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pww.comVisa Inc., Q3 2024 Earnings Call, Jul 23, 2024 - NYSE:V

NYSE:V

Jennifer Como [Head of Investor Relations] 💬

Jennifer Como, the Head of Investor Relations at Visa Inc., made the following statements during the Q3 2024 Earnings Call:

  1. Opening Statement:

    • Thanked participants and welcomed them to Visa's Fiscal Third Quarter 2024 Earnings Call.
    • Introduced Ryan McInerney, Visa's Chief Executive Officer, and Chris Suh, Visa's Chief Financial Officer.
    • Mentioned that the call is being webcast on the Investor Relations section of Visa's website at investor.visa.com.
    • Noted that a replay will be archived on the website for 30 days.
    • Announced that a slide deck containing financial and statistical highlights has been posted on the IR website.

  2. Forward-Looking Statements Disclosure:

    • Reminded listeners that the presentation included forward-looking statements.
    • Stated that these statements are not guarantees of future performance and actual results could differ materially.
    • Directed listeners to additional information concerning factors that could affect results, available in Visa's most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K, which can be found on the SEC's website and the Investor Relations section of Visa's website.

  3. Financial Results Disclosure:

    • Clarified that comments regarding financial results would reflect revenue on a GAAP basis and all other results on a non-GAAP nominal basis, unless otherwise noted.
    • Mentioned that the related GAAP measures and reconciliation are available in the earnings release and related materials on the IR website.

  4. Transition to CEO:

    • Turned the call over to Ryan McInerney, Visa's CEO, to provide further details.

  5. Q&A Session Introduction:

    • Thanked Chris Suh for his presentation and announced that they were ready to take questions.

  6. Closing Statement:

    • Thanked participants for joining the call.

    • Invited listeners to contact or email the Investor Relations team for any additional questions.

    • Concluded the call and wished everyone a great day.

Ryan M. McInerney [President, CEO & Director] 💬

Ryan M. McInerney, Visa's President, CEO & Director, provided insights and updates on various aspects of Visa’s operations and strategies during the fiscal third quarter of 2024. Here is a detailed summary of his statements:

Introduction

  • Client Engagement Survey Results: Visa achieved a global Net Promoter Score (NPS) of 76, up 3 points from the previous year. There were NPS increases across all client types (merchants, issuers, fintechs, and processors) and regions, with a notable 6-point improvement in North America.

Consumer Payments

  • Opportunity Size: More than $20 trillion opportunity to capture cash, checks, ACH, domestic schemes, and other forms of electronic payment.
  • Strategic Partnerships:
    • Lloyds Banking Group: Named preferred network partner, renewing debit relationship and expanding credit significantly, winning 10 million additional credentials.
    • NatWest: Launched a new Visa Travel Rewards credit card.
    • Raiffeisen Bank International AG: Renewed commercial business and expanded consumer debit and credit in the Czech Republic and Romania, totaling over 2 million potential new credentials.
    • KB Kookmin Card (Korea): Deepened partnership with Visa Direct cross-border money movement and Visa consumer and commercial issuance.
    • Banco de Crédito del Perú (Peru): Extended partnership across consumer and commercial portfolios with plans to launch additional new flows offerings and value-added services.
    • Wells Fargo (U.S.): Extended agreement to support Wells Fargo's strategy to reinvent their credit business and provide additional growth through Visa assets like consulting and sponsorships.
  • Brand Activation:
    • Olympic Games: Engaged with the Visa brand and activation across the world in marketing campaigns, cardholder experiences, and Olympic and Paralympic-branded Visa issuance (nearly 6 million cards in Europe).
    • Co-Brand Partnerships:
      • Adani One and ICICI Bank (India): Launched a co-brand card with rich airport-linked benefits.
      • Tata Digital (India): Signed an agreement to launch a new co-brand card, including a multicurrency prepaid foreign exchange card.
      • Unicomer (Latin America): Deliver a co-brand credit card and use CyberSource.
      • BinDawood (CEMEA): Reached a de novo co-brand arrangement with a leading grocer in Saudi Arabia.
      • Malaysia Airlines: Extended relationship from prepaid co-brand card to also launch a new co-brand credit card.
      • Turkish Airlines (U.S.): Chosen as the exclusive network partner for their new Miles&Smiles co-brand credit card.
  • Wallets:
    • Yape (Peru): A super app with more than 15 million users enabling them to send money via Visa Direct and accept Visa through Tap to Phone functionality.
    • Vietnam: Leading digital wallets (MoMo, VNPAY, ZaloPay) enable their users to utilize Visa cards as a funding source for transactions at over 500,000 QR acceptance points.

Checkout Experiences

  • Click to Pay and Visa Payment Passkey Service: Enabled customer authentication using biometrics. Hundreds of issuers enabled for passkeys in Europe, and multiple issuers piloting the solution, representing more than 50% of e-commerce payments volume in Europe.
  • Tokenization: Crossed 10 billion tokens, generating more than $40 billion in incremental e-commerce revenue and saving over $600 million in fraud globally.
  • Tap to Pay: Grew 4 percentage points from the previous year to 80% of face-to-face transactions globally, excluding the U.S. In the U.S., surpassed 50% with 30 cities above 60% penetration.

New Flows

  • Revenue Growth: 18% year-over-year in constant dollars.
  • Visa Direct Transactions: Grew 41% year-over-year.
  • Commercial Volumes: Up 7% year-over-year in constant dollars.
  • Business-to-Business (B2B):
    • Healthcare: Working with AXA and Paysure to launch a commercial virtual card solution to simplify claims processes.
    • Cintas: Expanded virtual card acceptance with a key business services provider to streamline payments, automate processes, and manage costs.
    • Billtrust: Extended BPN collaboration to connect suppliers and buyers, facilitating straight-through processing of virtual card payments with rich data.
  • Brazil (Celero): Providing issuers with enhanced visibility into small business spend by aggregating data across cards, bank accounts, boletos, and more.
  • Spend Clarity: Wells Fargo white-labeled the solution called Wells One Expense Manager, which has onboarded 6,000 corporate clients representing over 1 million users.

Visa Direct

  • Partnerships and Agreements:
    • Monobank (CEMEA): Renewed Visa Direct relationship and consumer and commercial credit, debit, and prepaid portfolios.
    • China ZheShang Bank (Asia Pacific): Partnered on cross-border capabilities, including Visa Direct and Currencycloud, supporting cross-border payments for merchant clients.
    • Nuvei (Canada): Extended agreement for Visa Direct across all cross-border use cases in more than 30 countries for merchant clients.
    • WorldRemit and Sendwave: Executed a global agreement enabling customers to send Visa Direct cross-border remittances from 50 countries to recipients in 130 countries.
    • Quicklly (South Asian Marketplace): Enabled Visa Direct cross-border remittance solutions for U.S. customers sending money to South Asia.
    • Weavr (U.K.): Reached an agreement to enable Weavr's business clients to offer employee expense reimbursement, reward and recognition, and earned wage access.
    • PayActiv: Renewed agreement and will enable Visa+ for payouts.
    • Astra: Expanded relationship to offer cross-border remittances, implement Visa+ to reach domestic wallets in the U.S., and expand to additional use cases.

Value-Added Services

  • Revenue Growth: 23% in the third quarter in constant dollars.
  • Card Benefits: Strong issuance in premium cards across most regions, driving growth in card benefits.
    • Latin America: Travel benefits grew with over 370,000 unique visits to Visa Infinite airport lounge in Brazil.
    • United States: Partnership with OpenTable to offer eligible Visa cardholders access to coveted restaurant reservations and experiences.
  • Acceptance Solutions: Growth driven by increasing utilization across both token and e-commerce-related services.
    • iFood (Brazil): Utilizing Visa's Verifi solution to help prevent disputes before they become chargebacks.
  • Risk and Identity Solutions: Strong adoption by new and existing clients, driven by growth in card-not-present transactions.
    • North America (Worldpay): Expanding use of authentication solutions from CardinalCommerce, fostering collaboration and real-time enhanced data exchange between Worldpay merchants and issuers during card-not-present transactions.
    • Account-to-Account Risk Scoring Solution (Visa Protect):
      • Pay.UK Pilot: Showed an average 40% uplift in fraud detection over the 3-month pilot period.
      • Argentina (COELSA): Successfully piloted and launched Visa Protect.
  • Open Banking and Advisory Services:
    • Tink (Europe and U.S.): Continuing to sign new partners.
    • Consulting and Marketing Services: Strong growth in client demand, particularly around marquee events such as the Olympic and Paralympic Games.

Legal Update

  • Settlement Rejection: Disappointed with the court's decision to reject the settlement for the injunctive relief class. Visa believes the settlement provided meaningful relief to all merchants and will continue to work towards another settlement.

Closing Remarks

  • Financial Performance: Strong revenue and EPS growth resulting from relatively stable volume and transaction growth.
  • Strategy Focus: Building and deploying the best solutions possible across consumer payments, new flows, and value-added services.

Additional Insights

  • Consumer Payments Strategy: Focused on growing credentials and increasing acceptance locations, with wallets as a great example of where Visa can be a funding source, an embedded credential, and an accepted form of payment.

  • Checkout Experiences: Emphasized the importance of delivering simple, easy, and secure checkout experiences, highlighting the integration of Click to Pay and Visa Payment Passkey Service, tokenization milestones, and Tap to Pay growth.

  • New Flows Revenue: Highlighted the growth in Visa Direct transactions and commercial volumes, with a focus on B2B solutions and partnerships.

  • Value-Added Services: Discussed the growth in revenue and highlighted specific areas of progress, such as card benefits, acceptance solutions, risk and identity solutions, and open banking and advisory services.

Christopher Suh [Chief Financial Officer] 💬

Christopher Suh, the Chief Financial Officer of Visa Inc., provided insights into the company's financial performance and expectations during the fiscal third quarter 2024 earnings call. Here is a detailed summary of his comments:

Fiscal Third Quarter 2024 Financial Results:

  • Revenue Growth: Net revenue grew 10% in both GAAP and constant dollars, in line with expectations.
  • EPS Growth: EPS increased 12% year-over-year and 13% in constant dollars.
  • Payment Volume Growth:
    • U.S.: Payments volume grew 5% year-over-year, with credit and debit also growing 5%.
    • International: Payments volume grew 10% in constant dollars, with strong growth in Latin America, CEMEA, and Europe ex U.K.
  • Cross-Border Volume Growth:
    • Excluding intra-Europe transactions, total cross-border volume grew 14% in constant dollars.
  • Processed Transactions: Grew 10% year-over-year.

Revenue Components:

  • Service Revenue: Grew 8% year-over-year, in line with 8% growth in constant dollar payments volume.
  • Data Processing Revenue: Grew 9% year-over-year, with revenue yield generally in line sequentially and versus the previous year.
  • International Transaction Revenue: Up 9% year-over-year, impacted by lapping higher currency volatility from the previous year.
  • Other Revenue: Grew 31%, primarily driven by strong consulting and marketing services revenue related to the Olympics and pricing.
  • Client Incentives: Grew 11%.

Growth Engines:

  • Consumer Payments: Growth was driven by stable payments volume, cross-border volume, and processed transaction growth.
  • New Flows Revenue: Grew 18% year-over-year in constant dollars.
  • Value-Added Services Revenue: Grew 23% in constant dollars to $2.2 billion, driven by Issuing and Acceptance Solutions and Advisory Services.

Operating Expenses:

  • Growth: Increased 14% year-over-year, primarily due to increases in general and administrative, personnel, and marketing expenses, including spending related to the Olympics.

Exchange Rate Impact:

  • FX Drag: 0.5 point versus the 1.5 point benefit that was expected.
  • Pismo Impact: Approximately 1 point drag.

Stock Buyback and Dividends:

  • Buyback: Approximately $4.8 billion in stock was bought back.
  • Dividends: Distributed over $1 billion in dividends to stockholders.
  • Remaining Authorization: $18.9 billion remaining in buyback authorization at the end of June.

Recent Trends (July 21st):

  • U.S. Payments Volume: Up 4% year-over-year, with debit up 4% and credit up 3%.
  • Cross-Border Volume: Grew 13% year-over-year, below Q3 levels.
  • Processed Transactions: Grew 9% year-over-year.

Expectations:

  • Fourth Quarter:
    • Payments volume and processed transactions expected to grow at a similar rate to Q3.
    • Total cross-border volume growth expected to be slightly below Q3.
    • Currency volatility expected to stay in line with Q3 levels.
    • Incentives expected to be at their lowest growth rate all year.
    • Adjusted net revenue growth expected in the low double digits, slightly improved from the 10% adjusted revenue growth rate in Q3.
    • Adjusted operating expenses expected to grow in the high single digits.
    • Nonoperating income expected to be between $40 million and $50 million.
    • Tax rate expected to be between 19% and 19.5%.
    • Q4 adjusted EPS growth rate expected in the high end of low double digits.
  • Full Year:

    • Adjusted net revenue growth remains unchanged from the initial expectations.

    • Full year adjusted operating expense growth expected to be in the high single digit to low double digits, reflecting the less favorable impact of FX.

    • Full year adjusted EPS growth expected to be in the low teens.

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