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BOSTON — Visa Inc.'s fiscal second-quarter profit rose nearly 71 percent, beating Wall Street expectations, as cost cuts and international gains offset U.S. consumers' growing reluctance to use credit cards during a recession.
The world's largest electronic payment network on Wednesday also said it expects a slight improvement in its full-year fiscal 2009 profit margin compared with its earlier guidance.
San Francisco-based Visa reported net income for the three months ended March 31 of $536 million, or 71 cents per share. That's up from $314 million, or 39 cents per share, in the year-earlier quarter.
Not counting one-time items including restructuring and amortization expenses, Visa's adjusted profit was $553 million, or 73 cents per share. On that basis, analysts surveyed by Thomson Reuters expected a profit of 64 cents per share, on average.
Revenue rose 13 percent to $1.64 billion, slightly ahead of analysts' forecast of $1.61 billion, and in line with the company's expectations. Visa earns revenue primarily from fees it charges to process payments made with credit and debit cards, which has enabled it to weather the recession better than banks that issue credit cards and make loans.
Despite its growing profit and revenue, Visa's payments volume dipped 1 percent to $675 billion for the period ended Dec. 31 — Visa reports some operational results on a three-month lag. The U.S. payment volume decline was slightly steeper than the overall decline, but was partly offset by growth in other regions of the world that are increasingly embracing credit and debit payments over cash and checks. Total cards carrying the Visa brands rose 8 percent over a year ago, to more than 1.7 billion.
The shift to electronic payments "continues unabated" despite the recession, Chairman and Chief Executive Joseph Saunders told analysts on a conference call.
While calling Visa "resilient" amid the sour economy, Saunders conceded his company "is not immune."
For example, Visa reported increasing consumer reliance on debit transactions rather than credit, with less spent per transaction, as consumers become more conservative. The quarter that ended Dec. 31 marked the first since Visa was founded in the 1970s that U.S. debit payment volume exceeded credit payment volume.
The mostly flat payment volume results were offset by a 10 percent increase in data processing revenues to $544 million, and 18 percent growth in international transaction revenues to $446 million.
Considering the slightly negative trends in U.S. payments volume, Visa's fiscal second-quarter results "would have been a whole lot worse had Visa not been able to lean on its international model and new business lines," said Red Gillen, an analyst with Celent, a Boston-based financial research and consulting firm.
The profit increase also was driven by a 31 percent drop in total operating expenses to $766 million — the result of an expense-cutting campaign, including reduced marketing costs.
Because of the cost cuts and strong results so far this year, Visa now expects its full-year adjusted operating profit margin to reach the low 50s on a percentage basis, up from earlier guidance of the mid- to high 40s.
"We are obviously focused on expense control and efficiency, and we will never stop focusing on that in the future," Saunders told analysts.
Visa reiterated expectations for fiscal 2009 revenue growth in the high single digits in percentage terms, with growth in the low single digits in the third quarter, and slightly higher gains in the fourth quarter. For fiscal 2010, the company expects revenue growth at the lower end of the 11 to 15 percent range.
Visa also reiterated expectations for fiscal 2009 full-year profit growth of more than 20 percent.
Analysts expect a full-year fiscal 2009 profit of $2.69 per share, up nearly 20 percent from a year earlier.
Visa reported its second-quarter results Wednesday after its shares rose $2.80, or 4.6 percent, to close at $63.51. In after-hours trading, the stock slipped 12 cents to $63.39.
The latest period was Visa's fourth full quarter as a public company. Visa went public in March 2008 in the biggest U.S. IPO ever. The launch came just as the U.S. economy fell deeper into a recession that is turning out to be longer-lasting and more far-reaching than most analysts had expected.
Visa's chief rival, MasterCard Inc., is due to report first-quarter results on Friday. Analysts expect MasterCard to post a profit of $2.61 per share on revenue of $1.21 billion. In the same quarter of last year, the company recorded a profit of $2.59 per share on revenue of $1.22 billion.
