Share-based Compensation

12 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement, Noncash Expense [Abstract]

Note 17—Share-based Compensation

2007 Equity Incentive Compensation Plan

The Company’s 2007 Equity Incentive Compensation Plan, or the EIP, authorizes the compensation committee of the board of directors to grant non-qualified stock options (“options”), restricted stock awards, RSUs and performance-based shares to its employees and non-employee directors. On January 26, 2021, the EIP was amended to extend the termination date from January 31, 2022 to January 26, 2031 and reduce the number of shares of class A common stock authorized for grant from 236 million to 198 million. Shares available for grant may be either authorized and unissued or previously issued shares subsequently acquired by the Company. Under the amended EIP, shares withheld for taxes, or shares used to pay the exercise or purchase price of an award, shall not again be available for future grant. The EIP will continue to be in effect until all of the common stock available under the EIP is delivered and all restrictions on those shares have lapsed, unless the EIP is terminated earlier by the Company’s board of directors.

For fiscal 2021, 2020 and 2019, the Company recorded share-based compensation cost related to the EIP of $518 million, $393 million and $388 million, respectively, in personnel expense on its consolidated statements of operations. The related tax benefits for fiscal 2021, 2020 and 2019 were $73 million, $63 million and $59 million, respectively.

Options

Options issued under the EIP expire 10 years from the date of grant and primarily vest ratably over 3 years from the date of grant, subject to earlier vesting in full under certain conditions.

During fiscal 2021, 2020 and 2019, the fair value of each stock option was estimated on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:


	For the Years Ended September 30,
	2021			2020			2019
Expected term (in years)(1)	4.07			4.03			3.98
Risk-free rate of return(2)	0.3		%	1.6		%	2.9		%
Expected volatility(3)	25.1		%	18.7		%	20.2		%
Expected dividend yield(4)	0.6		%	0.7		%	0.7		%
Fair value per option granted	$	39.51		$	29.37		$	25.89

(1)Based on Visa’s historical exercise experience.

(2)Based upon the zero coupon U.S. treasury bond rate over the expected term of the awards.

(3)Based on the Company’s implied and historical volatilities.

(4)Based on the Company’s annual dividend rate on the date of grant.

The following table summarizes the Company’s option activity for fiscal 2021:


	Options	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value(1) (in millions)
Outstanding at September 30, 2020	5,786,549	$	114.61
Granted	1,022,430	$	207.57
Forfeited	(57,107)	$	179.38
Expired	—	$	—
Exercised	(912,093)	$	87.06
Outstanding at September 30, 2021	5,839,779	$	134.56	6.56	$	515
Options exercisable at September 30, 2021	3,736,509	$	105.05	5.55	$	440
Options exercisable and expected to vest at September 30, 2021(2)	5,783,092	$	133.93	6.54	$	514

(1)Calculated using the closing stock price on the last trading day of fiscal 2021 of $222.75, less the option exercise price, multiplied by the number of instruments.

(2)Applied a forfeiture rate to unvested options outstanding at September 30, 2021 to estimate the options expected to vest in the future.

During fiscal 2021, 2020 and 2019, the total intrinsic value of options exercised was $124 million, $146 million and $107 million, respectively, and the tax benefit realized was $23 million, $31 million and $23 million, respectively. As of September 30, 2021, there was $23 million of total unrecognized compensation cost related to unvested options, which is expected to be recognized over a weighted-average period of approximately 0.42 years.

Restricted Stock Units

RSUs issued under the EIP primarily vest ratably over 3 years from the date of grant, subject to earlier vesting in full under certain conditions. Upon vesting, RSUs can be settled in class A common stock on a one-for-one basis or in cash, or a combination thereof, at the Company’s option. The Company does not currently intend to settle any RSUs in cash. During the vesting period, RSU award recipients are eligible to receive dividend equivalents, but do not participate in the voting rights granted to the holders of the underlying class A common stock.

The fair value and compensation cost before estimated forfeitures for RSUs is calculated using the closing price of class A common stock on the date of grant. During fiscal 2021, 2020 and 2019, the weighted-average grant date fair value of RSUs granted was $209.00, $183.61 and $137.38, respectively. During fiscal 2021, 2020 and 2019, the total grant date fair value of RSUs vested was $331 million, $284 million and $228 million, respectively.

The following table summarizes the Company’s RSU activity for fiscal 2021:


	Units	Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value(1) (in millions)
Outstanding at September 30, 2020	4,690,500	$	154.06
Granted	2,486,219	$	209.00
Vested	(2,327,105)	$	142.35
Forfeited	(323,166)	$	183.46
Outstanding at September 30, 2021	4,526,448	$	188.16	0.87	$	1,008

(1)Calculated by multiplying the closing stock price on the last trading day of fiscal 2021 of $222.75 by the number of instruments.

At September 30, 2021, there was $452 million of total unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately 0.87 years.

Performance-based Shares

For the Company’s performance-based shares, in addition to service conditions, the ultimate number of shares to be earned depends on the achievement of both performance and market conditions. The performance condition is based on the Company’s earnings per share target. The market condition is based on the Company’s total shareholder return ranked against that of other companies that are included in the Standard & Poor’s 500 Index. For fiscal 2021, the fair value of the performance-based shares incorporating the market condition is estimated on the grant date using a Monte Carlo simulation model with the following weighted-average assumptions: risk-free rate of return of 0.2%, expected term of 2 years, expected volatility of 27.2% and expected dividend yield of 0.6%. In fiscal 2021, 2020 and 2019, the weighted-average grant date fair value of performance-based shares granted was $229.81, $211.08 and $153.42 per share, respectively. Performance-based shares vest over three years and are subject to earlier vesting in full under certain conditions. During fiscal 2021, 2020 and 2019, the total grant date fair value of performance-based shares vested and earned was $47 million, $65 million and $41 million, respectively. Compensation cost for performance-based shares is initially estimated based on target performance. It is recorded net of estimated forfeitures and adjusted as appropriate throughout the performance period.

The following table summarizes the maximum number of performance-based shares which could be earned and related activity for fiscal 2021:


	Shares	Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value(1) (in millions)
Outstanding at September 30, 2020	994,800	$	171.33
Granted(2)	432,714	$	229.81
Vested and earned	(359,894)	$	130.98
Unearned	(203,760)	$	224.79
Forfeited	—	$	—
Outstanding at September 30, 2021	863,860	$	204.82	0.82	$	192

(1)Calculated by multiplying the closing stock price on the last trading day of fiscal 2021 of $222.75 by the number of instruments.

(2)Represents the maximum number of performance-based shares which could be earned.

At September 30, 2021, there was $40 million of total unrecognized compensation cost related to unvested performance-based shares, which is expected to be recognized over a weighted-average period of approximately 0.82 years.

Employee Stock Purchase Plan

The Visa Inc. Employee Stock Purchase Plan (the “ESPP”) permits eligible employees to purchase the Company’s class A common stock at a 15% discount of the stock price on the purchase date, subject to certain restrictions. A total of 20 million shares of class A common stock have been reserved for issuance under the ESPP. In fiscal 2021, 2020 and 2019, the ESPP did not have a material impact on the consolidated financial statements.