Visa : Transcript ( PDF 342 KB )

Corrected Transcript

27-Apr-2021

Visa, Inc. (V)

Q2 2021 Earnings Call

	Total Pages: 21
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Visa, Inc. (V)	Corrected Transcript
Q2 2021 Earnings Call	27-Apr-2021

CORPORATE PARTICIPANTS

Jennifer Como	Vasant M. Prabhu
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

Timothy Chiodo	Lisa Ellis
Analyst, Credit Suisse Securities (USA) LLC	Analyst, MoffettNathanson LLC
Darrin Peller	Daniel R. Perlin
Analyst, Wolfe Research LLC	Analyst, RBC Capital Markets LLC
David Mark Togut	Harshita Rawat
Analyst, Evercore ISI	Analyst, Sanford C. Bernstein & Co. LLC
Tien-Tsin Huang	James E. Friedman
Analyst, JPMorgan Securities LLC	Analyst, Susquehanna Financial Group LLLP
Dan Dolev	Jason Kupferberg
Analyst, Mizuho	Analyst, Bank of America Merrill Lynch

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MANAGEMENT DISCUSSION SECTION

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.

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Jennifer Como

Investor Relations, Visa, Inc.

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.

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Visa, Inc. (V)	Corrected Transcript
Q2 2021 Earnings Call	27-Apr-2021

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.

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Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

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 7 points from Q1 and reached 116% of 2019, which is up 3 points from Q1. Cross-border volume excluding intra-Europe declined 21%, but improved 12 points from Q1 and is 75% of 2019 levels, 3 points better than Q1. Process transactions growth of 8% improved 4 points from Q1 and represented 116% of 2019, which is consistent with the first quarter.

This quarter, we continued to make progress across our three growth levers. First, consumer payments. In Asia- Pacific, we renewed our partnership with Rakuten Card, a subsidiary of Rakuten Group, the largest e-commerce marketplace in Japan. In Korea, Visa won the first hotel chain co-brand in the country with Marriott and Shinhan Card, Korea's largest issuer. In China, we renewed our credit portfolios with CITIC Bank and Agricultural Bank of China, two of the top 10 largest banks in the country.

Also on the co-brand front, in Brazil, Samsung, in partnership with [ph] Banco Itaú, (4:18) will issue their inaugural co-brand in Latin America with Visa targeting Samsung's 57 million Brazilian users. In Europe, Visa won incremental business with BNP Paribas Fortis in Belgium. This expands our relationship to include 4 million debit cards in addition to our existing credit relationship. In Switzerland, we gained significant traction in growing Visa Debit. Since January of 2019, we have signed 13 new debit deals representing an incremental 2.6 million cards.

In new flows, Visa Direct transactions grew almost 60% in the second quarter. We're pleased to have clients going live now with Visa Direct Payouts which offers a flexible set of APIs for Visa partners globally to use a single point of connection for push payments to cards and accounts. MoneyGram, Goldman Sachs Transaction Banking, Standard Chartered Bank Hong Kong, and KyckGlobal are among the first to start utilizing Visa Direct Payouts for B2C, cross-border P2P, and B to small B payouts.

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Visa, Inc. (V)	Corrected Transcript
Q2 2021 Earnings Call	27-Apr-2021

A few additional highlights on specific Visa Direct use cases include that in the marketplace - in marketplace payouts, Airbnb, which now has 4 million hosts globally, will offer host payouts using Visa Direct in select markets. In cross-border P2P, Remitly, a top digital remittance fintech, has renewed its Visa Direct relationship building upon the past three years of partnership. And monobank in Ukraine enabled cross-border P2P to their 1.7 million cardholders.

In payroll category, the Earned Wage Access use case continues to grow with 25 Earned Wage Access platforms now offering Visa Direct for fast and convenient access to employee earnings. G2C continues to grow as well. Global Blue, a leading tax-free shopping solutions company covering 52 countries and 35 million tax-free transactions in 2019, is utilizing Visa Direct to distribute tax refund payments across Europe.

Separate from Visa Direct, we supported the US government's disbursements of economic impact payments to nearly 13 million Visa prepaid credentials in the US so far this year.

And now to our third growth lever, value-added services, we're continuing to see strong adoption. Let me highlight a couple of examples.

For Cybersource - Planet, a European acquirer and payments service provider that delivers payment processing and currency conversion solutions to over 600,000 merchants, will be partnering with Cybersource to simplify payments across the hospitality, food and beverage, and retail sectors.

KeyBanc, a top US acquirer, will begin to offer Cybersource to its merchant clients. And as e-commerce continued to grow, Decision Manager, a key risk offering of Cybersource, increased transactions over 30% fiscal year-to-date.

Our other risk, fraud, and authentication capabilities grew as well. For example, we've now crossed the 2 billion token milestone, up from 1.4 billion tokens just in September. One of our key authentication capabilities, CardinalCommerce, grew revenue almost 50% year-over-year this quarter by rapidly expanding beyond its US origins. In the next year, we plan to more than double our clients in Europe and Central Europe, Middle East and Africa.

So while the pandemic has disrupted the world, it has not changed our strategy. In fact, it has reinforced our belief that our three areas of focus will deliver robust growth for years to come.

As we look ahead, with COVID recovery underway, a few key important realities. Mainly, the way consumers feel about e-commerce, cash, and travel will particularly impact Visa.

The pandemic has accelerated e-commerce. Global card-not-present credentials excluding travel grew over 20% in the quarter versus last year. Our growth in card-not-present payments volume excluding travel has averaged at least 30% in the United States, Canada, Brazil, United Kingdom, Italy, Germany, India and Singapore over the last three quarters, and in global cross-border excluding intra-Europe, it's averaged 20% growth.

We believe this shift is likely to persist as the convenience of e-commerce is indisputable and its growth continues to be robust even as card-present begins to return.

In March, in the United States, as some states loosened transactions, card-present as a percentage of 2019 spend improved 11 points versus February. While at the same time, card-not-present excluding travel still expanded 8 points.

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Visa, Inc. (V)	Corrected Transcript
Q2 2021 Earnings Call	27-Apr-2021

If you look at that in Japan, where restrictions were also lifted, card-present improved 6 points, and card-not- present excluding travel still improved 4 points in that same comparison between March and February.

The pandemic has accelerated the digitization of cash, and we see the impact in debit and tap-to-pay. When we look at cash usage in the last 12 months just on the Visa brand, such as with ATM withdrawals, we see that global debit cash volumes have decreased by 7%, while debit payment growth has grown - payments volume has grown 16%, both on a constant dollar basis. This 20-point gap is more than double the historic gap in growth rates and relatively consistent globally, demonstrating cash digitization in both mature and emerging regions.

Overall, Visa tap-to-pay transactions have grown over 30% year-over-year in March. In Europe, less than a year since contactless limits increased across the region, Visa has seen 1 billion additional touch-free transactions.

In the United States, one in 10 face-to-face Visa transactions are now done with a tap. More than a two times increase since the beginning of the pandemic. In New York City, the penetration is nearly 30%, demonstrating the potential of focused issuance and merchant enablement along with transit. In the past three years alone, we've enabled nearly 250 transit systems globally and we can see based on our research that enabling tap-to-pay on transit can bring more than a 15% lift in transactions for merchants in the surrounding neighborhoods.

The decline in travel is temporary, and we're starting to see some early signs of recovery. Cross-border travel- related spending excluding intra-Europe improved from Q1 driven by two factors. First, those who are abroad are spending more, likely because of fewer restrictions. This quarter, essentially all of the cross-border travel spend improvement was driven by higher spend per card rather than more active cards.

Second, we continue to see strength from countries with open borders. For example, US to Mexico volume was almost 20% above 2019 levels for the quarter. We also saw several top corridors between the US and Latin America improve by more than 10 points through the quarter versus 2019.

Travel will certainly take more time to recover than other sectors, but we believe personal travel in particular will

come back, and that's good for Visa for two primary reasons. One, because the vast majority of the travel we capture on our credentials is consumer, and two, we are the (sic) [a] global leader in travel co-brands.

With the backdrop of travel cash digitization and e-commerce, let's briefly explore the future potential of our three growth levers.

In consumer payments, in the last two years, we've grown our credentials to 3.6 billion and physical merchant locations to over 70 million, up 7% and 34%, respectively. And remember that our merchant locations only count our partners like PayPal and Square each as one. That said, there's ample opportunity as we focus on specific regions and partners.

Looking at regions, even with our leading position in both emerging and developed markets, our market-driven approach to growing credentials is succeeding, and Europe is an excellent example. From 2018 to 2020, we grew active card credentials by 10%, and looking ahead, we have line of sight to more than 25 million additional credentials across 50 clients in the next few years.

Let me cite a couple of recent partnerships that would show this rapid growth. Since fintech Revolut signed a global agreement in September 2019 selecting Visa as their lead issuing partner, they've increased the number of cards and payments volume by more than 200% through December 2020. Crypto.com has launched Visa cards

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