What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-04-24 compared with 2024-01-26 · 156 added, 71 removed, 219 unchanged (51% of the section changed)

6 unchanged sentences

Private Securities Litigation Reform Act of 1995 that relate to, among other things, the impact on our future financial position, results of operations and cash flows;

the implementation of the exchange offer program;

the completion of the class B-1 exchange offer;

prospects, developments, strategies and growth of our business;

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Three Months Ended

March 31, Six Months Ended

(in millions, except percentages and per share data)

Net revenues $ 8,634 $ 7,936 9 %

$ 8,775 $ 7,985 10 % $ 17,409 $ 15,921 9 %

Operating expenses $ 3,421 $ 2,649 29 % $ 6,101 $ 5,495 11 %

10 unchanged sentences

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

Highlights for the first quarter of fiscal 2024.

For the three months ended December 31, 2023, net revenues increased 9% over the prior-year comparable period, primarily due to the growth in nominal cross-border volume, processed transactions and nominal payments volume, partially offset by higher client incentives.

During the three months ended December 31, 2023, exchange rate movements did not have a material impact on net revenues growth.

See Results of Operations—Net Revenues below for further discussion.

For the three months ended December 31, 2023, GAAP operating expenses decreased 6% over the prior-year comparable period, primarily driven by lower litigation provision, partially offset by higher personnel expenses.

Highlights for the first half of fiscal 2024.

For the three and six months ended March 31, 2024, net revenue increased 10% and 9% over the prior-year comparable periods, respectively, primarily due to the growth in nominal cross-border volume, processed transactions and nominal payments volume, partially offset by higher client incentives.

During the three and six months ended March 31, 2024, exchange rate movements did not have a material impact on net revenue growth.

See Results of Operations—Net Revenue below for further discussion.

For the three months ended March 31, 2024, GAAP operating expenses increased 29% over the prior-year comparable period, primarily driven by higher litigation provision and general and administrative expenses.

For the six months ended March 31, 2024, GAAP operating expenses increased 11% over the prior-year comparable period, primarily driven by higher personnel and general and administrative expenses.

See Results of Operations—Operating Expenses below for further discussion.

During the three months ended December 31, 2023, exchange rate movements positively impacted our operating expenses by approximately one percentage point.

For the three months ended December 31, 2023, non-GAAP operating expenses increased 7% over the prior-year comparable period, primarily driven by higher personnel expenses.

On January 16, 2024, we acquired Pismo Holdings (Pismo), a global cloud-native issuer processing and core banking platform, for $1.0 billion in cash.

During the three and six months ended March 31, 2024, exchange rate movements did not have a material impact on our operating expenses growth.

For the three and six months ended March 31, 2024, non-GAAP operating expenses increased 11% and 9% over the prior-year comparable periods, respectively, primarily driven by higher general and administrative and personnel expenses.

On January 16, 2024, we acquired Pismo Holdings (Pismo), a global cloud-native issuer processing and core banking platform, for a purchase consideration of $929 million.

See Note 2—Acquisitions to our unaudited consolidated financial statements.

Interchange multidistrict litigation.

During the six months ended March 31, 2024, we recorded an additional accrual pursuant to the agreement to resolve the Injunctive Relief Class claims in the interchange multidistrict litigation.

See Note 13—Legal Matters to our unaudited consolidated financial statements.

Common stock repurchases.

During the three months ended December 31, 2023, we repurchased 15 million shares of our class A common stock in the open market for $3.6 billion.

As of December 31, 2023, our share repurchase programs had remaining authorized funds of $26.4 billion.

During the six months ended March 31, 2024, we repurchased 25 million shares of our class A common stock in the open market for $6.4 billion.

As of March 31, 2024, our share repurchase program had remaining authorized funds of $23.6 billion.

See Note 9—Stockholders’ Equity to our unaudited consolidated financial statements.

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These long-term investments are strategic in nature and are primarily private company investments.

Gains and losses 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.

Gains and losses 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.

• 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 of acquired intangible assets consists of amortization of intangible assets such as technology, customer relationships and trade names 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.

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These costs include professional fees, technology integration fees, restructuring activities and other direct costs related to the purchase and integration of acquired entities.

These costs also include 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.

These costs also include retention equity and deferred 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 as the expenses are recognized for a limited duration and do not reflect the underlying performance of our business.

• Litigation provision.

During the three months ended December 31, 2022, we recorded additional accruals to address claims associated with the interchange multidistrict litigation.

Litigation provision includes significant accruals related to certain legal matters that are not covered by the U.S.

retrospective responsibility plan or the Europe retrospective responsibility plan (uncovered legal matters) and additional accruals associated with the interchange multidistrict litigation which are covered by the U.S.

retrospective responsibility plan (U.S.

covered litigation).

Litigation provision associated with these matters can vary significantly based on the facts and circumstances related to each matter and do not correlate to the underlying performance of our business.

During the three and six months ended March 31, 2024, and six months ended March 31, 2023, we have excluded these amounts to facilitate a comparison to our past operating performance.

Under the U.S.

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covered litigation through a downward adjustment to the rate at which shares of our class B-1 common stock ultimately convert into shares of class A common stock.

During the three months ended December 31, 2022, basic and diluted earnings per class A common stock were unchanged, as a result of the downward adjustments of the class B common stock conversion rate during the period.

During the three and six months ended March 31, 2024, there was no conversion rate adjustment.

During the six months ended March 31, 2023, basic and diluted earnings per class A common stock increased $0.01 and was unchanged, respectively, as a result of the downward adjustments of the class B-1 common stock conversion rate during the period.

See Note 5—U.S.

and Europe Retrospective Responsibility Plans and Note 13—Legal Matters to our unaudited consolidated financial statements.

• Lease consolidation costs.

During the three and six months ended March 31, 2024, we recorded a charge within general and administrative expense associated with the consolidation of certain leased office spaces.

We have excluded these amounts as they do not reflect the underlying performance of our business.

Non-GAAP operating expenses, 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.

2 unchanged sentences

Three Months Ended

December 31, 2023

March 31, 2024

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

6 unchanged sentences

Acquisition-related costs (26) — 1 25 0.01

Litigation provision (424) — 95 329 0.16

Lease consolidation costs

(57) — 13 44 0.02

Non-GAAP $ 2,871 $ 189 $ 976 16.0 % $ 5,117 $ 2.51

Six Months Ended

March 31, 2024

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

Effective Income Tax Rate (2)

Income Diluted Earnings Per Share (2)

(in millions, except percentages and per share data)

As reported $ 6,101 $ 247 $ 2,002 17.3 % $ 9,553 $ 4.68

(Gains) losses on equity investments, net — 26 6 20 0.01

Amortization of acquired intangible assets (83) — 19 64 0.03

Acquisition-related costs (47) — 2 45 0.02

Litigation provision (424) — 95 329 0.16

Lease consolidation costs

(57) — 13 44 0.02

Non-GAAP $ 5,490 $ 273 $ 2,137 17.5 % $ 10,055 $ 4.92

Three Months Ended

December 31, 2022

March 31, 2023

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

6 unchanged sentences

Acquisition-related costs (22) — 2 20 0.01

Non-GAAP $ 2,581 $ 32 $ 1,052 19.4 % $ 4,384 $ 2.09

Six Months Ended

March 31, 2023

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

Effective Income Tax Rate (2)

Income Diluted Earnings Per Share (2)

(in millions, except percentages and per share data)

As reported $ 5,495 $ (171) $ 1,819 17.7 % $ 8,436 $ 4.02

(Gains) losses on equity investments, net — 196 43 153 0.07

Amortization of acquired intangible assets (89) — 19 70 0.03

Acquisition-related costs (45) — 4 41 0.02

Litigation provision (341) — 76 265 0.13

4 unchanged sentences

Payments volume and processed transactions.

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.

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

Payments volume represents the aggregate dollar amount of purchases made with cards and other form factors carrying the Visa, Visa Electron, V PAY and Interlink brands and excludes Europe co-badged volume.

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dollar/foreign currency exchange rate for each local currency in which our volumes are reported.

Processed transactions represent transactions using cards and other form factors carrying the Visa, Visa Electron, V PAY, Interlink and PLUS brands processed on Visa’s networks.

Processed transactions include payments and cash transactions, and represent transactions using cards and other form factors carrying the Visa, Visa Electron, V PAY, Interlink and PLUS brands processed on Visa’s networks.

The following table presents nominal payments and cash volume:

International Visa Inc.

Three Months Ended September 30, (1)

International Visa

Three Months Ended December 31, (1)

(in billions, except percentages)

Nominal payments volume

Consumer credit

$ 601 $ 569 6 % $ 755 $ 697 8 % $ 1,356 $ 1,265 7 %

Consumer debit (3)

743 707 5 % 764 664 15 % 1,507 1,372 10 %

Commercial (4)

259 246 5 % 157 137 15 % 416 384 8 %

Total nominal payments volume (2)

$ 1,603 $ 1,522 5 % $ 1,677 $ 1,498 12 % $ 3,280 $ 3,020 9 %

Cash volume (5)

150 151 (1 %) 484 466 4 % 634 617 3 %

Total nominal volume (2),(6)

$ 1,752 $ 1,673 5 % $ 2,161 $ 1,965 10 % $ 3,914 $ 3,637 8 %

International Visa

Six Months Ended December 31, (1)

2023 2022 % Change (2)

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Consumer credit $ 1,181 $ 1,120 5 % $ 1,491 $ 1,381 8 % $ 2,672 $ 2,501 7 %

$ 580 $ 551 5 % $ 735 $ 684 7 % $ 1,315 $ 1,236 6 %

Consumer debit (3)

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The following table presents the change in nominal and constant payments and cash volume:

International Visa Inc.

Ended September 30,

International Visa

Ended December 31,

Nominal Constant (7)

Payments volume growth

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Total volume growth 10 % 10 % 8 % 7 % 10 % 10 % 8 % 8 %

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

Therefore, service revenues reported for the three months ended December 31, 2023 and 2022, respectively, were based on nominal payments volume reported by our financial institution clients for the three months ended September 30, 2023 and 2022, respectively.

(1) Service revenue in a given quarter is primarily assessed based on nominal payments volume in the prior quarter.

Therefore, service revenue reported for the three and six months ended March 31, 2024 and 2023, respectively, was based on nominal payments volume reported by our financial institution clients for the three and six months ended December 31, 2023 and 2022, respectively.

On occasion, previously presented volume information may be updated.

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Three Months Ended

March 31, Six Months Ended

(in millions, except percentages)

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Results of Operations

The following table presents our net revenues earned in the U.S.

The following table presents our net revenue earned in the U.S.

and internationally:

Three Months Ended

March 31, Six Months Ended

(in millions, except percentages)

1 unchanged sentence

International 5,132 4,445 15 % 10,121 8,814 15 %

Net revenues $ 8,634 $ 7,936 9 %

$ 8,775 $ 7,985 10 % $ 17,409 $ 15,921 9 %

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

Percentage changes are calculated based on unrounded numbers.

Net revenues increased over the three-month prior-year comparable period primarily due to the growth in nominal cross-border volume, processed transactions and nominal payments volume, partially offset by higher client incentives.

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.

During the three months ended December 31, 2023, exchange rate movements did not have a material impact on net revenues growth.

The following table presents the components of our net revenues:

Net revenue increased over the three and six-month prior-year comparable periods primarily due to the growth in nominal cross-border volume, processed transactions and nominal payments volume, partially offset by higher client incentives.

Our net revenue is impacted by the overall strengthening or weakening of the U.S.

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

During the three and six months ended March 31, 2024, exchange rate movements did not have a material impact on net revenue growth.

The following table presents the components of our net revenue:

Three Months Ended

March 31, Six Months Ended

(in millions, except percentages)

Service revenues $ 3,915 $ 3,511 11 %

Data processing revenues 4,356 3,827 14 %

International transaction revenues

Service revenue

$ 4,033 $ 3,771 7 % $ 7,948 $ 7,282 9 %

Other revenues 692 587 18 %

Data processing revenue

4,259 3,819 12 % 8,615 7,646 13 %

International transaction revenue

2,984 2,749 9 % 6,003 5,546 8 %

Other revenue

756 551 37 % 1,448 1,138 27 %

Client incentives (3,257) (2,905) 12 % (6,605) (5,691) 16 %

Net revenues $ 8,634 $ 7,936 9 %

$ 8,775 $ 7,985 10 % $ 17,409 $ 15,921 9 %

(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 9% growth in nominal payments volume and select pricing modifications.

• Data processing revenues increased primarily due to 9% growth in processed transactions, select pricing modifications and business mix.

• International transaction revenues increased primarily due to growth in nominal cross-border volumes of 18%, excluding transactions within Europe, partially offset by lower volatility of a broad range of currencies.

• Other revenues increased primarily due to select pricing modifications and growth in consulting services.

• Client incentives increased primarily due to growth in payments volume.

• Service revenue increased primarily due to 9% growth in nominal payments volume over the three and six-month prior-year comparable periods.

• Data processing revenue increased primarily due to 11% and 10% growth in processed transactions over the three and six-month prior-year comparable periods, respectively, and select pricing modifications.

• International transaction revenue increased primarily due to growth in nominal cross-border volumes of 16% and 17% over the three and six-month prior-year comparable periods, respectively, excluding transactions within Europe, partially offset by lower volatility of a broad range of currencies.

• Other revenue increased primarily due to growth in consulting and marketing services and select pricing modifications over the three and six-month prior-year comparable periods.

• Client incentives increased primarily due to growth in payments volume over the three and six-month prior-year comparable periods.

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 the execution of new contracts.

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Three Months Ended

March 31, Six Months Ended

(in millions, except percentages)

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Depreciation and amortization

249 234 7 % 496 461 8 %

General and administrative

Litigation provision 9 341 (97 %)

452 282 61 % 792 604 31 %

Litigation provision 430 — NM 439 341 29 %

Total operating expenses $ 3,421 $ 2,649 29 % $ 6,101 $ 5,495 11 %

NM - Not meaningful

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

Percentage changes are calculated based on unrounded numbers.

• Personnel expenses increased during the three months ended December 31, 2023 primarily due to a higher number of employees and compensation, reflecting our strategy to invest in future growth.

• Marketing expenses decreased during the three months ended December 31, 2023 primarily due to spend related to the FIFA World Cup 2022 TM in the prior year and absent in the current year.

• Professional fees increased during the three months ended December 31, 2023 primarily due to higher legal and consulting fees.

• General and administrative expenses increased during the three months ended December 31, 2023 primarily due to higher usage of travel related card benefits and indirect taxes, partially offset by favorable foreign currency fluctuations.

• Litigation provision decreased during the three months ended December 31, 2023 primarily due to the accrual related to the U.S.

covered litigation in the prior year and absent in the current year.

• Personnel expenses increased during the three and six months ended March 31, 2024 primarily due to a higher number of employees and compensation, reflecting our strategy to invest in future growth.

• Marketing expenses increased during the three months ended March 31, 2024 primarily due to higher spending in various campaigns.

Marketing expenses decreased during the six months ended March 31, 2024 primarily due to spend related to the FIFA World Cup TM in the prior year and absent in the current year, partially offset by higher spending in various campaigns.

• Professional fees increased during the three and six months ended March 31, 2024 primarily due to higher advisory and consulting fees.

The increase during the six months ended March 31, 2024 also included higher legal fees.

• General and administrative expenses increased during the three and six months ended March 31, 2024 primarily due to lease consolidation costs, higher indirect taxes and higher usage of travel related card benefits.

The increase during the three months ended March 31, 2024 also included unfavorable foreign currency fluctuations.

• Litigation provision increased during the three months ended March 31, 2024 due to the accruals related to the uncovered litigation and U.S.

covered litigation.

Litigation provision increased during the six months ended March 31, 2024 due to the accruals related to the uncovered litigation, partially offset by lower accruals related to the U.S.

covered litigation.

See Note 13—Legal Matters to our unaudited consolidated financial statements.

2 unchanged sentences

Three Months Ended

March 31, Six Months Ended

(in millions, except percentages)

Interest expense $ (82) $ (142) (43 %) $ (269) $ (279) (4 %)

Investment income (expense) and other 275 24 NM

Investment income (expense) and other 241 84 185 % 516 108 376 %

Total non-operating income (expense) $ 159 $ (58) (375 %) $ 247 $ (171) (245 %)

NM - Not meaningful

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

Percentage changes are calculated based on unrounded numbers.

• Interest expense increased during the three months ended December 31, 2023 primarily due to losses from derivative instruments and the discrete tax benefit recognized during the prior year, partially offset by lower interest expense related to lower outstanding debt.

• Investment income (expense) and other increased during the three months ended December 31, 2023, primarily due to higher interest income on our cash and investments and gains on our investments.

• Interest expense decreased during the three months ended March 31, 2024 primarily due to higher interest benefit related to taxes, partially offset by higher losses from derivative instruments.

Interest expense decreased during the six months ended March 31, 2024 primarily due to higher interest benefit related to taxes and lower interest expense related to lower outstanding debt, partially offset by losses from derivative instruments.

• Investment income (expense) and other increased during the three months ended March 31, 2024, primarily due to higher interest income on our cash and investments and lower losses on our investments.

Investment income (expense) and other increased during the six months ended March 31, 2024, primarily due to higher interest income on our cash and investments and gains on our investments.

Effective Income Tax Rate

1 unchanged sentence

Three Months Ended

March 31, Six Months Ended

2024 2023 2024 2023

Effective income tax rate 15 % 19 % 17 % 18 %

The difference in the effective tax rates is primarily due to a $142 million tax benefit recognized during the three months ended December 31, 2022 due to the reassessment of an uncertain tax position as a result of new information obtained during an ongoing tax examination.

The difference in the effective tax rates is primarily due to the following:

• During the three and six months ended March 31, 2024, a $184 million tax benefit as a result of the conclusion of an audit;

• During the six months ended March 31, 2023, a $142 million tax benefit due to the reassessment of an uncertain tax position as a result of new information obtained during an ongoing tax examination.

Liquidity and Capital Resources

1 unchanged sentence

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

Three Months Ended

Six Months Ended

(in millions)

4 unchanged sentences

Operating activities.

Cash provided by operating activities for the three months ended December 31, 2023 was lower than the prior-year comparable period primarily due to higher incentive payments and higher litigation payments, partially offset by continued growth in our underlying business.

Cash provided by operating activities for the six months ended March 31, 2024 was higher than the prior-year comparable period primarily due to growth in our underlying business, partially offset by higher incentive payments.

Investing activities.

Cash used in investing activities for the three months ended December 31, 2023 was higher than the prior-year comparable period primarily due to higher purchases of investment securities and cash received from the settlement of net investment hedge derivative instruments in the prior year.

Cash used in investing activities for the six months ended March 31, 2024 was higher than the prior-year comparable period primarily due to cash paid for acquisitions, net of cash acquired, higher purchases, net of maturities and sales, of investment securities and cash received from the settlement of net investment hedge derivative instruments in the prior year.

See Note 2—Acquisitions to our unaudited consolidated financial statements .

Financing activities.

Cash used in financing activities for the three months ended December 31, 2023 was lower than the prior-year comparable period primarily due to the principal debt payment upon maturity of our December 2022 senior notes in the prior year, partially offset by higher share repurchases and higher dividends paid.

Cash used in financing activities for the six months ended March 31, 2024 was lower than the prior-year comparable period primarily due to the principal debt payment upon maturity of our December 2022 senior notes in the prior year, partially offset by higher share repurchases and higher dividends paid.

See Note 7—Debt and Note 9—Stockholders’ Equity to our unaudited consolidated financial statements .

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Common stock repurchases.

During the three months ended December 31, 2023, we repurchased shares of our class A common stock in the open market for $3.6 billion.

As of December 31, 2023, our share repurchase programs had remaining authorized funds of $26.4 billion.

During the six months ended March 31, 2024, we repurchased shares of our class A common stock in the open market for $6.4 billion.

As of March 31, 2024, our share repurchase program had remaining authorized funds of $23.6 billion.

See Note 9—Stockholders’ Equity to our unaudited consolidated financial statements.

During the three months ended December 31, 2023, we declared and paid $1.1 billion in dividends to holders of our common and preferred stock.

On January 23, 2024, our board declared a quarterly cash dividend of $0.52 per share of class A common stock (determined in the case of class B-1 and C common stock and series A, B and C convertible participating preferred stock on an as-converted basis).

During the six months ended March 31, 2024, we declared and paid $2.1 billion in dividends to holders of our common and preferred stock.

On April 23, 2024, our board declared a quarterly cash dividend of $0.52 per share of class A common stock (determined in the case of all other outstanding common and preferred stock on an as-converted basis).

See Note 9—Stockholders’ Equity to our unaudited consolidated financial statements.

We expect to continue paying quarterly dividends in cash, subject to approval by the board.

All preferred and class B-1 and C common stock will share ratably on an as-converted basis in such future dividends.

Acquisition .

On January 16 2024, we acquired Pismo for $1.0 billion in cash.

On January 16 2024, we acquired Pismo for a purchase consideration of $929 million.

See Note 2—Acquisitions to our unaudited consolidated financial statements.

11 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