Visa reports Second Quarter 2014 net income of $1.6 Billion

Visa Inc. last week announced the financial results for the Company’s fiscal second quarter 2014. Net income for the quarter was $1.6 billion, an increase of 26% over the prior year, or $2.52 per share, an increase of 31% over the prior year.

These results include a tax benefit of $218 million of which $201 million relates to prior periods. Excluding the prior periods’ impact, earnings per share was $2.20, an increase of 15% over the prior year.

Net operating revenue in the fiscal second quarter of 2014 was $3.2 billion, an increase of 7% nominally or 9% on a constant dollar basis over the prior year, driven by solid growth in service revenues, data processing revenues and international transaction revenues. The strengthening of the U.S. dollar impacted net operating revenues by 2 percentage points of negative growth during the quarter.

“Our underlying business drivers remained strong during the fiscal second quarter with payments volume continuing to grow at solid levels,” said Charlie Scharf, Chief Executive Officer of Visa Inc. “As expected, softer net revenue growth was impacted by a strengthening U.S. dollar and difficult year-over-year comparisons due to non-recurring items. We expect this impact to be slightly more pronounced next quarter before rebounding in our fiscal fourth quarter, which will be more reflective of the fundamental strength of the business model. We continue to make substantial investments in products and services that will drive our future growth, while enhancing our financial institution and merchant client relationships.”

Second Quarter 2014 Financial Highlights:
Payments volume growth, on a constant dollar basis, for the three months ended December 31, 2013, on which fiscal second quarter service revenue is recognized, was 12% over the prior year at $1.2 trillion. Payments volume growth, on a constant dollar basis, for the three months ended March 31, 2014, was 12% over the prior year at $1.1 trillion.

Cross-border volume growth, on a constant dollar basis, was 8% for the three months ended March 31, 2014.

Total processed transactions, the three months ended March 31, 2014, were 15.4 billion, an 11% increase over the prior year.

Fiscal second quarter 2014 service revenues were $1.5 billion, an increase of 7% over the prior year, and are recognized based on payments volume in the prior quarter. All other revenue categories are recognized based on current quarter activity. Data processing revenues rose 7% over the prior year to $1.2 billion. International transaction revenues, which are driven by cross-border volume, grew 5% over the prior year to $871 million. Other revenues, which include the Visa Europe licensing fee, were $183 million, an increase of 5% over the prior year. Client incentives, which are a contra revenue item, were $587 million and represent 15.6% of gross revenues.

Total operating expenses were $1.1 billion for the quarter, a 2% increase over the prior year, primarily due to an increase in marketing spending to support the 2014 Sochi Winter Olympics and 2014 World Cup campaigns, however there was an offset by a reduction in personnel and professional fees.

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