Visa : Transcript ( PDF 220 KB )

Corrected Transcript

08-Mar-2022

Visa, Inc. (V)

Wolfe Research Fintech Forum

	Total Pages: 14
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Visa, Inc. (V)	Corrected Transcript
Wolfe Research Fintech Forum	08-Mar-2022

CORPORATE PARTICIPANTS

Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

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OTHER PARTICIPANTS

Darrin Peller

Analyst, Wolfe Research LLC

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MANAGEMENT DISCUSSION SECTION

Unverified Participant

Good morning and welcome to Wolfe Research FinTech Forum hosted by Wolfe senior analyst from payments processors and IT services, Darrin Peller.

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Darrin Peller

Analyst, Wolfe Research LLC

All right. Thanks, [ph] Sanjay (00:00:15), and good morning, everybody. Thank you very much for joining. I want to thank everyone, particularly my teammates, as well as the corporate access team, sales, everyone else here in the logistics at Wolfe for helping put this conference together. We're really proud to have more than 100 public and private companies participating in over 50 fireside chats and panels throughout the next three days.

As you know, the conference is going to be held in really a virtual manner, as well as some on-site meetings. So, we're trying to make it as hybrid as possible with the hopes that next year we'll be back to completely in-person. We expect to come away with incremental takes on a number of macro themes, including updated thoughts on some of the geopolitical implications as well as the pandemic-related impacts on the names, but I think more importantly just longer term thoughts on the latest industry themes and some of the read-throughs for the names in our coverage universe.

We're going to have a ton of key discussions on a lot of industry themes, including the likes of consumer behavior post-pandemic, obviously are going to have important implications on names like Visa, Mastercard, PayPal, Global Payments and many, many others across the space. We're going to talk a lot about cross-border and payments there. We're going to discuss buy now, pay later and have a whole panel discussion with PayPal as well as others on that.

Payback enablement, we have participants from the industry to talk about - talk us through those themes, as well as gateways, B2B payments, POS technology; Square, Shift4, Fiserv, Global, FIS and many others on that. Domestic and international acquiring and just bank technology and the evolutions that have been happening have been pretty robust and pretty quick. We also have a great VC and private equity panel that's going to be speaking

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Visa, Inc. (V)	Corrected Transcript
Wolfe Research Fintech Forum	08-Mar-2022

throughout the conference, and we'll have some great takes on whether the bid-ask spread on M&A might actually be pulling back together again given some of the valuation changes we're seeing.

For our coverage, we're going to also look for insight for a number of names in our coverage. We have the CEOs of names including Visa and Mastercard; all the merchant acquirers Global, FIS, Fiserv and the new CEO of Western Union, along with CEOs and CFOs of many other names, Shift4, PayPal, [indiscernible] (00:02:31) and others that are going to be meeting or presenting in the conference. We're looking for some incremental takes, especially given the magnitude of volatility in our coverage.

Speaking of volatility, valuations across many of our names are hitting pretty low levels given these elements of uncertainty in the market. Our coverage spread to the market multiple based on next 12-month [ph] CE (00:02:49) is at 118% of the S&P market multiple versus the typical, where our space will trade at about 42% premium to the market if you go back historically. Said another way, we're at about a 3 multiple point turn premium to the market versus usually trading between 7 and 10 turns above the market multiple.

And you're seeing that the compounders, the names that have free cash flow and you can rely on earnings growth versus just revenue and no EBITDA earnings at this point, those are the names trading at 1 times of their growth rate on a gross profit [indiscernible] (00:03:26) gross profit basis versus the growth stocks that are only at 0.3 right now, guys, 0.3 relative to what used to be about 0.8 to 0.9 times growth. So, keep that in perspective when you look at [ph] the rating (00:03:39) that's happened.

And lastly, I'll just mention FinTech compounders, historically traded 8 to 10 turns premium to the XLF, are now actually trading in line with financial stocks. That's typically been the inflection we've seen is when our space reaches parity valuations with the financial services names. It tends to bounce off those levels, and that's pretty much what we're hoping for to happen again given the volatility we're seeing.

But before we kick it off with - our fireside chat with Visa, I just want to remind you there is an opportunity for you to ask your questions virtually below. We're going to try to leave a few minutes of time at the end to read and address as many as we can. So, with that, let me start by welcoming Al Kelly, the CEO of Visa, to join us. I really, really appreciate him being here. We have Jen Como from our Investor Relations also.

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Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

[indiscernible] (00:04:28).

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Darrin Peller

Analyst, Wolfe Research LLC

Thanks for joining us. Great to have you back in-person again.

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Visa, Inc. (V)	Corrected Transcript
Wolfe Research Fintech Forum	08-Mar-2022

QUESTION AND ANSWER SECTION

Darrin Peller

Analyst, Wolfe Research LLC

Q

Well, just I think as an introduction, given how many opportunities that you have ahead of Visa, if you could just start by explaining really what you and the rest of the senior management team are prioritizing your time with, just where are you focusing most of your attention right now?

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Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

A

Again, Darrin, thank you [indiscernible] (00:04:50) thanks for having me. I think about my time and that of the senior leadership trying to think about how much time we spend externally versus internally, and I kind of have an objective for it to be about 50/50. We are predominantly out. Externally, I spend a lot of time with clients, talking to them about all kinds of things ranging from payments-related matters to things like return-to-office. It's hard to have conversations with fellow CEOs these days without talking about that topic. But also talking to government officials and talking to investors and talking to the media in many ways.

I carry a title that allows me to get access [indiscernible] (00:05:32) a big part of my job is to help our country presidents and our account executives around the world wherever I can to try to do business development, which is I think a big part of my role. And then obviously internally, I've spent a lot of time on strategy and key strategic initiatives. I am a believer that one of the most important jobs a CEO has is talent. So, I spend an exorbitant amount of time on that subject [indiscernible] (00:06:02) coaching to actually doing some training, to succession planning [indiscernible] (00:06:11). A lot of times, people ask me to interview to help break a tie or to actually [indiscernible] (00:06:21) in terms of a candidate that we really want to get with the company.

I spend a lot of time on - with Vasant and Ryan and others on investments. [indiscernible] (00:06:30) great list of opportunities, and the question is [indiscernible] (00:06:36) spread it like peanut butter and we got to replace our debts in any given course of the year. And then, we have a pretty good cadence of business reviews, [ph] Darrin (00:06:45), that we do both in terms of key initiatives and financials. And then, there's the kind of transactional firefighting that goes on. We, being a global company doing business in the number of - I think it's 240 countries and territories around the world and something seems to go wrong every day. And certainly, I've spent the better part of my last 10 days on the situation, for instance, in Ukraine and Russia.

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Darrin Peller

Analyst, Wolfe Research LLC

Q

And on that note, just before we get into a further discussion on strategy, you've provided some disclosure on the exposure to Russia and Ukraine. If you could just revisit that and what's included in that, and maybe higher level thoughts on the impact of the invasion in Ukraine to your business be it maybe cross-border or macro overall or any other thoughts.

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Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

A

So, first to maybe back up and talk about kind of our decision-making process, we - over the last number of days, it's become very obvious that it's becoming more and more challenging to actually operate in-country in Russia. Secondly, obviously, we're concerned about the actions taken by the Russian government and wanted to make

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Visa, Inc. (V)	Corrected Transcript
Wolfe Research Fintech Forum	08-Mar-2022

sure that we were being very cognizant of the fact that it was not something that we, in any way, would think was anything [indiscernible] (00:08:03). And thirdly, we looked at where this is going and the writing on the wall and concluded that we were much better off maybe going through an orderly wind-down of our business in Russia than being forced into a next round of sanctions, where we would have to, in a haphazard and fast manner, unwind the business perhaps in 24 hours or less. And I think our strategy is panning out well. Our settlement for example is going smoothly, and frankly, it's business as usual. So, I think that this idea of an orderly wind-down is a very smart move on our part.

In terms of impact, what we said is that Russia domestically as well as inbound and outbound cross-border represents about 4% of our revenue, and Ukraine, on the same dimensions, is a little less than 1% of our revenue. And obviously, over time, there'll be offsets to that [indiscernible] (00:09:14). We're going to have some incremental expense in the short-term as we're extremely focused on employee safety. We have 155 employees in Ukraine and a little over 200 in Russia. And our North Star on this from the beginning as an executive team is to make sure that we do everything and anything that we can to help our colleagues, and that has included hiring a number of security people to help us migrate out of range as many of our employees and their families that want to do it. And it's been gut-wrenching, Darrin, to witness this, because as you probably know, men [indiscernible] (00:09:57) half men, half women. Men between 18 and 60 can't leave the country.

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Darrin Peller

Analyst, Wolfe Research LLC

Yeah, yeah.

Q

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Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

A

And even now [indiscernible] (00:10:05). So, if we want to take a family out of Ukraine - I'm sorry, out of Kiev, just to take them to the Western part of Ukraine, the fact of the matter is [indiscernible] (00:10:15) because there are so many checkpoints now. At a checkpoint, if there's a man who's eligible to be [indiscernible] (00:10:22), the entire car or van will be turned around and sent back. So, I think we're doing all the right things in what is, I believe, a difficult and challenging situation.

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Darrin Peller

Analyst, Wolfe Research LLC

Q

Yeah. All right. Maybe we can shift gears and just talk about some of the recent trends that we saw that came out of February [indiscernible] (00:10:43) there were obviously some notable points that we saw. Credit continued to outpace debit. We saw international start to show some traction in markets like India, Canada and Brazil, and obviously, we saw cross-border looking in the right direction. I think it was at 81% of 2019 levels again, reaching back to peak levels we saw in December. I guess just to start off with what you'd expect, is that in line with what you would have expected to see when you guys started off the year coming out of the pandemic hopefully and just think about what we should expect going forward [indiscernible] (00:11:15)?

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Alfred F. Kelly, Jr.

Chairman & Chief Executive Officer, Visa, Inc.

A

Well, I think that really last summer, we started to see the beginnings of a pretty robust recovery and everything was going quite smoothly until the Omicron variant that showed up kind of right after the US Thanksgiving. And what you really did see was about a four or five-week hiccup - of impact from the very Omicron variant kind of mid-December to mid-January. But in the same 8-K that you referred to that we issued last Wednesday, in

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