanged sentences

2021 September 30,

2020 December 31,

2020 March 31,

2021 September 30,

6 unchanged sentences

Treasury securities

2,050 650 — —

Investment securities:

24 unchanged sentences

Treasury securities.

As of December 31, 2020 and September 30, 2020, the Company held $ 3.0 billion and $ 3.8 billion of these investment securities, respectively.

As of March 31, 2021 and September 30, 2020, the Company held $ 2.0 billion and $ 3.8 billion of these available-for-sale investment securities, respectively.

All of the Company’s long-term available-for-sale investment securities are due within one to five years .

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

During the three months ended December 31, 2020 and 2019, upward adjustments of $ 14 million and $ 9 million, respectively, were included in the carrying value of non-marketable equity securities accounted for under the fair value measurement alternative.

The three months ended December 31, 2020 also included downward adjustments of $ 2 million.

During the three months ended December 31, 2020 and 2019, there was no impairment recognized.

The following table summarizes the total carrying value of the Company’s non-marketable equity securities held as of December 31, 2020 including cumulative unrealized gains and losses:

The following table summarizes the total carrying value of the Company’s non-marketable equity securities held as of March 31, 2021 including cumulative unrealized gains and losses:

(in millions)

3 unchanged sentences

Carrying amount, end of period $ 1,200

During the three and six months ended March 31, 2021 and 2020, unrealized gains and losses included in the carrying value of the Company’s non-marketable equity securities were as follows:

Three Months Ended

March 31, Six Months Ended

2021 2020 2021 2020

(in millions)

Upward adjustments $ 129 $ — $ 143 $ 9

Downward adjustments (including impairment) $ — $ — $ ( 2 ) $ —

Non-financial assets and liabilities.

5 unchanged sentences

The Company completed its annual impairment review of its indefinite-lived intangible assets and goodwill as of February 1, 2021, and concluded that there was no impairment.

No recent events or changes in circumstances indicate that impairment existed at December 31, 2020.

No recent events or changes in circumstances indicate that impairment existed at March 31, 2021.

Other Fair Value Disclosures

2 unchanged sentences

If measured at fair value in the financial statements, these instruments would be classified as Level 2 in the fair value hierarchy.

As of December 31, 2020, the carrying value and estimated fair value of debt was $ 21.1 billion and $ 23.8 billion, respectively.

As of March 31, 2021, the carrying value and estimated fair value of debt was $ 21.0 billion and $ 22.1 billion, respectively.

As of September 30, 2020, the carrying value and estimated fair value of debt was $ 24.1 billion and $ 26.6 billion, respectively.

Other financial instruments not measured at fair value.

The following financial instruments are not measured at fair value on the Company’s unaudited consolidated balance sheet at December 31, 2020, but disclosure of their fair values is required:

The following financial instruments are not measured at fair value on the Company’s unaudited consolidated balance sheet at March 31, 2021, but disclosure of their fair values is required:

settlement receivable and payable and customer collateral.

The estimated fair value of such instruments at December 31, 2020 approximates their carrying value due to their generally short maturities.

The estimated fair value of such instruments at March 31, 2021 approximates their carrying value due to their generally short maturities.

If measured at fair value in the financial statements, these financial instruments would be classified as Level 2 in the fair value hierarchy.

43 unchanged sentences

(2) Represents the change in fair value of interest rate swap agreements entered into on a portion of outstanding senior notes.

During the three months ended December 31, 2020, the Company repaid $ 3.0 billion of principal upon maturity of its senior notes due December 14, 2020.

During the six months ended March 31, 2021, the Company repaid $ 3.0 billion of principal upon maturity of its senior notes due December 14, 2020.

Note 8—Settlement Guarantee Management

4 unchanged sentences

The Company’s settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in time, which vary significantly day to day.

During the three months ended December 31, 2020, the Company’s maximum daily settlement exposure was $ 97.5 billion and the average daily settlement exposure was $ 61.2 billion.

During the six months ended March 31, 2021, the Company’s maximum daily settlement exposure was $ 99.3 billion and the average daily settlement exposure was $ 61.5 billion.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The Company maintains and regularly reviews global settlement risk policies and procedures to manage settlement exposure, which may require clients to post collateral if certain credit standards are not met.

At December 31, 2020 and September 30, 2020, the Company held the following collateral to manage settlement exposure:

At March 31, 2021 and September 30, 2020, the Company held the following collateral to manage settlement exposure:

2021 September 30,

8 unchanged sentences

The number of shares of each series and class, and the number of shares of class A common stock on an as-converted basis were as follows:

December 31, 2020 September 30, 2020

March 31, 2021 September 30, 2020

Outstanding Conversion Rate Into

16 unchanged sentences

(2) The number of shares outstanding was less than one million.

(3) Class A common stock shares outstanding reflect repurchases that settled on or before December 31, 2020 and September 30, 2020.

(3) Class A common stock shares outstanding reflect repurchases that settled on or before March 31, 2021 and September 30, 2020, respectively.

(4) The class B to class A common stock conversion rate is presented on a rounded basis.

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The following table presents the reduction in as-converted UK&I and Europe preferred stock after the Company recovered VE territory covered losses through conversion rate adjustments in the three months ended December 31, 2020.

There were no conversion rate adjustments in the three months ended December 31, 2019.

Three Months Ended

December 31, 2020

There were no conversion rate adjustments in the six months ended March 31, 2020.

Six Months Ended

March 31, 2021

(in millions, except per share data)

9 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2021 2020 2021 2020

(in millions, except per share data)

4 unchanged sentences

$ 1,713 $ 3,133 $ 3,509 $ 5,503

(1) Shares repurchased in the open market reflect repurchases that settled during the three months ended December 31, 2020 and 2019.

(1) Shares repurchased in the open market reflect repurchases that settled during the three and six months ended March 31, 2021 and 2020, respectively.

All shares repurchased in the open market have been retired and constitute authorized but unissued shares.

1 unchanged sentence

Average repurchase price per share and total cost is calculated based on unrounded numbers.

In January 2020, the Company’s board of directors authorized a $ 9.5 billion share repurchase program (the “January 2020 Program”) and in January 2021, authorized an additional $ 8.0 billion share purchase program.

In January 2020, the Company’s board of directors authorized a $ 9.5 billion share repurchase program and in January 2021, authorized an additional $ 8.0 billion share purchase program.

These authorizations have no expiration date.

As of December 31, 2020, the Company’s January 2020 Program had remaining authorized funds of $ 3.7 billion.

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

O n January 26, 2021, the Company’s board of directors declared a quarterly cash dividend of $ 0.32 per share of class A common stock (determined in the case of class B and C common stock and series A, UK&I and Europe preferred stock on an as-converted basis), which will be paid on March 1, 2021, to all holders of record as of February 12, 2021.

During the three months ended December 31, 2020 and 2019, the Company declared and paid dividends of $ 703 million and $ 671 million, respectively.

As of March 31, 2021, the Company’s repurchase programs had remaining authorized funds of $ 10.0 billion.

O n April 23, 2021, the Company’s board of directors declared a quarterly cash dividend of $ 0.32 per share of class A common stock (determined in the case of class B and C common stock and series A, UK&I and Europe preferred stock on an as-converted basis), which will be paid on June 1, 2021, to all holders of record as of May 14, 2021.

The Company declared and paid dividends of $ 701 million and $ 668 million during the three months ended March 31, 2021 and 2020, respectively, and $ 1.4 billion and $ 1.3 billion during the six months ended March 31, 2021 and 2020, respectively.

Note 10—Earnings Per Share

7 unchanged sentences

(1) shares of class A common stock issuable upon the conversion of series A, UK&I and Europe preferred stock and class B and C common stock based on the conversion rates in effect through the period, and (2) incremental shares of class A common stock calculated by applying the treasury stock method to the assumed exercise of employee stock options, the assumed purchase of stock under the Company’s Employee Stock Purchase Plan and the assumed vesting of unearned performance shares.

The following table presents earnings per share for the three months ended December 31, 2020:

The following table presents earnings per share for the three months ended March 31, 2021:

Basic Earnings Per Share Diluted Earnings Per Share

8 unchanged sentences

Net income $ 3,026

The following table presents earnings per share for the three months ended December 31, 2019:

The following table presents earnings per share for the six months ended March 31, 2021:

Basic Earnings Per Share Diluted Earnings Per Share

8 unchanged sentences

Net income $ 6,152

The following table presents earnings per share for the three months ended March 31, 2020:

Basic Earnings Per Share Diluted Earnings Per Share

Outstanding (B) Earnings per

(in millions, except per share data)

Class A common stock $ 2,360 1,703 $ 1.39 $ 3,084 2,228 (3)

Class B common stock 552 245 $ 2.25 $ 551 245 $ 2.25

Class C common stock 61 11 $ 5.54 $ 60 11 $ 5.54

Participating securities (4)

111 Not presented Not presented $ 111 Not presented Not presented

Net income $ 3,084

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The following table presents earnings per share for the six months ended March 31, 2020:

Basic Earnings Per Share Diluted Earnings Per Share

Outstanding (B) Earnings per

(in millions, except per share data)

Class A common stock $ 4,866 1,708 $ 2.85 $ 6,356 2,234 (3)

Class B common stock 1,135 245 $ 4.62 $ 1,134 245 $ 4.62

Class C common stock 126 11 $ 11.40 $ 125 11 $ 11.38

Participating securities (4)

229 Not presented Not presented $ 229 Not presented Not presented

Net income $ 6,356

(1) Net income is allocated based on proportional ownership on an as-converted basis.

The weighted-average number of shares of as-converted class B common stock used in the income allocation was 398 million for the three months ended December 31, 2020 and 2019.

The weighted-average number of shares of as-converted class C common stock used in the income allocation was 43 million and 44 million for the three months ended December 31, 2020 and 2019, respectively.

The weighted-average number of shares of preferred stock included within participating securities was 21 million of as-converted series A preferred stock for the three months ended December 31, 2020, 16 million and 32 million of as-converted UK&I preferred stock for the three months ended December 31, 2020 and 2019, respectively, and 22 million and 44 million of as-converted Europe preferred stock for the three months ended December 31, 2020 and 2019, respectively.

The weighted-average number of shares of as-converted class B common stock used in the income allocation was 398 million for the three and six months ended March 31, 2021 and 2020.

The weighted-average number of shares of as-converted class C common stock used in the income allocation was 43 million for the three and six months ended March 31, 2021 and 44 million for the three and six months ended March 31, 2020.

The weighted-average number of shares of preferred stock included within participating securities was 12 million and 17 million of as-converted series A preferred stock for the three and six months ended March 31, 2021, respectively, 16 million and 32 million of as-converted UK&I preferred stock for the three and six months ended March 31, 2021 and 2020, respectively, and 22 million and 44 million of as-converted Europe preferred stock for the three and six months ended March 31, 2021 and 2020, respectively.

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

1 unchanged sentence

(3) Weighted-average diluted shares outstanding are calculated on an as-converted basis and include incremental common stock equivalents, as calculated under the treasury stock method.

The computation includes common stock equivalents of 3 million for the three months ended December 31, 2020 and 2019, because their effect would have been dilutive.

The computation excludes common stock equivalents of 1 million for the three months ended December 31, 2020 and 2019, because their effect would have been anti-dilutive.

The computation includes common stock equivalents of 2 million and 3 million for the three and six months ended March 31, 2021, respectively, and 3 million for the three and six months ended March 31, 2020, because their effect would have been dilutive.

The computation excludes common stock equivalents of 1 million for the three and six months ended March 31, 2021 and 1 million and 2 million for the three and six months ended March 31, 2020, respectively, because their effect would have been anti-dilutive.

(4) Participating securities include preferred stock outstanding and unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, such as the Company’s series A preferred stock, UK&I and Europe preferred stock and restricted stock units.

Participating securities’ income is allocated based on the weighted-average number of shares of as-converted stock.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

Note 11—Share-based Compensation

The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan, or the EIP, during the three months ended December 31, 2020:

The Company granted the following equity awards to employees and non-employee directors under the 2007 Equity Incentive Compensation Plan, or the EIP, during the six months ended March 31, 2021:

Granted Weighted-Average

7 unchanged sentences

(1) Represents the maximum number of performance-based shares which could be earned.

For the three months ended December 31, 2020 and 2019, the Company recorded share-based compensation cost related to the EIP of $ 116 million and $ 111 million, respectively, net of estimated forfeitures.

Related to the EIP, the Company recorded share-based compensation cost, net of estimated forfeitures, of $ 148 million and $ 93 million for the three months ended March 31, 2021 and 2020, respectively, and $ 264 million and $ 204 million for the six months ended March 31, 2021 and 2020, respectively.

On January 26, 2021, the EIP was amended to extend the termination date from January 31, 2022 to January 26, 2031 and reduce the number of shares authorized for grant from 236 million to 198 million.

Additionally, shares available for grant may be either unissued or previously issued shares subsequently acquired by the Company, except that shares withheld for taxes, or shares used to pay the exercise or purchase price of an award, shall not again be available for future grant.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

Note 12—Income Taxes

For the three months ended December 31, 2020 and 2019, the effective income tax rates were 17 % and 18 %, respectively.

The difference in the effective tax rates between the three-month periods was primarily due to an $ 81 million tax benefit recognized during the three months ended December 31, 2020 as a result of the conclusion of audits by taxing authorities.

During the three months ended December 31, 2020, the Company’s gross and net unrecognized tax benefits decreased by $ 6 million and $ 49 million, respectively.

The effective income tax rates were 17 % for the three and six months ended March 31, 2021, and 19 % for the three and six months ended March 31, 2020.

The decrease in the effective tax rate was primarily due to $ 66 million and $ 147 million of tax benefits recognized during the three and six months ended March 31, 2021, respectively, as a result of the conclusion of audits by taxing authorities.

During the three and six months ended March 31, 2021, the Company’s gross unrecognized tax benefits decreased by $ 111 million and $ 117 million, respectively, and the Company’s net unrecognized tax benefits decreased by $ 127 million and $ 176 million, respectively.

The decrease in unrecognized tax benefits is primarily due to the recognition of previously unrecognized tax benefits as a result of the conclusion of audits by taxing authorities, partially offset by increases in gross timing differences as well as various tax positions across several jurisdictions.

During the three months ended December 31, 2020 and 2019, there were no significant changes in accrued interest and penalties related to uncertain tax positions.

During the three and six months ended March 31, 2021 and 2020, there were no significant changes in accrued interest and penalties related to uncertain tax positions.

The Company’s tax filings are subject to examination by U.S.

4 unchanged sentences

On January 21, 2021, the Tax Court of Canada approved the settlement agreement related to the examination.

The Company’s income tax provision was already adjusted to reflect the estimated impact of the settlement in fiscal 2020.

The Company’s income tax provision was adjusted to reflect the estimated impact of the settlement in fiscal 2020.

The American Rescue Plan Act of 2021 (the “ARP Act”) was enacted in the U.S.

on March 11, 2021.

The ARP Act is not expected to have a material impact on the Company’s financial results.

Note 13—Legal Matters

4 unchanged sentences

From time to time, the Company may engage in settlement discussions or mediations with respect to one or more of its outstanding litigation matters, either on its own behalf or collectively with other parties.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The litigation accrual is an estimate and is based on management’s understanding of the Company’s litigation profile, the specifics of each case, advice of counsel to the extent appropriate and management’s best estimate of incurred loss as of the balance sheet date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The following table summarizes the activity related to accrued litigation:

Three Months Ended

Six Months Ended

(in millions)

21 unchanged sentences

covered litigation:

Three Months Ended

Six Months Ended

(in millions)

14 unchanged sentences

The following table summarizes the accrual activity related to VE territory covered litigation:

Three Months Ended

Six Months Ended

(in millions)

6 unchanged sentences

On December 18, 2020, the plaintiffs purporting to act on behalf of the putative Injunctive Relief Class moved for class certification.

On April 28, 2021, a complaint was filed by Hayley Lanning, SBG Designs, LLC and others against Visa and Mastercard on behalf of a purported class of merchants located in 25 states and the District of Columbia who have taken payment using the Square card acceptance service.

The complaint alleges violations of the antitrust laws of those jurisdictions and seeks recovery for plaintiffs as indirect purchasers.

To the extent that Plaintiffs’ claims are not released by the Amended Settlement Agreement, Visa believes they are covered by the U.S.

Retrospective Responsibility Plan.

Interchange Multidistrict Litigation (MDL) - Individual Merchant Actions

3 unchanged sentences

Since July 2013, in excess of 650 Merchants (the capitalized term “Merchant,” when used in this section, means a merchant together with subsidiary/affiliate companies that are party to the same claim) have commenced proceedings against Visa Europe, Visa Inc.

and other Visa subsidiaries in the UK, Germany, Belgium and Poland primarily relating to interchange rates in Europe and in some cases relating to fees charged by Visa and certain Visa rules.

and other Visa subsidiaries in the UK, Belgium and Poland primarily relating to interchange rates in Europe and in some cases relating to fees charged by Visa and certain Visa rules.

As of the filing date, Visa Europe, Visa Inc.

5 unchanged sentences

Other Litigation

Canadian Merchant Litigation

All defendants have settled with the plaintiffs.

The appeals by Wal-Mart Canada and/or Home Depot of Canada Inc.

of the decisions approving the Visa and Mastercard settlements have been rejected in all five provinces.

Wal-Mart Canada and Home Depot of Canada Inc.

sought leave to appeal the British Columbia, Quebec, Ontario and Saskatchewan Courts of Appeal decisions to the Supreme Court of Canada, and those applications were denied.

Wal-Mart Canada and Home Depot of Canada Inc.

chose not to appeal the Alberta Court of Appeal decision to the Supreme Court of Canada, and the Visa and Mastercard settlements are now final.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

EMV Chip Liability Shift

1 unchanged sentence

Court of Appeals for the Second Circuit denied defendants’ request to appeal the district court’s decision granting plaintiffs’ motion for class certification.

Australian Competition and Consumer Commission

On March 9, 2021, the Australian Competition and Consumer Commission accepted an undertaking by Visa to resolve the investigation.

The investigation is now closed.

Euronet Litigation

4 unchanged sentences

Department of Justice against Visa and Plaid was dismissed.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

German ATM Litigation

In December 2020 and January 2021, six savings banks and cooperative banks filed claims in Germany against Visa Europe Ltd.

challenging Visa’s ATM rules prohibiting the charging of access fees on domestic cash withdrawals with a credit card as anti-competitive.

In December 2020 and January 2021, six savings banks and cooperative banks filed claims in Germany against Visa Europe challenging Visa’s ATM rules prohibiting the charging of access fees on domestic cash withdrawals with a credit card as anti-competitive.

No damages are currently sought.

On December 24, 2020, 275 German savings banks initiated conciliation proceedings against Visa Europe Ltd., Visa Europe Services, LLC., and Visa Europe Services, Inc.

On December 24, 2020, 275 German savings banks initiated conciliation proceedings against Visa Europe, Visa Europe Services, LLC., and Visa Europe Services, Inc.

asserting claims related to the same rules.

Visa declined participation in these proceedings on March 22, 2021.

Department of Justice Civil Investigative Demand (2021)

On March 26, 2021, the Antitrust Division of the U.S.

Department of Justice (the “Division”) issued a Civil Investigative Demand (“CID”) to Visa seeking documents and information regarding a potential violation of Section 1 or 2 of the Sherman Act, 15 U.S.C.

The CID focuses on U.S.

debit and competition with other payment methods and networks.

Visa is cooperating with the Division in connection with the CID.

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 1. Financial Statements