Visa Inc. Weathers the FX Storm

Image source: Visa.

Visa (V -0.15%) reported fiscal first-quarter results on Jan. 28, 2015. While foreign currency headwinds are taking a toll on its results, the payments technology company continues to benefit from the global trend toward electronic payments.

Visa results: The raw numbers

Data source: Visa Q1 2016 earnings press release.

What happened with Visa this quarter?
Revenue rose 5% (and 8% excluding the effects of foreign exchange rate fluctuations) year over year to $3.6 billion, driven by solid growth in service, data processing, and international transaction revenues.

Service revenues grew 7% to $1.6 billion, as payments volume increased 12% on a constant dollar basis to $1.3 billion. Data processing revenues rose 7% to $1.5 billion, with the number of transactions process on Visa's network increasing 8% to 19 billion. International transaction revenues grew 6% to $1 billion, and other revenues came in at $198 million, a decrease of 3% over the fourth quarter of 2014.

Client incentives, which are a contra revenue item, were $788 million. That represented 18.1% of gross revenues, up from 17.4% in the prior-year period

Total operating expenses increased only 2% to $1.2 billion, as Visa prioritized cost controls during the quarter due to the increasingly challenging macroeconomic environment. That helped operating margin improve to 67% from 66% in the first quarter of 2015, with operating income increasing 7% to $2.4 billion.

Adjusted net income, which excludes certain non-cash items, rose 7% to $1.7 billion. And adjusted earnings per share, boosted by share buybacks, increased 10% to $0.69.

Looking forward
Management continues to expect fiscal full-year 2016 constant dollar revenue growth in the high-single-digit to low-double-digit range with foreign currency likely to lower revenue growth by 3 percentage points.

The company also maintained its guidance for full-year constant dollar adjusted earnings-per-share growth at the low end of the mid-teens range with an expectation of about 4 percentage points of negative foreign currency impact. Annual free cash flow projections remained at about $7 billion.

"We continue to be pleased with our financial performance given the uneven global economy and the ongoing negative effects of the strong U.S. dollar," said CEO Charlie Scharf in a press release. "While these headwinds do not appear to be abating in the short-term as we had hoped, the fundamentals of our business remain strong and our long-term growth trajectory remains intact as we navigate through this uncertain environment."