Visa Inc. (V) on Q2 2021 Results - Earnings Call Transcript

Operator: Welcome to Visa's Fiscal Second Quarter 2021 Earnings Conference Call. All participants are in a listen-only mode until the question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host from Investor Relations, Ms. Jennifer Como and Mr. Mike Milotich. Ms. Como, you may now begin. Jennifer Como: Thanks, Jordan. Good afternoon, everyone, and welcome to Visa's fiscal second quarter 2021 earnings call. Joining us today are Al Kelly, Visa's Chairman and Chief Executive Officer; and Vasant Prabhu, Visa's Vice Chairman and Chief Financial Officer. This call is being webcast on the Investor Relations section of our website at www.investor.visa.com. A replay will be archived on our site for 30 days. A slide deck containing financial and statistical highlights has been posted on our IR website. Let me also remind you that this presentation includes forward-looking statements. These statements are not guarantees of future performance, and our actual results could differ materially as a result of many factors. Additional information concerning those factors is available in our most recent reports on Forms 10-K and 10-Q, which you can find on the SEC's website and the Investor Relations section of our website. For non-GAAP financial information disclosed in this call, the related GAAP measures and reconciliation are available in today's earnings release. And with that, let me turn the call over to Al. Al Kelly: Jennifer, thank you and congratulations on your second anniversary with Visa. Good afternoon, everyone. And thanks for joining us today. I'm going to provide a few quick stats on the quarter and then share my thoughts on what's ahead as the world continues to recover. The recovery is going to take many different shapes and the timing will differ around the world based on vaccination rollouts and the easing of restrictions. But we believe we're at the beginning of the end of the pandemic. And the recovery is well underway, at least in a number of markets. First, Q2 results, revenue declined 2% year-over-year, but would be slightly positive at 20 basis points if service revenues were recognized on current quarter payments volume. Non-GAAP EPS was $1.38, a decrease of 1%. When looking at volumes and transactions growth, keep in mind that we're now lapping the start of the pandemic as growth rates are now less indicative of performance and the business trajectory. We're going to also provide some metrics compared to 2019 on a constant dollar basis. So payments volume grew 11%, improving seven points from Q1 and reached 116% of 2019, which is up three points from Q1. Cross-border volume excluding inter-Europe declined 21%, but improved 12 points from Q1 and it's 75% of 2019 levels, three points better than Q1. Process transactions growth of 8% improved four points from Q1 and represented 116% of 2019, which is consistent with the first quarter. Vasant Prabhu: Thank you, Al. Good afternoon, everyone. Our fiscal second quarter results were stronger than we expected with net revenue down 2% largely due to improving cross model volumes and lower than expected client incentives. GAAP EPS was flat to last year and non-GAAP EPS declined 1% helped by a lower tax rate. Exchange rate shift increased net revenue by 0.5 point, but lower EPS by 0.5 point due to currency related benefits in the second quarter last year. As Al mentioned, as we lacked the most significant COVID-19 impact, starting in March, 2020, year-over-year growth rates are not the best indicator of the underlying trend. To help you better assess what the magnitude and the trajectory of the recovery so far, they also provided growth rates for key performance metrics relative to fiscal year 2019. In constant dollars, global payments volume year-over-year growth was over 11% fueled by continued strength in debit, as well as improving credit spending. Compared to the corresponding quarter in 2019, the other payments volume was 16% higher, but 3 point acceleration from the first quarter. Excluding China, total payments volume growth was 13% or 20% higher than 2019 as Chinese domestic volumes continue to be impacted by dual branded card conversion, which have minimal revenue impact. U.S. payments volume growth was 18% and up 24% from 2019 benefiting from economic impact payments in early January and mid-March, as well as the relaxing of COVID-related restriction in many States partially offset by bad weather lowering spending in mid-February. Even after adjusting for economic impact payments, U.S. payments volumes have bounced back to the people that trend line. Debit growth accelerated 13 points to 34%, up 44% from 2019 boosted by the two economic impact payments in this quarter. Credit growth of 2% up 6% from 2019, the credit improvement of health by increases in retail, travel, restaurant and entertainment spending mostly starting in early March as restrictions were relaxed in many States. It is important to note that credit has improved without debits volume pointing to accelerated cash displacement. Card not present volume excluding travel continued to grow over 30% in the quarter and what 55% about 2019 levels primarily driven by retail spend. The most notable sign of a domestic recovery was card presence spent growing 4%, which is up 3% over 2019 and 8 point acceleration from the first quarter led by retail and restaurant spending. Improving card presence spending did not slow e-commerce indicating that e-commerce trend is likely to continue even as card presence spent recovers. International constant dollars payments volume growth was 6% up 9% from 2019 a few regional highlights. CEMEA remains our fastest growing region, growing 26%, up 50% from 2019 levels. The easing of COVID-related restrictions, particularly in the Middle East and Russia, as well as 0:25:52 drove the robust growth. Latin America grew 23%, up 40% from 2019, but consistently strong performance across the region mostly fueled by accelerating e-commerce adoption and usage as well as client wins. Europe grew 2% up 8% from 2019, but decelerated from the last quarter, as many countries put significant COVID restrictions in place, particularly the UK, France, Italy and Germany. In Asia-Pacific, excluding China, second quarter spending grew 4% up 8% from 2019. Performance across the region vary based on the level of COVID restrictions that markets like New Zealand and Singapore growing strongly by markets like Hong Kong and Japan, which had restrictions for most of the quarter the weaker. Global profits transaction growth was 8% up 16% from 2019 lagging volume growth due to higher ticket sizes, particularly in the U.S. and significant code restrictions in Europe. Visa direct continues to perform well. The transaction is growing almost 60% globally this quarter, consistent for the first quarter. The cross model volume recovery continued despite most models remaining completely or partially closed. Constant dollars cross model volume excluding transactions within Europe declined 21% in the second quarter, another 75% of 2019 volumes. Looking at the trajectory versus 2019, this was a feed point improvement from the first quarter. We’re seeing the typical seasonal uptake in March and into April, which is a positive sign as we look ahead to the summer. Card not present excluding travel volume continued to be very strong growing 28% year-over-year, up 44% from 2019 driven mostly by retail spending and some benefit from cryptocurrency purchases. Cross model travel-related spend declined 55% year-over-year and more than 39% of 2019 levels. Card presence spend as a percentage of 2019 expanded 3 points versus the first quarter. Some color on the state of cross model travel as we approach the important summer travel season. Travel to and from the U.S. and Latin America is the best performing corridor almost at 90% of 2019 levels by March. Help by U.S. travel, travel into Latin America in general has recovered to over 80% of 2019. Travel between Russia and neighboring countries, as well as travel in and out of the Gulf States has helped CEMEA cross model travel to recover two-thirds of its pre-COVID volume. Cross model travel in and out of Asian countries remains very depressed down almost 75% versus 2019 and flat lining for the past six months. Travel into the U.S. an important corridor for us, but also down 70% versus 2019 in March, but hasn’t been recovering slowly. The significant U.S., Canada border restriction travel is still down about 80% relative to 2019 in this corridor. As Europe has increased COVID restrictions, travel in and out of Europe remain hard hit down over 50% versus 2019 in March. Moving now to a quick review of second quarter financial results. Net revenue declined 2% as we recognized service revenues on current quarter payments volume, net revenue growth would have been slightly positive. Service revenues grew 8% helped by small pricing modifications. Data processing grew 11% with strong value-added services growth continuing to be partially offset by the mixed shift away from higher using cross-border transactions. International transaction revenues were down 19% in line with nominal cross-border volume, excluding Intra-Europe. Other revenues were flat, negatively impacted by low usage of travel related card benefits and client marketing projects pushed to later in the year, while advisory services continued to grow strongly. In total, value added services revenue continue to perform well growing 14% with strong growth in CyberSource security and identity solutions. This quarter, we reclassified some prior period travel related card benefits as value-added services. And as such, our previously reported first quarter revenue growth would have been similar to the second quarter on a comparable basis. Prime incentives were 25.8% of gross revenues, lower than expected due to better than cross-border volume lifting gross revenue and lower Europe and Asia Pacific volumes benefiting client incentives. Non-GAAP operating expenses grew 3% in line with expectations. Recorded gain from our equity investments of $156 million. Excluding investment gains non-GAAP non-operating expense was $109 million for the fiscal second quarter, below our expectations, primarily due to benefits, one of which is offset in personnel expenses and the other is related to the completion of certain tax audits. These completed audits also benefited our GAAP and non-GAAP tax rate with a non-GAAP tax rate lower than expected at 16.8%. GAAP and non-GAAP EPS was $1.38. We bought 8.3 million shares of Class A common stock at an average price of $208.51 for $1.7 billion this quarter. Including our quarterly dividend of $0.32 per share returned approximately $2.4 billion of capital to shareholders in the quarter. Turning from the past to the future, I’ll start with key business driver trends through April 21. As we look at these weekly trends, keep in mind, three key factors. One, year-over-year growth is napping the 2020 lows in many cases. Two, the timing of Easter is impactful. Three, in the U.S., there are peaks in debit spending when economic impact payments are deposited in people’s bank accounts. Through April 21, U.S. payments volume growth was 64% with U.S. debit growing 67% and credit up 61%. Compared to 2019, U.S. payments volume, debit and credit were up 29%, 51% and 9% respectively, all consistent with the March trend. Looking outside the U.S., trends versus 2019 are relatively stable, notable exception is included the UK improving as restrictions relaxed, while India is slowing as restrictions increase. Profits transaction growth was 58% up 16% from 2019, which is consistent with the second quarter. Cross border volume excluding transactions within Europe on a constant dollar basis grew 63% and more than 78% of 2019, which is three points above the second quarter and one point above March. As we look ahead, there are several positive cross border travel indicators to highlight. Travel bubbles were being created. Australia, New Zealand is already in place with an immediate and substantial uptick in bookings. Hong Kong, Singapore is starting in late May with more likely. So far, all indications are that some popular tourist destination in Southern Europe will be open for the summer and bookings are trending well. Just this week, it was announced that Europe’s border will be open to vaccinated visitors from the U.S. this summer. As a U.S. vaccination program moves along fast, it is possible that travel to and from the U.S. will gather momentum into the summer. Airlines are adding capacity in anticipation. The trajectory of the cross-border travel recovery remains a key metric to watch. We will be monitoring all leading indicators, using a border restriction for the bookings, as well as surveys of consumer intention and we’ll update you as we learn more. As the previous quarters, accurate forecasting is difficult in this fast changing environment. Assuming stable to improving trends relative to FY2019 continue, Q3 net revenue growth is expected to be in the high teens. The cross border travel recovery trajectory will be the key factor to watch. Client incentives as a percent of gross revenue are expected to increase 1 to 1.5 points above the second quarter level as client volumes grow significantly over the last year low. And so this fees are recognized that the quarter lag. We plan to increase operating expenses in the mid-teens in the third quarter, as we step up investments on marketing and key initiatives to capture the significant growth opportunities Al described. We expect non-operating expense to be around $130 million consistent with the second quarter, excluding the non-recurring impacts I mentioned earlier. Our tax rate expectations are 19% to 19.5%, again, consistent with last quarter’s expectations before the tax audit completions in the second quarter, I mentioned earlier. In closing, we’re stepping up our investments to drive accelerated growth in a post COVID world. A few points to highlight. Our net revenue on profit by the fiscal year 2019 levels, even as the rebound in travel, especially cross-border travel still remains ahead of us after the world is vaccinated and borders reopen. That a significant pent up demand for travel in particular, personal travel. Large swaths of new consumers worldwide have been introduced to the ease, convenience and security that digital payments can offer. This is evidenced by the significant global growth in debit as consumers abandoned cash at an accelerated pace. These are habits we believe will not only stick, but also continue to grow help my initiatives such as staff to pay. Consumers, merchants and governments globally have recognized the value of e-commerce through the pandemic. Governments are upgrading the digital infrastructure, merchants are significantly enhancing their e-commerce capabilities and more consumers are turning to e-commerce across more categories and also cross-border. We expect these trends will only accelerate. But in our new flows business, Visa Direct has continued to grow an extraordinary rates. The pandemic has expanded adoption of use cases in P2P, B2C and G2C, many use cases and markets are just starting to scale. B2B remains a huge opportunity and they’re committed to our three-pronged approach to drive growth, card based, cross-border and large enterprise accounts receivables and payables that many capabilities scaling or launching in the near future. Our value-added services have sustained high growth, despite lower usage of travel related services. That is an e-commerce acceleration have driven growth in our debit processing, security and identity and CyberSource businesses and the recovery in travel related services lies ahead. As a result, we see acceleration across all three vectors of growth in consumer payments, new flows and value added services. As Al indicated, we’re investing in the strategies and capabilities required to capture these growth opportunities. With that, I’ll hand it back to Mike for the Q&A session. Mike Milotich: Thank you, Vasant. Jordan, we’re now ready to take questions. Operator: Our first question comes from Timothy Chiodo from Credit Suisse. Your line is open. Timothy Chiodo: Thanks a lot for taking the question. I wanted to touch on the evolving mix of the cross-border business. So within cross-border, you call it out a couple of use cases for Visa Direct. Earlier you touched on remittances, you touched on marketplace payouts. But separately, we’d add to that list some of the new flows within cross-border B2B. So maybe you could just comment a little bit on the prospects for those new areas of cross-border to come into the mix and maybe the more meaningful portion over the next, call it, three to five years. Al Kelly: Well, I think as we grow out our capabilities, if you see the recovery in the pandemic. I think that these have payouts capability we just put in place, which basically brings together what was earth for. And Visa Direct is a single point of connection is going to facilitate many more use cases and make it very, very easy for, for people to spend money cross-border. And that’s kind of the high volume, lower value types of transactions. I think we are continuing to make progress in connecting more banks around the world to B2B Connect. And as we complete the grow out of that network over the next few years, I see us as having great capability to drive cross-border B2B high value, lower volume types of transactions. So I think the combination of our capabilities, what has happened in terms of continued adoption of digitization and the capabilities that we have built in and the use cases that we are working with today and anticipate adding to the mix over time. I think this is going to become an increasingly important and growing part of our business. Vasant Prabhu: A couple of things to add, before we got into the pandemic two-thirds of our cross-border business was travel related, one-third was e-commerce related. Today, in the second quarter two-thirds of our business was cross-border e-commerce, one-third was travel. It says two things, one how much our cross-border e-commerce business has grown and the second, how much recovery is left in our cross-border travel business, because Al has said, most of our cross-border travel is personal travel and there's a substantial amount of personal travel that is going to come back once border is reopened. So the traditional, cross-border e-commerce is an area of significant growth we've seen that as people move online, they become somewhat less sensitive to where the product is shipped from. And there's just a lot more cross-border e-commerce. The other use case that pulls a lot of potential is to the extent that crypto related transactions become significant and they are enabling a vast number of them. One use case that is particularly useful in either stable coin or Bitcoin type of scenarios is cross-border. And that is another new use case that could have a lot of potential in the long-term. Timothy Chiodo: Thanks, Vasant. That's exactly what I was trying to get at, the mix has certainly flipped to more e-com and there are some new flows that are coming in to keep the travel portion lower than it was pre-COVID. So thank you so much for taking the question. Vasant Prabhu: Next question please. Operator: Next question comes from Darrin Peller from Wolfe Research. Your line is open. Darrin Peller: Thanks guys and nice job. When we look at the Slide, the index to 2019 was really helpful, showing 16% up from 2019 levels. I mean, there's a lot of considerations we're getting at about including stimulus and higher savings rates, but clearly also structural changes in the industry, which – some of which we just touched on e-com, but just more going on to debit cards faster across the whole industry. How do you parse out what you see as structurally sustainable, e-commerce is a part that you mentioned, but even beyond that, just more on maybe small ticket versus what was maybe stimulus driven or near-term? Thanks guys. Al Kelly: But – I will start Darrin. First of all, I think we definitely see millions of new people coming into the e-com shoppers who weren't there before, and I don't think they're going to turn backward at all. So I think that certainly remains obviously as we get out of the pandemic, the stimulus types of money will dry up and that will go away. I think the people being concerned about cash and much more comfortable shopping online, the combination of that will continue. I think that will also see structurally much more Tap to Pay as people find that to be a more helpful way to shop. I think we're seeing governments during this pandemic become bigger clients and they're increasingly interested in showing the way in terms of digitizing more of what they do as a government and I think we'll see more of that activity taking as well. I think that, in general we had before the pandemic a very little separation in growth rate between debit and credit, in any given month or quarter, they would kind of grow within a percentage point of each other. We saw incredible separation during the pandemic as much as 40 points of differential incomes of growth. We're now seeing in this quarter credit come back a bit and then start to drift into a positive territory. But I think that at least for the foreseeable future and maybe for longer, that I think you're going to see debit continue to grow above credit, although as travel comes back that should certainly help bounce back credit buyers, particularly since most of the travel co-brand cards and many of the actual travelers tend to use credit cards. Vasant Prabhu: I mean, a couple of other things to add there is, as you know, debit has become the engine for cash digitization. And what we see in this pandemic, especially as it has gone on for quite a while, is there's often a hurdle in getting people to change habits. So people are used to using cash, getting them to use digital forms of payment, not take some time. This pandemic has called a range of changes in behavior, because there was no choice, whether it's an emerging markets, where there was a greater propensity to use cash or certain cultures, you've heard of Germany and Japan as having been very cash based economies for a very long time or habits in terms of people using cash for certain categories like food and drug that's changing, more people using more cash at the physical point of sale, as Al said, with the cash dirty risk, as well as Tap to Pay are making payments easy at the physical point of sale, we're seeing a substantial shift towards cash digitization, even at the physical point of sale. And then the point you said about smaller and smaller transactions that used to be cash moving digital, again Tap to Pay is a big engine for that and the trajectory of Tap to Pay remains very significant. And we are probably within a year of coming to the point where the U.S. will be in takeoff with on Tap to Pay to which is a very big market. Darrin Peller: Really helpful guys, thanks. Operator: Our next question comes from David Togut from Evercore ISI. Your line is open. David Togut: Thank you very much. Just bridging to Darrin’s question on structural changes, when you look at the heightened shift to e-commerce, which you've indicated will likely accelerate even post-COVID. Can you talk about your funding mix of e-commerce transactions, debit versus credit, specifically how you expect that to evolve with economic reopening, would you expect consumers to lean a little bit more heavily on their credit cards as the economy rebounds or should debit likely remain the primary funding of e-commerce transactions? Vasant Prabhu: Well, David, I think one of the incredible stories of the pandemic was that, debit has become the cash of the e-commerce world and people are doing much more everyday shopping post the pandemic than they did pre the pandemic. The amount of food orders that are placed and takeout orders that are placed, buying normal household staples that might have been, many of them were in person or the vast majority and maybe even some of them were in cash. But we're just seeing the type of transaction that typically goes along with debit is everyday spend. And so what we're seeing as a real structural change is, everyday spend is food from in-person to e-commerce in a big way. I do think though that credit will make a rebound particularly as some of the larger discretionary spending comes back in as the affluent get back into making travel reservations as the online travel agency business starts to grow. I think that there'll be a closing of the gap between debit growth and credit growth. But again, as I said to Darrin, I'm not sure that we get back to those two different card platforms growing at the same level going forward. I think we certainly closed the gap, but I think at least as far out as I'm looking right now, debit will continue to outpace the growth of credit. David Togut: Thank you very much. Vasant Prabhu: Thank you. Operator: Our next question comes from Tien-Tsin Huang from JPMorgan. Your line is open. Tien-Tsin Huang: Hey, thanks so much. You gave a lot of volume growth, a good detail here. I want to ask maybe differently about credential growth building on the last couple of answers here. It seems like everyone is trying to bank their users by giving them cards and there's a lot of new use cases around virtual cards, so I'm wondering either kind of is either out, if you're thinking about credential growth and you compare that to 2019 or are you thinking about potential for issuance or the pipeline for new cards that might be coming out globally? How does that measure it today? If you want to qualify that, is it much larger than what you would have expected, let's say pre-pandemic? Al Kelly: Well, I think the – first of all, good to hear from you. I think that the pandemic has interrupted a little bit, a real bolstering of credentials that was driven by a combination of marketplace platforms, wallets, Neobanks et cetera. I cited a number of examples in my remarks about the fact that we think that there's upwards of 2 billion more credentials out there from a lot of those types of players and we've seen, but I do it by building partnerships with numbers of Fintechs over the course of the last year or two, a tremendous amount of opportunity to grow these credentials. Either by having these players become issuers and acquirers for us, which is a very big and important trend particularly in developing countries, but also just getting currencies and credentials into some of the existing wallets. But we believe there's an enormous opportunity to grow the number of credentials. And it's something that we're certainly focused on particularly as we talked to the FinTechs, the Wallets, and then the Neobank around the world. Tien-Tsin Huang: Appreciate that. Al Kelly: Thanks Tien-Tsin. Operator: Our next question comes from Dan Dolev from Mizuho. Your line is open. Dan Dolev: Hey guys. Great quarter. Thanks for taking my question. Can you talk a little bit – you spoke a little bit about Bitcoin earlier and about the used case for Crypto and Bitcoin on cross border transactions. Can you talk a little bit about – more about that and kind of the progress you're making on settlement and stable coins and the steps you've taken on a theory. I think there's a lot of interest out there and what you guys are doing there and how it's progressing? Thank you. Al Kelly: Well, thanks, Dan. This is an interesting subject. So let me give a little bit of background to talk about where we see the opportunities. So first of all there's two market segments as we see it. No one is, are the Bitcoin to kind of, which are primarily assets held by people, they're not used much in a form of payments. We kind of think of them as the digital gold, and then there are digital currencies including central bank digital currencies and stable coins that are directly backed by existing fiat currencies, and they're definitely emerging as a payment option. And they're running on public blockchain, which is really an essence and additional network, much like an RTP or ACH might be. So our focus is on five different opportunities that we see in this space. And I would say that this is space that we are leaning into in a very, very big way and I think are extremely well positioned. The first opportunity is really at the core of what we do, which is enabling consumers to make a purchase of these currencies or Bitcoins, and we're working hard with Wallets and exchanges to just make sure we're facilitating acceptance of people's ability to use their Visa cards to buy. And besides referenced that in his remarks that we through our some increase, some of them by paying for people making these purchases on Visa card. Secondly, the second opportunity is enabling digital currency cash outs to fiat. So converting a digital currency to a fiat on a Visa credential, which then makes that those funds available for shopping at any one of the 70 million Visa merchants and gives immediate utility to the digital currency and we're the clear leader here. We've got over 35 digital currency platforms and wallets that have chosen to work with us. Coin based crypto.com, block five-fold BitPay are just some examples. And, so that's certainly the second big opportunity. Thirdly is enabling financial institutions and FinTech partners to be able to have a crypto option for their customers. So what we've done in this space is we created APIs that enable financial institution customers to purchase custody, or even trade digital currencies held by anchorage, which is the first federally charted digital asset bank in the U.S. and we've done our first rollout with first Boulevard, which is a digital Neobank focused on building generational wealth for the black community. So that's the third opportunity just helping FIS and FinTechs have this crypto option for their customers. Four point is settlement, which you started to reference, we've upgraded our infrastructure to allow a financial institution to settle with Visa in a digital currency with stable coin, starting with USDC. As you think, today we transact in 160 currencies every day, and we settle every evening in 25 currencies. So we're going to now be able to support digital currencies as an additional settlement currency on our network. And on our end, we're going to settling in USDC is pretty similar to settling in U.S. dollars, but the mechanics of receiving these funds is a bit different and requires just some integration work with several crypto custodian like players like anchorage. And then the fifth area of opportunities just working with central banks. Central bank digital currencies being explored in many nations and I think it could end up being proved to be quite valuable in countries where the infrastructure to distribute cash is either unavailable or limited. And it's one of the factors that hinders these 1.7 billion people I referred to on remarks that are outside the financial mainstream for being in the financial mainstream. So we're talking to central banks about the criticality though of public private partnership, and in particular the criticality of acceptance, because for these central bank digital currencies to have value they're going to have to both these secure in the minds of consumers and that's something we have a long track record with and can help. And then secondly, obviously they have to have some form of utility. So Dan, that's a bit about how we're thinking about crypto with our real focus on digital currencies and those five opportunities. Dan Dolev: Thank you, Al. Yes, it definitely sounds like you guys are at the forefront of these. So recharge on that. Thank you. Operator: Our next question comes from Lisa Ellis from MoffettNathanson. Your line is open. Lisa Ellis: Hi, good afternoon guys. Al, I'll use your comment there that debit is becoming the cash of online transactions as an opening task about the online debit competitive environment. Can you just highlight or describe what in your view from Visa's perspective are the advantages of Visa signature debit products over alternatives like account-to-account transfers or pinless debit for online transactions? Thank you. Vasant Prabhu: Al, I think you're on mute. Al Kelly: Sorry, Vasant. I'd better tread a little bit lightly there in light of the DOJ case, so we feel very good about our Visa debit business. We think we've got very, very good capabilities and we believe that the innovations that we have the ability to stand behind customers in disputes and other cases makes our products something that both consumers, merchants and issuers look to true. And we will continue to invest in debit for a product that we hope people use both online and in purchases around the world. Lisa Ellis: Perfect. Thank you. Thanks for covering. Operator: Our next question comes from Dan Perlin from RBC Capital Markets. Your line is open. Dan Perlin: Thanks and good evening. I in keeping with the kind of structural change being that we all seem to be on tonight. All of these new products, I'm just wondering how the long-term growth rates of the company are going to be sustainable if not accelerating from these kind of levels. You're using these indexes back to 2019, but I'm thinking back even a couple of years, it's a much larger organization. You seem to outline many potential avenues of growth. So I'm wondering, are you at a point now where there is just this pivot in the actual business itself where it constructionally grow faster than they did over the next five to 10 years, then maybe you did over the prior five to 10 years, just given all of the new constituents that you're ultimately servicing these days? Al Kelly: Well, Dan, we don't typically get into forecasting out that far, but obviously you hopefully got a good sense in my remarks that we feel like we have three very strong growth drivers and we think each of them has tremendous gas left in the tank. We – and our consumer payments which has been our staple for years still has huge upside, you're back to Tien-Tsin’s question about credentials growth. We think there is tremendous amount of growth in credentials, we think there is tremendous amount of growth in acceptance footprint. We think there is a tremendous amount of growth when we look at various geographies, and we look at the 1.7 billion people that are outside the financial mainstream. When we look at new flows there is $185 trillion of opportunity there. So we think we've got two big efforts going in both B2B and Visa directed to take advantage of those. And value-added services is relatively new as well, but we've got to – in terms of how we talk about it, we've had many value-added services or capabilities or solutions for years and they've always contributed well to our revenue, but we were increasingly been focused on them the last two years. And we’re driving a lot more revenue and higher revenue growth than we had in consumer payments through value-added services. And so we think there is still a tremendous amount of upside there, I commented about the fact that we're getting high usage from a lot of our clients, but there is still a huge amount of room to grow with existing – with clients that are already using value-added services, as well as clients that are not assuming as many of their value-added services. So I look ahead and say the future is very, very bright and adding on top of that a lot of what we've talked about in terms of digitization and the fact that we will come out of this pandemic and we'll start to see travel recover all of those are extremely good trends for us. Dan Perlin: Excellent. Thank you so much. I appreciate it. Operator: Our next question comes from Harshita Rawat from Bernstein. Your line is open. Harshita Rawat: Hi, good afternoon. Thank you for taking my question. My question is on the growth in buy now, pay later. In a very long time horizon, how do you see the NPL coexisting with credit and debit? And I know it’s globally very small right now, but the growth rates are very interesting. Given your partnerships with the NPL providers your installment relations, it’s a growth here as it's growing opportunity from your perspective. Thank you. Al Kelly: I don't know where installments is going to end up, but we are attacking that, like we attack crypto and other things and assuming that it's going to be successful and that we want to lean in heavily and be in the middle of it and be a driver of what's going to potentially happen. As you alluded to, we have both strategy working with third-party providers as well as offering our own Visa proprietary platform that would allow issuers to offer their own buy now, pay later capability. And we see it as potentially having a very, very good effect for us. I mean, we could see – we could work with a whole bunch of options, virtual cards from Visa could be used for repayments, a Visa card on file could be used for repayment, we could explore Visa Direct as a way for installments to be paid off. And in many of those cases, if that's the case, what ends up happening is a single purchase turns into a number of installments. So that one transaction can end up being three to four or five payment transactions, which is certainly very, very good for us. We also think that this is a space where we can sell value-added services, data analytics broadband providers underwriting for example are risk products to help some of the third-party provider. So we’re doing a lot in this space, we're committed to it, there are countries where it has taken off, there is other countries where it's nascent. Again, I can't predict exactly where it's going to land, but we are going to the degree that it takes off, we're going to be there to be part of it. Harshita Rawat: Great. Thanks, Al. Operator: Our next question comes from Jamie Friedman from Susquehanna. Your line is open. Jamie Friedman: Al, in your prepared remarks, you talked about the trajectory and the spend per card, I was hoping you could elaborate on that. How you see that evolving, I would think with the recovery of travel, there would be more gas in the tank, there as well? But anything you have on spend per card, would appreciate it. Thank you. Al Kelly: Well, in my remarks, what I believe I referenced was that in travel, we were seeing higher spend per card versus seeing more people active. And while we haven't been able to study that, what we think is happening is that with – in places that people can travel, there tend to be also just less restrictions. And that's just opening up more options for people to actually spend. And for instance instead of doing takeout, go to a restaurant and eat a more expensive meal or a nice bottle of wine and et cetera. So I think that right now, what we're seeing is simply higher spend per card in terms of travel. We haven't commented on spend per card beyond that. Jamie Friedman: Got it. Thank you. Al Kelly: One last question, Jordan. Operator: Our last question comes from Jason Kupferberg from Bank of America. Your line is open. Jason Kupferberg: Hey guys. Thank you. I was just curious if you could share with us some of your underlying assumptions for the different gross revenue lines, if we look at the high teens revenue growth outlook for the June quarter, I know there is a lot of moving parts in the macroenvironment, it just seems like high teens could maybe be conservative based on what you've seen in April so far, even though I know the comps won't be as easy in May in June. So would just love to hear more about how you're thinking about the different pieces of gross revenue, because you outlined the rebate piece pretty clearly. Vasant Prabhu: On revenues – high teens is our best estimate. Service revenues as you know were recognizing with a quarter lag. So the service revenues you've seen in the third quarter remember will not reflect the revenues related to the volumes in the third quarter. So the third quarter will have a big ramp in volumes as you're seeing, because we're lapping, but the revenues in service fees will reflect the revenues from the volumes in the second quarter, it's important to remind people of that. In terms of the cross border business, I think you see what the trends are. In terms of transactions, I think the trends are fairly stable at this point quarter-over-quarter. A point to make on incentives, it's important for you to note that last year third quarter was when our incentives were really hit because volumes declined, even though we recognized and received that allowed – our incentives are recognized in the quarter based on quarter volumes. So this quarter we'll see a big ramp in volumes relative to last year, which are going to cause incentives to go up a lot and be compared to a quarter last year where they went down. The second thing is, we have these incentives tied to certain thresholds being achieved last year because of all the drops, thresholds were not achieved, this year we're resuming the ability, so you get an additional amount of incentive, because clients are going to hit certain thresholds. So you have to factor in the fact that year-over-year incentives growth is going to be quite high in the third quarter and factor in the fact that we won't have the benefit of the volumes in our service fees because of the lag. So you should make sure you have all that as you think about our third quarter revenue growth. Jamie Friedman: Right, okay. Well, thank you for all the color. Al Kelly: And with that, I'd like to thank everyone for joining us today. If you have additional questions, you can always reach out to myself or Jennifer and we're happy to help you. So thanks so much and have a great day. Operator: Thank you for your participation in today's conference, you may disconnect at this time.
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Visa Inc. (NYSE: V) Continues to Dominate the Payments Industry

Visa Inc. (NYSE: V) is a global leader in the payments processing industry. Founded in 1958, Visa went public in 2008, raising $17.9 billion in what was then the largest public offering. The company has maintained a dominant position in the payments industry, even as it faces competition from other major players like Mastercard and American Express.

On June 2, 2025, Matthew Coad from Truist Financial set a bullish price target of $400 for Visa. At the time, Visa's stock was trading at $363.13, suggesting a potential increase of approximately 10.15%. This optimistic outlook aligns with Visa's recent developments, including a surge in the adoption of its "Tap to Phone" technology and a new scam disruption initiative.

Visa's fiscal second-quarter results exceeded Wall Street expectations, reflecting strong consumer spending. The company also announced a $30 billion share buyback plan, which has helped the stock remain resilient amid economic uncertainties. This buyback plan is a strategy where a company purchases its own shares from the marketplace, reducing the number of outstanding shares and often boosting the stock price.

Visa's stock recently reached an all-time high above $369, marking a 15.6% increase since the start of the year. Currently, Visa's stock is trading at $363.03, with a slight decrease of 0.59% today. The stock has seen a low of $359.96 and a high of $364.05 in today's trading. Visa's market capitalization stands at approximately $704 billion, reflecting its significant presence in the global market.

Truist Launches Coverage on Visa With $400 Price Target, Citing Defensive Strength

Truist Securities initiated coverage on Visa (NYSE:V) with a Buy rating and a $400 price target, pointing to the payment giant’s resilient earnings profile and appeal as a defensive investment, even during periods of economic uncertainty.

Analysts highlighted Visa’s ability to deliver mid-to-high single-digit earnings growth even in a downturn, supported by its diverse revenue mix, including stable value-added services and brand fees tied to essential consumer spending. Additionally, the firm noted Visa's flexibility to manage costs—such as by scaling back marketing—and its robust buyback activity as further buffers during economic slowdowns.

While Truist sees a potential drag from softer cross-border spending, which led to slightly below-consensus forecasts, they view the current valuation as compelling. With investors seeking safety in uncertain times, Visa’s profile could support a higher relative multiple. The $400 price target reflects a 30x multiple on 2026 EPS, translating to a PEG ratio of approximately 2.3x based on an expected 13% earnings growth rate in 2027.

Visa Tops Q2 Estimates and Unveils $30B Buyback

Visa (NYSE:V) delivered better-than-expected fiscal second-quarter results, powered by robust gains in payments and cross-border volumes, and announced a massive new $30 billion share repurchase program.

The payments giant reported earnings of $2.76 per share, surpassing analyst expectations of $2.68. Revenue rose 9% year-over-year to $9.6 billion, slightly ahead of the $9.55 billion consensus. The company benefited from strong underlying trends, including a 13% jump in cross-border volume and a 9% increase in processed transactions, underscoring continued consumer and business activity across markets.

In a show of confidence, Visa’s board authorized a new $30 billion buyback of class A common stock, adding to its already aggressive capital return program.

Visa Tops Q2 Estimates and Unveils $30B Buyback

Visa (NYSE:V) delivered better-than-expected fiscal second-quarter results, powered by robust gains in payments and cross-border volumes, and announced a massive new $30 billion share repurchase program.

The payments giant reported earnings of $2.76 per share, surpassing analyst expectations of $2.68. Revenue rose 9% year-over-year to $9.6 billion, slightly ahead of the $9.55 billion consensus. The company benefited from strong underlying trends, including a 13% jump in cross-border volume and a 9% increase in processed transactions, underscoring continued consumer and business activity across markets.

In a show of confidence, Visa’s board authorized a new $30 billion buyback of class A common stock, adding to its already aggressive capital return program.

TD Cowen Trims Visa Price Target Amid Murkier Consumer Outlook

TD Cowen lowered its price target on Visa (NYSE:V) to $370 from $382 while reaffirming a Buy rating, noting resilient payment volumes but growing uncertainty in the consumer environment.

The firm anticipates Visa’s March quarter will show steady performance, potentially in line or slightly above expectations. However, macro signals suggest the back half of the year may bring slower growth, prompting the analyst to cut revenue and earnings estimates for fiscal 2025 and 2026. Visa’s more favorable exposure to debit over credit and stronger U.S. market presence are seen as near-term advantages compared to Mastercard.

The firm believes Visa remains better positioned to defend margins, with a more agile cost-cutting approach if macro conditions worsen. Despite the revised outlook, Visa’s diversified business and ability to navigate economic headwinds continue to support the bullish long-term view.

TD Cowen Trims Visa Price Target Amid Murkier Consumer Outlook

TD Cowen lowered its price target on Visa (NYSE:V) to $370 from $382 while reaffirming a Buy rating, noting resilient payment volumes but growing uncertainty in the consumer environment.

The firm anticipates Visa’s March quarter will show steady performance, potentially in line or slightly above expectations. However, macro signals suggest the back half of the year may bring slower growth, prompting the analyst to cut revenue and earnings estimates for fiscal 2025 and 2026. Visa’s more favorable exposure to debit over credit and stronger U.S. market presence are seen as near-term advantages compared to Mastercard.

The firm believes Visa remains better positioned to defend margins, with a more agile cost-cutting approach if macro conditions worsen. Despite the revised outlook, Visa’s diversified business and ability to navigate economic headwinds continue to support the bullish long-term view.

Visa Inc. (NYSE: V) Maintains Strong Position in Payments Industry Despite Competition

  • Visa Inc. (NYSE:V) holds a significant market share with a 63% total volume and 31% more revenue than competitors.
  • Mastercard Inc. (MA) is growing faster than Visa, outpacing it in revenue growth by approximately two percentage points over a five-year average.
  • Visa's stock experienced a slight decrease of about 1.12%, trading at $335.69, with a yearly fluctuation between $366.54 and $252.70.

Visa Inc. (NYSE:V) is a global leader in the payments industry, known for its extensive network and significant market share. On March 21, 2025, Susquehanna maintained a Positive grade for Visa, recommending investors to hold the stock. At that time, Visa's stock price was $336.80, as highlighted by Benzinga.

Visa's dominance in the payments sector is clear, with 63% more total volume and 31% more revenue than its competitors. The company also boasts a ten-point operating margin advantage, thanks to its superior fixed cost leverage. Visa controls nearly two-thirds of the global market share in purchase volume, with 50% more cards outstanding than its rivals.

Despite Visa's strong position, Mastercard Inc. (MA) has been surpassing Visa in growth. Mastercard has outpaced Visa in revenue growth by about two percentage points, maintaining a five-year average advantage. This growth is driven by Mastercard's focus on faster-expanding regions and diverse revenue streams.

Visa's stock is currently trading at $335.69, reflecting a decrease of approximately 1.12% from its previous price. The stock has seen a low of $335.57 and a high of $339.30 today. Over the past year, Visa's stock has fluctuated between a high of $366.54 and a low of $252.70. The company's market capitalization is around $655.8 billion, with a trading volume of 6,667,168 shares.