Visa : Transcript ( PDF 307 KB )

Corrected Transcript

27-Jul-2021

Visa, Inc. (V)

Q3 2021 Earnings Call

	Total Pages: 20
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Visa, Inc. (V)	Corrected Transcript
Q3 2021 Earnings Call	27-Jul-2021

CORPORATE PARTICIPANTS

Jennifer Como	Vasant M. Prabhu
Vice President, Investor Relations, Visa, Inc.	Vice Chairman & Chief Financial Officer, Visa, Inc.
Alfred F. Kelly, Jr.	Mike Milotich
Chairman & Chief Executive Officer, Visa, Inc.	Senior Vice President, Investor Relations, Visa, Inc.

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OTHER PARTICIPANTS

Tien-Tsin Huang	Darrin Peller
Analyst, JPMorgan Securities LLC	Analyst, Wolfe Research LLC
Harshita Rawat	Robert Napoli
Analyst, Sanford C. Bernstein & Co. LLC	Analyst, William Blair & Co. LLC
Ramsey El-Assal	Ashwin Vassant Shirvaikar
Analyst, Barclays Capital, Inc.	Analyst, Citigroup Global Markets, Inc.
Lisa Ellis	David Mark Togut
Analyst, MoffettNathanson LLC	Analyst, Evercore ISI
Sanjay Sakhrani	Dan Dolev
Analyst, Keefe, Bruyette & Woods, Inc.	Analyst, Mizuho Securities USA LLC

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MANAGEMENT DISCUSSION SECTION

Operator: Welcome to Visa's fiscal third 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.

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Jennifer Como

Vice President, Investor Relations, Visa, Inc.

Thanks, Michelle. Welcome to Visa's fiscal third quarter 2021 earnings call. Before we begin, we want to acknowledge the filing was a little later than usual due to an edgar issue, but hopefully you've had opportunity to review prior to the 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.

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Visa, Inc. (V)	Corrected Transcript
Q3 2021 Earnings Call	27-Jul-2021

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 reconciliations are available in today's earnings release.

And with that, let me turn the call over to Al.

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Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

Thanks, Jennifer. Good afternoon and thanks for joining us.

We had a really strong fiscal third quarter as payments volume, processed transactions, and cross-border volume all improved globally. In our time today, I will first cover our results and then discuss our performance to date across our three growth levers, consumer payments, new flows, and value-added services, but first, Q3 results.

Net revenue rose 27%, or 39% if service revenues were recognized on the current quarter's payments volume. This growth far exceeded our expectations due to the strength in the US, improving cross-border volumes, and lower than expected client incentives, largely due to deal timing. Non-GAAP EPS was $1.49, up 41%.

As we look at volumes and transactions, keep in mind that year-over-year growth rates are less indicative of performance and the business trajectory due to the COVID-19 impact. So once again, we provide metrics compared to 2019 on a constant dollar basis as well as year-over-year growth rates.

Payments volume was 121% of 2019, which is up 5 points from the second quarter and represents a 34% year- over-year growth rate. Cross-border volume excluding intra-Europe was 82% of 2019, 7 points better than the second quarter and up 53% year over year. Processed transactions were 120% of 2019, up 4 points from Q2 and up 39% year over year. Vasant will provide more color on our results, so now let me transition to progress relative to our business strategy.

Efforts across our three growth levers helped to fuel strong results while positioning us to capture future opportunities. In consumer payments this quarter, we saw favorable secular trends and had a number of wins with large issuers, co-brands, and fintechs.

Cash displacement trends continued this quarter. Globally, cash volume on Visa debit credentials, the dollar amount of cash taken out of ATMs, was 98% of 2019 levels, flat with the second quarter, while payments volume on Visa debit credentials was 140% of 2019 levels, up 5 points from Q2.

While debit remains strong and has accelerated since Q2, credit spending is now also improving. Global credit payments volume was 104% of 2019, up 4 points from the second quarter. At the same time, face-to-face payments volume trends were stable to improving, while e-commerce or card-not-present remains elevated. When we average across our top markets where we process versus 2019, we see card-present improve 10 points while card-not-present, excluding travel, improved 1 point in Q3 over Q2.

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Visa, Inc. (V)	Corrected Transcript
Q3 2021 Earnings Call	27-Jul-2021

Travel is starting to recover, both domestically and in cross-border. Again, averaging across our top markets where we process versus 2019, domestic travel spending improved more than 20 points in Q3 over Q2. Globally, cross-border travel, excluding intra-Europe, versus 2019 improved 6 points in Q3 over Q2 and exited the quarter with June at 50% of 2019.

Simply looking at the absolute levels, it was a record quarter for Visa, with $2.7 trillion in payments volume and more than 600 million payment transactions per day globally, which is up 60 million per day from the last quarter and nearly 160 million transactions per day from a year ago. And we expect much more recovery to come, especially in the areas of credit and cross-border travel.

Tap-to-pay is a key accelerator for many of these trends, including face-to-face spending in both credit and debit. We continue to see countries increasing tap-to-pay limits. For example, in Brazil, the limit was doubled five months ago, and the face-to-facetap-to-pay penetration has already more than doubled, from 6% to 14% in that short period. In the United States this quarter, we surpassed 370 million tap-to-pay-enabled cards, and we now have three cities above 25% face-to-facetap-to-pay penetration, New York, San Francisco, and San Jose.

Merchant progress continued as well. Target has doubled its tap-to-pay penetration in the last year to two out of every five face-to-face transactions. And Costco's US gas stations have reached 40% penetration in tap-to-pay payments since enabling this feature approximately six months ago.

Now shifting to clients, we continue to win with large issuers globally. Let me share a few examples from the quarter. In the United States, we're pleased to have renewed our longstanding partnership with Navy Federal Credit Union, the largest US credit union with over 10.5 million members, for a multiyear credit, debit, and processing agreement. Also in the US, Google Pay introduced a Visa virtual card that links to US Android users' Google Pay balances, enabling these users to spend their balances at stores.

In Italy, we extended our agreement with Banca Sella, part of the Sella Group, the largest private and independent banking group in Italy, for the consumer credit and commercial portfolios, with plans to launch a new innovative digital credit small business solution.

In Singapore, we're expanding our strong partnership with DBS, the largest bank in Southeast Asia. We have renewed our consumer debit partnership agreement and we will continue to grow in the DBS debit portfolio.

In Latin America, we renewed the HSBC debit portfolio, one of the top five portfolios in Mexico.

In our CEMEA region, we won the consumer credit portfolio of Qatar National Bank, the largest financial institution in the Middle East and Africa. And we renewed the credit portfolio of Saudi British Bank, one of the largest Saudi banks.

We're also building momentum as the global leader in co-brands. In the US alone, we have 7 of the top 10 co- brands. And this quarter we were pleased to renew Hyatt in the US and renew and grow the Williams-Sonoma co- brand, which will be relaunched with an expanded scope across the Williams-Sonoma brands, including Pottery Barn and West Elm.

We secured a new co-brand relationship with PayPal in Australia and MercadoLibre, the largest e-commerce retailer in Latin America. In partnership with Banco Itaú, we also won the co-brand business of Magalu, a major retailer with one of the largest co-brand portfolios in Brazil.

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Visa, Inc. (V)	Corrected Transcript
Q3 2021 Earnings Call	27-Jul-2021

Finally in the Asia-Pacific region, we secured a significant part of LINE Pay's business with the partnership renewal in Taiwan, the largest co-brand program in the country.

Fintechs are also core to our consumer payments growth, and this quarter we forged new partnerships and deepened relationships with long-time clients. I just mentioned LINE Pay in Taiwan, and we also continue to see strong momentum in our partnership with LINE Pay in Japan and with LINE BK in Thailand. Over the last year, they have added more than 2 million Visa credentials across those markets.

Likewise in India, long-time partner Paytm has issued 6 million virtual Visa debit cards. In addition, they've recently started to issue physical Visa debit cards, which they expect to ramp up over the coming months. Kakao Pay, one of the top three mobile wallet providers in Korea with more than 30 million users, recently signed on to issue Visa credit cards.

In the Middle East, we're partnering with stc pay, the fintech subsidiary of Saudi Arabia's largest telecom operator, to embed [audio gap] in stc pay wallets. More than 1 million Visa credentials have been issued since September of 2020.

Rappi, Latin America's super app with over 70 million users, has now started issuing Visa credit cards in Brazil, Mexico, Colombia, and Peru, with plans to expand to additional countries in coming months.

And in the crypto space, we recently signed three partnerships, one with Kala to partner on cryptocurrency solutions for the global unbanked, and two with crypto exchanges FTX and CoinZoom to begin offering Visa cards. We now have more than 50 crypto wallet and platforms, up from 35 in Q1, and more than the next leading network. And collectively, they drove over $1 billion in payments volume in just the last six months. While consumer payments represent a significant engine of growth, the market opportunity in new flows is 10 times greater, and we continue to make progress in our efforts.

We have several capabilities within card and B2B that have been gaining traction. Our Freedom solution enables corporates to control and monitor corporate card spending and expand to new use cases, including payables and virtual card capabilities. Across Australia and New Zealand, we have renewed our longstanding partnerships with ANZ Bank for Freedom's expense management capabilities as well as NAB and BNZ to deliver expense management and payables solutions. And in the United States, Wells Fargo will deliver these capabilities to their corporate clients as part of our partnership we announced earlier this year.

Visa's Commercial Pay, which offers a mobile app enabling virtual card issuance and management of business incidentals with enhanced data, will be part of OCBC Bank's virtual purchasing card offering in Singapore.

Visa Direct transaction growth remains robust, with nearly 0.5 billion more transactions this quarter than in the third quarter of last year. We continue to see large banks enable Visa Direct payouts for their customers, including CIBC this quarter.

In the payroll category, ADP, a leading global technology company providing human capital management solutions, recently integrated its Wisely offering with Visa Direct to provide ADP clients with a digitally enabled, convenient, and cost-effective solution for employee off-cycle payments.

In the P2P space, the WhatsApp payment feature, powered by Visa Direct and Visa Cloud Token Framework, launched in Brazil in May and we're seeing early success with a significant number of Visa credentials enrolled

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