For Visa, Electronic Payments Produce a River of Cash

Visa Inc. may be in the business of credit and debit cards, mobile wallets, tokenization, EMV chips and virtually anything involving electronic payments, but its latest financials tell the real story—it’s all about cash.

On a day dominated by news of its pending $23 billion takeover of Visa Europe, Visa Inc. on Monday reported net income of $1.51 billion for its fourth quarter of fiscal 2015 ended Sept. 30, up 40.9% from $1.07 billion a year earlier. Operating revenues, which are gross transaction fees, service charges and other revenues minus the incentives the company pays out to issuers and merchants to promote Visa payments, grew 10.6% to $3.57 billion from $3.23 billion a year earlier.

For all of fiscal 2015, Visa reported net income of $6.33 billion, up 16.4% from $5.44 billion in 2014, on operating revenues of $13.9 billion, an increase of 9.3% from $12.7 billion. The company has $9.3 billion in cash and cash equivalents on its balance sheet and is projecting free cash flow in the neighborhood of $7 billion for fiscal 2016, according to a presentation for analysts at a Monday morning conference call.

Nearly all of Visa’s key operating metrics showed strong growth in the fourth quarter. U.S. credit and debit card payments volume grew 9.7% to $693 billion from $632 billion in fiscal 2014’s fourth quarter. U.S. credit card payments increased 10.2% to $345 billion while debit payments grew 9.3% to $349 billion. Visa’s worldwide payments volume hit $1.27 trillion, up not quite 4% as reported but 12% on a constant-currency basis.

Visa’s total worldwide payment transaction count hit 23.6 billion, up 12.9% from a year earlier, and transactions processed on the VisaNet network grew 8.1% to 18.4 billion.

“Visa’s fiscal fourth quarter was a strong finish to an equally strong fiscal full-year 2015 in terms of revenue and earnings per share growth in the face of a continued challenging global economic environment,” Visa chief executive Charles Scharf said in a statement.

Despite the seemingly glowing numbers, Visa’s fourth-quarter earnings of 62 cents per share missed analysts’ consensus estimate of 63 cents. With that miss, Visa’s stock closed Monday at $75.22, down 3% from Friday’s close.

Visa paid $802 million in client incentives in the fourth quarter, representing 18% of gross revenues and up 5% from a year earlier.