Visa 10-Q 2022-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-33977

VISA INC.

(Exact name of Registrant as specified in its charter)

Delaware									26-0267673
(State or other jurisdiction of incorporation or organization)									(IRS Employer Identification No.)
P.O. Box 8999									94128-8999
San Francisco,			California
(Address of principal executive offices)									(Zip Code)

(650) 432-3200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class						Trading Symbol						Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share						V						New York Stock Exchange
1.500% Senior Notes due 2026						V26						New York Stock Exchange
2.000% Senior Notes due 2029						V29						New York Stock Exchange
2.375% Senior Notes due 2034						V34						New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☑						Accelerated filer			☐
Non-accelerated filer			☐						Smaller reporting company			☐
									Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of January 18, 2023, there were 1,624,954,064 shares outstanding of the registrant’s class A common stock, par value $0.0001 per share, 245,513,385 shares outstanding of the registrant’s class B common stock, par value $0.0001 per share, and 9,745,019 shares outstanding of the registrant’s class C common stock, par value $0.0001 per share.

VISA INC.

TABLE OF CONTENTS

						Page
PART I.			Financial Information			4
Item 1.			Financial Statements (Unaudited)			4
			Consolidated Balance Sheets—December 31, 2022 and September 30, 2022			4
			Consolidated Statements of Operations—Three Months Ended December 31, 2022 and 2021			5
			Consolidated Statements of Comprehensive Income—Three Months Ended December 31, 2022 and 2021			6
			Consolidated Statements of Changes in Equity—Three Months Ended December 31, 2022 and 2021			7
			Consolidated Statements of Cash Flows—Three Months Ended December 31, 2022 and 2021			9
			Notes to Consolidated Financial Statements (Unaudited)			10
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			33
Item 4.			Controls and Procedures			33
PART II.			Other Information			34
Item 1.			Legal Proceedings			34
Item 1A.			Risk Factors			34
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 3.			Defaults Upon Senior Securities			35
Item 4.			Mine Safety Disclosures			35
Item 5.			Other Information			35
Item 6.			Exhibits			36
			Signatures			37

PART I. FINANCIAL INFORMATION

VISA INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

			December 31, 2022						September 30, 2022
			(in millions, except per share data)
Assets
Cash and cash equivalents			$	13,334					$	15,689
Restricted cash equivalents—U.S. litigation escrow			1,705						1,449
Investment securities			2,785						2,833
Settlement receivable			2,127						1,932
Accounts receivable			2,113						2,020
Customer collateral			2,591						2,342
Current portion of client incentives			1,402						1,272
Prepaid expenses and other current assets			1,802						2,668
Total current assets			27,859						30,205
Investment securities			2,735						2,136
Client incentives			3,657						3,348
Property, equipment and technology, net			3,236						3,223
Goodwill			18,024						17,787
Intangible assets, net			26,307						25,065
Other assets			3,569						3,737
Total assets			$	85,387					$	85,501
Liabilities
Accounts payable			$	258					$	340
Settlement payable			3,573						3,281
Customer collateral			2,591						2,342
Accrued compensation and benefits			736						1,359
Client incentives			6,553						6,099
Accrued liabilities			3,940						3,726
Current maturities of debt			—						2,250
Accrued litigation			1,702						1,456
Total current liabilities			19,353						20,853
Long-term debt			20,487						20,200
Deferred tax liabilities			5,443						5,332
Other liabilities			3,180						3,535
Total liabilities			48,463						49,920
Equity
Series A, Series B and Series C convertible participating preferred stock (preferred stock), $0.0001 par value: 25 shares authorized and 5 (Series A less than one, Series B 2, Series C 3) shares issued and outstanding			1,981						2,324
Class A, Class B and Class C common stock and additional paid-in capital, $0.0001 par value: 2,003,341 shares authorized (Class A 2,001,622, Class B 622, Class C 1,097); 1,881 (Class A 1,626, Class B 245, Class C 10) and 1,890 (Class A 1,635, Class B 245, Class C 10) shares issued and outstanding			19,827						19,545
Right to recover for covered losses			(28)						(35)
Accumulated income			16,403						16,116
Accumulated other comprehensive income (loss), net:
Investment securities			(94)						(106)
Defined benefit pension and other postretirement plans			(167)						(169)
Derivative instruments			(213)						418
Foreign currency translation adjustments			(785)						(2,512)
Total accumulated other comprehensive income (loss), net			(1,259)						(2,369)
Total equity			36,924						35,581
Total liabilities and equity			$	85,387					$	85,501

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

VISA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED**)**

									Three Months Ended December 31,
															2022						2021
															(in millions, except per share data)
Net revenues															$	7,936					$	7,059
Operating Expenses
Personnel															1,337						1,125
Marketing															332						280
Network and processing															178						190
Professional fees															109						100
Depreciation and amortization															227						198
General and administrative															322						242
Litigation provision															341						148
Total operating expenses															2,846						2,283
Operating income															5,090						4,776
Non-operating Income (Expense)
Interest expense															(137)						(134)
Investment income (expense) and other															24						255
Total non-operating income (expense)															(113)						121
Income before income taxes															4,977						4,897
Income tax provision															798						938
Net income															$	4,179					$	3,959
**Ba

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This management’s discussion and analysis provides a review of the results of operations, financial condition and liquidity and capital resources of Visa Inc. and its subsidiaries (Visa, we, us, our or the Company) on a historical basis and outlines the factors that have affected recent earnings, as well as those factors that may affect future earnings. The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes included in Item 1—Financial Statements of this report.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that relate to, among other things, the impact on our future financial position, results of operations and cash flows as a result of the war in Ukraine; the ongoing effects of the COVID-19 pandemic, including the reopening of borders and resumption of international travel; prospects, developments, strategies and growth of our business; anticipated expansion of our products in certain countries; industry developments; anticipated timing and benefits of our acquisitions; expectations regarding litigation matters, investigations and proceedings; timing and amount of stock repurchases; sufficiency of sources of liquidity and funding; effectiveness of our risk management programs; and expectations regarding the impact of recent accounting pronouncements on our consolidated financial statements. Forward-looking statements generally are identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “projects,” “could,” “should,” “will,” “continue” and other similar expressions. All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict. We describe risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, any of these forward-looking statements in our SEC filings, including our Annual Report on Form 10-K, for the year ended September 30, 2022, and any subsequent reports on Forms 10-Q and 8-K. Except as required by law, we do not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise.

Overview

Visa is a global payments technology company that facilitates global commerce and money movement across more than 200 countries and territories among a global set of consumers, merchants, financial institutions and government entities through innovative technologies. We provide transaction processing services (primarily authorization, clearing and settlement) to our financial institution and merchant clients through VisaNet, our advanced transaction processing network. We offer products and solutions that facilitate secure, reliable and efficient money movement for all participants in the ecosystem.

Financial overview. A summary of our as-reported U.S. GAAP and non-GAAP operating results is as follows:

									Three Months Ended December 31,
																					2022						2021						% Change**(1)**
																					(in millions, except percentages and per share data)
Net revenues																					$	7,936					$	7,059					12		%
Operating expenses																					$	2,846					$	2,283					25		%
Net income																					$	4,179					$	3,959					6		%
Diluted earnings per share																					$	1.99					$	1.83					8		%
Non-GAAP operating expenses(2)																					$	2,439					$	2,115					15		%
Non-GAAP net income(2)																					$	4,581					$	3,901					17		%
Non-GAAP diluted earnings per share(2)																					$	2.18					$	1.81					21		%

(1)Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.

(2)For a full reconciliation of our GAAP to non-GAAP financial results, see tables in Non-GAAP financial results below.

Russia & Ukraine. During the quarter ended March 31, 2022, economic sanctions were imposed on Russia by the U.S., European Union, United Kingdom and other jurisdictions and authorities, impacting Visa and its clients. In March 2022, we suspended our operations in Russia and as a result, are no longer generating revenue from domestic and cross-border activities related to Russia. For the three months ended December 31, 2021, total net revenues from Russia, including revenues driven by domestic as well as cross-border activities, was approximately 4% of our consolidated net revenues.

The continuing effects of the war in Ukraine are difficult to predict due to numerous uncertainties identified in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2022. We will continue to evaluate the nature and extent of the impact to our business.

Highlights for the first quarter of fiscal 2023. For the three months ended December 31, 2022, net revenues increased 12% over the prior-year comparable period, primarily due to the growth in nominal cross-border volume, processed transactions and nominal payments volume, partially offset by higher client incentives. During the three months ended December 31, 2022, exchange rate movements negatively impacted our net revenues growth by approximately three percentage points.

For the three months ended December 31, 2022, GAAP operating expenses increased 25% over the prior-year comparable period primarily due to higher expenses related to personnel and litigation provision. See Results of Operations—Operating Expenses below for further discussion. During the three months ended December 31, 2022, exchange rate movements positively impacted our operating expense growth by approximately one-and-a-half percentage points.

For the three months ended December 31, 2022, non-GAAP operating expenses increased 15% over the prior year comparable period primarily due to higher personnel and general and administrative expenses.

Interchange multidistrict litigation. During the three months ended December 31, 2022, we recorded an additional accrual of $341 million to address claims associated with the interchange multidistrict litigation. We also made deposits of $350 million into the U.S. litigation escrow account. See Note 4—U.S. and Europe Retrospective Responsibility Plans and Note 12—Legal Matters to our unaudited consolidated financial statements*.*

Common stock repurchases. In October 2022, our board of directors authorized a $12.0 billion share repurchase program*.* Previously, in December 2021, our board of directors authorized a $12.0 billion share repurchase program. During the three months ended December 31, 2022, we repurchased 16 million shares of our class A common stock in the open market for $3.1 billion. As of December 31, 2022, our repurchase programs had remaining authorized funds of $14.1 billion. See Note 8—Stockholders’ Equity to our unaudited consolidated financial statements.

Non-GAAP financial results. We use non-GAAP financial measures of our performance which exclude certain items which we believe are not representative of our continuing operations, as they may be non-recurring or have no cash impact, and may distort our longer-term operating trends. We consider non-GAAP measures useful to investors because they provide greater transparency into management’s view and assessment of our ongoing operating performance.

*•*Gains and losses on equity investments. Gains and losses on equity investments include periodic non-cash fair value adjustments and gains and losses upon sale of an investment. These long-term investments are strategic in nature and are primarily private company investments. Gains and losses and the related tax impacts associated with these investments are tied to the performance of the companies that we invest in and therefore do not correlate to the underlying performance of our business.

*•*Amortization of acquired intangible assets. Amortization of acquired intangible assets consists of amortization of intangible assets such as developed technology, customer relationships and brands acquired in connection with business combinations executed beginning in fiscal 2019. Amortization charges for our acquired intangible assets are non-cash and are significantly affected by the timing, frequency and size of our acquisitions, rather than our core operations. As such, we have excluded this amount and the related tax impact to facilitate an evaluation of our current operating performance and comparison to our past operating performance.

*•*Acquisition-related costs. Acquisition-related costs consist primarily of one-time transaction and integration costs associated with our business combinations. These costs include professional fees, technology integration fees, restructuring activities and other direct costs related to the purchase and integration of acquired entities. These costs also include retention equity and deferred equity compensation when they are agreed upon as part of the purchase price of the transaction but are required to be recognized as expense post-combination. We have excluded these amounts and the related tax impacts as the expenses are recognized for a limited duration and do not reflect the underlying performance of our business.

*•*Litigation provision. During the three months ended December 31, 2022 and 2021, we recorded an additional accrual to address claims associated with the interchange multidistrict litigation of $341 million and $145 million, respectively, and related tax benefit of $76 million and $32 million, respectively, determined by applying applicable tax rates. Under the U.S. retrospective responsibility plan, we recover the monetary liabilities related to the U.S. covered litigation through a downward adjustment to the rate at which shares of our class B common stock convert into shares of class A common stock. See Note 4—U.S. and Europe Retrospective Responsibility Plans and Note 12—Legal Matters to our unaudited consolidated financial statements.

Non-GAAP operating expenses, non-operating income (expense), income tax provision, effective income tax rate, net income and diluted earnings per share should not be relied upon as substitutes for, or considered in isolation from, measures calculated in accordance with U.S. GAAP. The following tables reconcile our as-reported financial measures, calculated in accordance with U.S. GAAP, to our respective non-GAAP financial measures:

									Three Months Ended December 31, 2022
									Operating Expenses												Non-operating Income (Expense)												Income Tax Provision						Effective Income Tax Rate**(1)**						Net Income						Diluted Earnings Per Share**(1)**
									(in millions, except percentages and per share data)
As reported									$	2,846											$	(113)											$	798					16.0		%				$	4,179					$	1.99
(Gains) losses on equity investments, net									—												106												24												82						0.04
Amortization of acquired intangible assets									(43)												—												9												34						0.02
Acquisition-related costs									(23)												—												2												21						0.01
Litigation provision									(341)												—												76												265						0.13
Non-GAAP									$	2,439											$	(7)											$	909					16.5		%				$	4,581					$	2.18

									Three Months Ended December 31, 2021
									Operating Expenses												Non-operating Income (Expense)												Income Tax Provision						Effective Income Tax Rate**(1)**						Net Income						Diluted Earnings Per Share**(1)**
									(in millions, except percentages and per share data)
As reported									$	2,283											$	121											$	938					19.1		%				$	3,959					$	1.83
(Gains) losses on equity investments, net									—												(231)												(42)												(189)						(0.09)
Amortization of acquired intangible assets									(13)												—												3												10						—
Acquisition-related costs									(10)												—												2												8						—
Litigation provision									(145)												—												32												113						0.05
Non-GAAP									$	2,115											$	(110)											$	933					19.3		%				$	3,901					$	1.81

(1)Figures in the table may not recalculate exactly due to rounding. Effective income tax rate, diluted earnings per share and their respective totals are calculated based on unrounded numbers.

Payments volume and processed transactions. Payments volume is the primary driver for our service revenues, and the number of processed transactions is the primary driver for our data processing revenues.

Payments volume represents the aggregate dollar amount of purchases made with cards and other form factors carrying the Visa, Visa Electron, V PAY and Interlink brands and excludes Europe co-badged volume. Nominal payments volume is denominated in U.S. dollars and is calculated each quarter by applying an established U.S. dollar/foreign currency exchange rate for each local currency in which our volumes are reported. Processed transactions represent transactions using cards and other form factors carrying the Visa, Visa Electron, V PAY, Interlink and PLUS brands processed on Visa’s networks.

The following table presents nominal payments and cash volume:

			U.S.																		International																		Visa Inc.
			Three Months Ended September 30,****(1)																		Three Months Ended September 30,****(1)																		Three Months Ended September 30,****(1)
			2022						2021						% Change**(2)**						2022						2021						% Change**(2)**						2022						2021						% Change**(2)**
			(in billions, except percentages)
Nominal payments volume
Consumer credit			$	551					$	480					15		%				$	684					$	652					5		%				$	1,236					$	1,132					9		%
Consumer debit(3)			682						640						6		%				635						692						(8		%)				1,317						1,332						(1		%)
Commercial(4)			247						206						20		%				130						118						11		%				377						323						17		%
Total nominal payments volume**(2)**			$	1,480					$	1,326					12		%				$	1,449					$	1,461					(1		%)				$	2,929					$	2,787					5		%
Cash volume(5)			155						179						(13		%)				451						496						(9		%)				606						675						(10		%)
Total nominal volume**(2),(6)**			$	1,635					$	1,505					9		%				$	1,900					$	1,958					(3		%)				$	3,535					$	3,462					2		%

The following table presents the change in nominal and constant payments and cash volume:

			International												Visa Inc.
			Three Months Ended September 30, 2022 vs. 2021**(1),(2)**												Three Months Ended September 30, 2022 vs. 2021**(1),(2)**
			Nominal						Constant**(7)**						Nominal						Constant**(7)**
Payments volume growth
Consumer credit growth			5		%				16		%				9		%				15		%
Consumer debit growth(3)			(8		%)				1		%				(1		%)				4		%
Commercial growth(4)			11		%				25		%				17		%				22		%
Total payments volume growth			(1		%)				9		%				5		%				10		%
Cash volume growth(5)			(9		%)				(2		%)				(10		%)				(5		%)
Total volume growth			(3		%)				6		%				2		%				7		%

(1)Service revenues in a given quarter are assessed based on nominal payments volume in the prior quarter. Therefore, service revenues reported for the three months ended December 31, 2022 and 2021, respectively, were based on nominal payments volume reported by our financial institution clients for the three months ended September 30, 2022 and 2021, respectively. On occasion, previously presented volume information may be updated. Prior-period updates are not material.

(2)Figures in the table may not recalculate exactly due to rounding. Percentage changes and totals are calculated based on unrounded numbers.

(3)Includes consumer prepaid volume and Interlink volume.

(4)Includes large, medium and small business credit and debit, as well as commercial prepaid volume.

(5)Cash volume generally consists of cash access transactions, balance access transactions, balance transfers and convenience checks.

(6)Total nominal volume is the sum of total nominal payments volume and cash volume. Total nominal volume is provided by our financial institution clients, subject to review by Visa.

(7)Growth on a constant-dollar basis excludes the impact of foreign currency fluctuations against the U.S. dollar.

The following table presents the number of processed transactions:

			Three Months Ended December 31,
2022						2021						% Change**(1)**
(in millions, except percentages)
Visa processed transactions			52,512						47,558						10		%

(1)Figures in the table may not recalculate exactly due to rounding. Percentage change is calculated based on unrounded numbers. On occasion, previously presented information may be updated. Prior period updates are not material.

Results of Operations

Net Revenues

The following table presents our net revenues earned in the U.S. and internationally:

									Three Months Ended December 31,
																											2022						2021												% Change**(1)**
																											(in millions, except percentages)
U.S.																											$	3,567					$	3,178											12		%
International																											4,369						3,881												13		%
Net revenues																											$	7,936					$	7,059											12		%

(1)Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.

Net revenues increased primarily due to the growth in nominal cross-border volume, processed transactions and nominal payments volume, partially offset by higher client incentives.

Our net revenues are impacted by the overall strengthening or weakening of the U.S. dollar as payments volume and related revenues denominated in local currencies are converted to U.S. dollars. During the three months ended December 31, 2022, exchange rate movements negatively impacted our net revenues growth by approximately three percentage points.

The following table presents the components of our net revenues:

									Three Months Ended December 31,
																											2022						2021												% Change**(1)**
																											(in millions, except percentages)
Service revenues																											$	3,511					$	3,193											10		%
Data processing revenues																											3,827						3,614												6		%
International transaction revenues																											2,797						2,174												29		%
Other revenues																											587						449												31		%
Client incentives																											(2,786)						(2,371)												18		%
Net revenues																											$	7,936					$	7,059											12		%

(1)Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.

• Service revenues increased primarily due to 5% growth in nominal payments volume, despite the impact of our suspension of operations in Russia. Service revenues also increased due to business mix, select pricing modifications and card benefits.

*•*Data processing revenues increased primarily due to overall growth in processed transactions of 10%, partially offset by our suspension of operations in Russia.

*•*International transaction revenues increased primarily due to growth in nominal cross-border volumes of 22%, excluding transactions within Europe. International transaction revenues also increased due to volatility of a broad range of currencies and select pricing modifications.

• Other revenues increased primarily due to value added services revenues tied to marketing and consulting services, acquisition-related revenues and select pricing modifications.

• Client incentives increased primarily due to growth in payments volume. The amount of client incentives we record in future periods will vary based on changes in performance expectations, actual client performance, amendments to existing contracts or the execution of new contracts.

Operating Expenses

The following table presents the components of our total operating expenses:

									Three Months Ended December 31,
																											2022						2021												% Change**(1)**
																											(in millions, except percentages)
Personnel																											$	1,337					$	1,125											19		%
Marketing																											332						280												18		%
Network and processing																											178						190												(6		%)
Professional fees																											109						100												9		%
Depreciation and amortization																											227						198												15		%
General and administrative																											322						242												33		%
Litigation provision																											341						148												130		%
Total operating expenses																											$	2,846					$	2,283											25		%

(1)Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.

• Personnel expenses increased primarily due to higher number of employees and compensation, reflecting our strategy to invest in future growth, including acquisitions.

• Marketing expenses increased primarily due to increased spending in various campaigns, including the FIFA World Cup 2022TM and client marketing.

• Network and processing expenses decreased primarily due to the absence of fees associated with the processing of Russian domestic transactions as a result of our suspension of operations in Russia, partially offset by continued technology and processing network investments to support growth.

*•*Depreciation and amortization expenses increased primarily due to additional depreciation and amortization from our acquisitions and on-going investments.

*•*General and administrative expenses increased primarily due to an increase in travel expenses, unfavorable foreign currency fluctuations, and higher usage of travel related card benefits.

*•*Litigation provision increased primarily due to an increase in accrual related to the U.S. covered litigation. See Note 12—Legal Matters to our unaudited consolidated financial statements.

Non-operating Income (Expense)

The following table presents the components of our non-operating income (expense):

									Three Months Ended December 31,
																											2022						2021						% Change**(1)**
																											(in millions, except percentages)
Interest expense																											$	(137)					$	(134)					2		%
Investment income (expense) and other																											24						255						(91		%)
Total non-operating income (expense)																											$	(113)					$	121					(194		%)

(1)Figures in the table may not recalculate exactly due to rounding. Percentage changes are calculated based on unrounded numbers.

*•*Interest expense increased primarily due to lower income from derivative instruments and higher interest expense related to the issuance of debt in fiscal 2022, partially offset by a discrete tax benefit recognized during the three months ended December 31, 2022.

*•*Investment income (expense) and other decreased primarily due to losses on our equity investments, partially offset by higher interest income on our cash and investments.

Effective Income Tax Rate

The following table presents our effective income tax rates:

						Three Months Ended December 31,
						2022						2021
Effective income tax rate						16		%				19		%

The difference in the effective tax rates is primarily due to a $142 million tax benefit related to prior years recognized during the three months ended December 31, 2022 due to the reassessment of an uncertain tax position as a result of new information obtained during an ongoing tax examination.

Liquidity and Capital Resources

Cash Flow Data

The following table summarizes our cash flow activity for the periods presented:

			Three Months Ended December 31,
			2022						2021
			(in millions)
Total cash provided by (used in):
Operating activities			$	4,171					$	4,232
Investing activities			(510)						(547)
Financing activities			(6,347)						(4,967)
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents			692						(194)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents			$	(1,994)					$	(1,476)

Operating activities. Cash provided by operating activities for the three months ended December 31, 2022 was lower than the prior-year comparable period primarily due to higher incentive payments, partially offset by continued growth in our underlying business.

Investing activities. Cash used in investing activities for the three months ended December 31, 2022 was lower than the prior-year comparable period primarily due to the absence of cash paid for acquisitions combined with cash received from the settlement of net investment hedge derivative instruments in the current year, partially offset by higher purchases, net of sales and maturities, of investment securities.

Financing activities. Cash used in financing activities for the three months ended December 31, 2022 was higher than the prior-year comparable period primarily due to the principal debt payment upon maturity of our December 2022 senior notes and higher dividends paid, partially offset by lower share repurchases. See Note 6—Debt and Note 8—Stockholders’ Equity to our unaudited consolidated financial statements*.*

Sources of Liquidity

Our primary sources of liquidity are cash on hand, cash flow from our operations, our investment portfolio and access to various equity and borrowing arrangements. Funds from operations are maintained in cash and cash equivalents and short-term or long-term investment securities based upon our funding requirements, access to liquidity from these holdings and the returns that these holdings provide. Based on our current cash flow budgets and forecasts of our short-term and long-term liquidity needs, we believe that our current and projected sources of liquidity will be sufficient to meet our projected liquidity needs for more than the next 12 months. We will continue to assess our liquidity position and potential sources of supplemental liquidity in view of our operating performance, current economic and capital market conditions and other relevant circumstances.

Uses of Liquidity

There has been no significant change to our primary uses of liquidity since September 30, 2022, except as discussed below.

Common stock repurchases. During the three months ended December 31, 2022, we repurchased shares of our class A common stock in the open market for $3.1 billion. As of December 31, 2022, our repurchase programs had remaining authorized funds of $14.1 billion. See Note 8—Stockholders’ Equity to our unaudited consolidated financial statements.

Dividends. During the three months ended December 31, 2022, we declared and paid $945 million in dividends to holders of our common and preferred stock. On January 24, 2023, our board of directors declared a quarterly cash dividend of $0.45 per share of class A common stock (determined in the case of class B and C common stock and series A, B and C convertible participating preferred stock on an as-converted basis). See Note 8—Stockholders’ Equity to our unaudited consolidated financial statements. We expect to continue paying quarterly dividends in cash, subject to approval by the board of directors. All preferred and class B and C common stock will share ratably on an as-converted basis in such future dividends.

Senior notes. During the three months ended December 31, 2022, we repaid $2.25 billion of principal upon maturity of our December 2022 senior notes. See Note 6—Debt to our unaudited consolidated financial statements.

Litigation. During the three months ended December 31, 2022, we deposited $350 million into the U.S. litigation escrow account to address claims associated with the interchange multidistrict litigation. The balance of this account as of December 31, 2022 was $1.7 billion and is reflected as restricted cash in our consolidated balance sheets. See Note 4—U.S. and Europe Retrospective Responsibility Plans and Note 12—Legal Matters to our unaudited consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate or another reference rate expected to be discontinued because of reference rate reform. Subsequently, the FASB also issued amendments to this standard. The amendments in the ASU are effective upon issuance through December 31, 2024. The adoption of ASU 2020-04 and its subsequent amendments is not expected to have a material impact on our consolidated financial statements.