Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - VISA INC. | d8k.htm |
| EX-99.1 - PRESS RELEASE OF VISA INC. - VISA INC. | dex991.htm |
 Visa
Inc. Financial Discussion
Byron Pollitt
Chief Financial Officer
October 26, 2010
Exhibit 99.2 |
 Information Classification as Needed
2
Agenda
Incorporating CyberSource
Results
Reporting of Non-Visa Transaction Pass-Through Revenue and Expense
Adjusting for Visa Extras Revenue and Expense
Revaluing the Visa Europe Put Option
2 |
 Information Classification as Needed
Revenue
–
Pre-acquisition, CyberSource
revenue included interchange passed through to issuers
–
Post-acquisition, will report net of interchange, primarily as data processing
revenue –
Will introduce “billable transactions”
as an operating metric
Intangible and Technology Assets
–
Transaction
created
$727
million
in
amortizable
assets,
of
which
$605
million
were
intangibles
–
For first 5 years, annual amortization rate is $76 million
–
Please note that $68 million of annual amortization related to the 2007
reorganization fully amortized in Q4 FY 2010
Year-Over-Year Comparables
–
FY
2010
included
2
months
of
results
representing
$41
million
in
net
revenue
–
EPS dilution in FY 2011 expected to be slightly dilutive, about 4¢,
compared to 2¢
in Q4 and 3¢
in total for FY 2010
Incorporating CyberSource
Results
3 |
 Information Classification as Needed
Historically, Visa has processed a modest number of non-Visa transactions
whereby fees, primarily interchange, pass through Visa in the settlement
process with minimal margin applied
–
Revenue booked to Data Processing
–
Expense booked to Network
Given a substantial increase in pass-through volume expected in FY 2011,
management revisited its income statement presentation of these
transactions While the “gross”
accounting treatment applied in FY 2010 is acceptable under GAAP,
management believes a “net”
presentation, which only reports Visa’s earned margin as
revenue, is more conservative and better reflects the underlying
economics
Adopting the “net”
presentation means that $140 million of pass-through revenue and
expense booked in FY 2010 will not repeat in FY 2011
The earnings impact is neutral
Beginning next quarter, we will footnote the corresponding pass-through revenue
and expense for FY 2010
Reporting of Non-Visa Transaction
Pass-Through Revenue and Expense
4 |
 Information Classification as Needed
Visa Extras is a turnkey, full feature cardholder rewards program developed to
support our issuers
When a reward is redeemed, the service provider invoices Visa for the cost, and
Visa passes through the expense to the client, no margin is applied
–
Revenue booked to Other
–
Expense booked to Marketing
Two call outs for FY 2011
–
Visa now moving to direct bill, where service provider bills issuer directly, not
through Visa –
Large issuer converted away from platform in June 2010
This means $89 million in revenue and expense booked in FY 2010 will not repeat in
FY 2011
Since this revenue has no margin, earnings impact is neutral
Beginning next quarter, we will footnote the corresponding Extras revenue and
expense for FY 2010
Adjusting for Visa Extras Revenue and Expense
5 |
 Information Classification as Needed
As part of the 2007 reorganization, Visa Europe received a Put option which gives
it the perpetual right to sell its business to Visa Inc.
Visa Inc. recorded a liability of $346 million related to the Put option to reflect
that under certain circumstances, the Put could require Visa Inc. to
purchase Visa Europe for an amount above fair value
Under GAAP, Visa is required to revalue the Put option each quarter, with changes
in value recorded as a non-operating gain or loss in the income
statement. Through Q3, no such adjustments in value have been
required In Q4, management’s evaluation indicated that the Put option
decreased in value by $79 million, primarily due to the decline in
Visa’s forward PE ratio, which, under the terms of the option, is
applied to Visa Europe’s earnings to calculate the purchase price This
change in the Put option value –
Is recorded as a non-cash income statement event
–
Is not subject to tax
–
Does not reflect any change in Visa Europe’s intent to exercise
Revaluing the Visa Europe Put Option
6 |