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    Visa Inc (V)

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    Visa Inc. is a global payments technology company that operates one of the world's largest electronic payments networks, VisaNet, providing transaction processing services such as authorization, clearing, and settlement across more than 200 countries and territories . The company does not issue cards, extend credit, or set rates and fees for account holders; instead, it facilitates secure and efficient money movement for its financial institution clients . Visa's business activities are primarily categorized into three growth pillars: consumer payments, new payment flows, and value-added services .

    1. Consumer Payments - Focuses on increasing credentials and acceptance locations, with over 4.6 billion credentials and 150 million merchant locations globally .
    2. Value-Added Services - Contributes significantly to revenue growth, divided into issuing solutions, acceptance solutions, risk and identity solutions, advisory services, and open banking .
    3. New Payment Flows - Represents a significant growth opportunity, including business-to-business (B2B), person-to-person (P2P), and government-to-consumer (G2C) transactions, with a market potential of $200 trillion .
    Initial Price$263.79June 30, 2024
    Final Price$274.95September 30, 2024
    Price Change$11.16
    % Change+4.23%

    What went well

    • Visa is well-positioned to capitalize on open banking opportunities in the U.S., leveraging their experience in Europe with Tink. In an environment where open banking is more available, the Visa brand can be a meaningful differentiator, giving confidence to end users and data providers, and helping resolve complexities in open banking.
    • Strong growth in value-added services, with revenue up 22% in the fourth quarter. Visa continues to innovate and expand offerings, including services for both Visa and non-Visa transactions, such as CyberSource, Authorize.net, Verifi, and risk tools like Decision Manager, capturing new opportunities in the payments ecosystem.
    • Confidence in navigating the competitive and regulatory landscape. Despite the complex regulatory environment in the U.S., Visa feels very good about their ability to manage through complexity, continue to run and grow the business, and continue to innovate and serve clients.

    What went wrong

    • Visa is facing significant regulatory and litigation challenges in the U.S., including a Department of Justice lawsuit, and is not disclosing its revenue exposure to U.S. debit, creating uncertainty for investors.
    • Visa may have limited operating leverage in the future, as expenses are projected to grow at similar rates to revenues, with no commitment to grow revenue faster than expenses, potentially impacting profitability.
    • Visa's growth in the Asia-Pacific region, especially China, is uncertain due to macroeconomic conditions, and the company does not forecast the economy, potentially limiting growth in that important market.

    Q&A Summary

    1. FY'25 Growth Outlook
      Q: How will growth in '25 differ across key segments?
      A: Visa expects total revenue growth in fiscal '25 to be in the middle of their provided range, with stable trends across consumer payments, new flows, and value-added services. Growth depends on incentives, cross-border volumes, volatility, and macroeconomic conditions.

    2. Operating Leverage and Expenses
      Q: Will expenses grow similarly to revenue in fiscal '25?
      A: Visa plans to invest in significant growth opportunities, resulting in expenses growing in line with revenues. They focus on maximizing long-term growth over short-term operating leverage by investing in product development and market expansion.

    3. Value-Added Services Growth
      Q: How will Visa sustain value-added services growth?
      A: Visa will continue consistent growth in value-added services by delivering products for Visa transactions, non-Visa transactions, and beyond payments. This includes issuer solutions, acquirer solutions, risk management tools, and open banking services, fueling growth across their portfolio.

    4. Incentives and Market Share
      Q: What's driving higher incentives and rebates in '25?
      A: Increased incentives reflect Visa's success in winning new business and renewing deals globally. Significant client wins and renewals lead to higher incentives as Visa invests to secure and expand partnerships, contributing to incentives and rebates growth.

    5. October Volume Growth
      Q: What's behind the recent uptick in October volumes?
      A: The strong start in October is due to favorable days mix and lapping prior year's Regulation II impacts. However, Visa cautions that three weeks don't establish a trend, and they will continue to monitor growth.

    6. Cross-Border Revenue Dynamics
      Q: Why did cross-border revenue grow slower than volumes?
      A: Cross-border revenue growth was slower due to lower currency volatility compared to last year and decreased associated volume growth, contributing to the difference between volume and revenue growth.

    7. Competitive Environment: Pay by Bank
      Q: How does Visa view competition from pay by bank?
      A: Visa acknowledges the growth of account-to-account payments and pay by bank options like Walmart's. They believe they can add significant value to these payments and feel confident about their ability to compete and grow.

    8. Commercial Volume Outlook
      Q: What's the outlook for commercial volume growth?
      A: Despite recent deceleration due to days mix impacts, Visa remains optimistic about commercial volumes, viewing them as a significant opportunity within new flows expected to grow ahead of consumer volumes over time.

    9. Featurespace Acquisition and AI
      Q: How will AI and Featurespace impact Visa's business?
      A: Visa is excited about acquiring Featurespace, enhancing their AI-driven fraud prevention solutions. They're aggressively adopting AI internally to drive productivity and incorporating generative AI into products to differentiate and add client value.

    10. Value-Added Services for Non-Visa Transactions
      Q: How significant is VAS revenue from non-Visa transactions?
      A: While the largest component of VAS revenue is services for Visa transactions, Visa is expanding services for non-Visa transactions with platforms like CyberSource and Pismo, opening significant opportunities by addressing a broader array of payment transactions.

    11. CFPB Open Banking Rule Impact
      Q: What opportunities arise from the CFPB's open banking rule?
      A: Visa sees the new rules aligning with their support for consumer control over financial data in a secure way. Increased open banking presents opportunities to leverage capabilities like Tink to offer confident solutions to the ecosystem.

    12. US Card-Present Volume Growth
      Q: Do you expect US card-present volume to accelerate?
      A: Visa anticipates overall trends will remain stable into fiscal '25, with payment volumes and transactions expected to be similar to fiscal '24. They will monitor performance as the year progresses.

    13. APAC Outlook and China
      Q: What are your assumptions for APAC, especially China?
      A: Visa expects trends to remain stable, with APAC performance dependent on macroeconomic conditions, particularly in China. They don't forecast the economy but note that improvements in China could positively impact results.

    14. DPS and CyberSource Performance
      Q: Can you share growth rates for DPS and CyberSource?
      A: Visa is proud of progress in DPS and CyberSource but doesn't disclose specific growth rates or metrics for these businesses. They focus on continuing success in these areas.

    15. Value-Added Services Tie to Transactions
      Q: How much VAS is tied to VisaNet transactions?
      A: The largest component of VAS revenue comes from services for Visa transactions, adding value and driving additional yield. Visa is also making meaningful progress in services for non-Visa transactions, expanding their market opportunity.

    Guidance Changes

    Quarterly guidance for Q1 2025:

    • Adjusted Net Revenue Growth: High single digits (lowered from low double digits )
    • Non-Operating Income: $35 million to $45 million (lowered from $40 million to $50 million )
    • Tax Rate: around 18.5% (lowered from 19% to 19.5% )
    • Adjusted EPS Growth: Low double digits (lowered from high end of low double digits )

    Annual guidance for FY 2025:

    • Net Revenue Growth: High single to low double digits (lowered from low double-digit growth )
    • Operating Expenses: High single digit to low double digits (no change from high single digit to low double digits )
    • EPS Growth: High end of low double digits (lowered from low teens )
    • Incentives: Significantly higher year-over-year growth, with more than 20% of payments volume impacted by renewals (no prior guidance)
    • Non-Operating Income: $150 million to $200 million (no prior guidance)
    • Tax Rate: 18% to 18.5% (no prior guidance)
    NamePositionStart DateShort Bio
    Ryan McInerneyChief Executive OfficerFebruary 1, 2023Ryan McInerney was appointed as the CEO of Visa Inc. on February 1, 2023. He has 20 years of experience in the payments and consumer banking industries. Previously, he served as President of Visa from May 2013 to January 2023 and held senior positions at JPMorgan Chase .
    Chris SuhChief Financial OfficerAugust 1, 2023Chris Suh joined Visa as Executive Vice President, CFO Designate on July 10, 2023, and became CFO on August 1, 2023. He was previously CFO at Electronic Arts, Inc. and held senior finance roles at Microsoft Corporation .
    Paul D. FabaraChief Risk and Client Services OfficerSeptember 2019Paul D. Fabara joined Visa in September 2019. He leads global risk and client operations, ensuring the integrity and security of the Visa payment system. He previously held senior positions at American Express, Barclays, and Alliance Data Systems .
    Rajat TanejaPresident, TechnologyNovember 2013Rajat Taneja joined Visa in November 2013. He is responsible for technology innovation and investment strategy, product engineering, and global IT. Previously, he was EVP and CTO at Electronic Arts Inc. and held various roles at Microsoft Corporation .
    Kelly Mahon TullierVice Chair, Chief People and Corporate Affairs OfficerJune 2014Kelly Mahon Tullier joined Visa in June 2014. She leads Visa's people, communications, government engagement, and corporate services functions. She previously served as Chief Legal and Administrative Officer and General Counsel .
    Julie B. RottenbergGeneral CounselFebruary 2008Julie B. Rottenberg is the General Counsel at Visa Inc., having joined in February 2008. She oversees global legal and compliance functions. Before Visa, she was a partner at Arnold & Porter, LLP, and served as a law clerk to two U.S. judges .
    1. With the DOJ lawsuit challenging Visa's practices in the U.S. debit market, how confident are you in defending your position, and could you quantify the potential impact on your U.S. debit revenue exposure if the outcome is unfavorable?

    2. Given the increasing proliferation of account-to-account payments and initiatives like Walmart's enhanced pay-by-bank offerings, how does Visa plan to compete and mitigate the risk of disintermediation in consumer payments?

    3. Can you provide more clarity on the deceleration in commercial volumes due to days mix in Q4, and what macroeconomic factors are influencing your expectations for commercial volume growth going forward?

    4. As value-added services for non-Visa transactions become a larger part of your business, can you break down the revenue contribution from these services and how they might impact your overall transaction yields?

    5. With the CFPB's final open banking rule potentially changing the competitive landscape in the U.S., what strategies does Visa have to leverage open banking through Tink while addressing any potential headwinds?

    Program DetailsProgram 1Program 2
    Approval DateOctober 2022 October 2023
    End Date/DurationNo expiration date No expiration date
    Total additional amount$12.0 billion $25.0 billion
    Remaining authorization amount$0 $13.1 billion
    DetailsCompleted Multiyear flexibility

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: FY 2025
    • Guidance:
      • Net Revenue Growth: High single to low double digits.
      • Incentives: Significantly higher year-over-year growth, with more than 20% of payments volume impacted by renewals.
      • Operating Expenses: High single digit to low double digits.
      • Non-Operating Income: $150 million to $200 million.
      • Tax Rate: 18% to 18.5%.
      • EPS Growth: High end of low double digits.
      • Q1 2025 Specifics:
        • Adjusted Net Revenue Growth: High single digits.
        • Non-Operating Income: $35 million to $45 million.
        • Tax Rate: Around 18.5%.
        • Adjusted EPS Growth: Low double digits .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024 and FY 2024
    • Guidance:
      • Q4 2024:
        • Adjusted Net Revenue Growth: Low double digits.
        • Payments Volume and Processed Transactions: Similar growth rate to Q3.
        • Total Cross-Border Volume Growth: Slightly below Q3 levels.
        • Currency Volatility: In line with Q3 levels.
        • Incentives: Lowest growth rate all year.
        • Adjusted Operating Expenses: High single digits.
        • Nonoperating Income: $40 million to $50 million.
        • Tax Rate: 19% to 19.5%.
        • Adjusted EPS Growth Rate: High end of low double digits.
      • FY 2024:
        • Adjusted Net Revenue Growth: Low double-digit growth.
        • Adjusted Operating Expense Growth: High single digit to low double digits.
        • Adjusted EPS Growth: Low teens .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024 and FY 2024
    • Guidance:
      • Full Year Guidance:
        • Adjusted Net Revenue Growth: Low double digits.
        • Operating Expense Growth: Low double digits.
        • EPS Growth: Low teens.
      • Q3 2024:
        • Adjusted Net Revenue Growth: Low double digits.
        • Adjusted Operating Expenses: Low teens.
        • Nonoperating Income: $50 million to $60 million.
        • Tax Rate: 19% to 19.5%.
        • Adjusted EPS Growth: High end of low double digits.
      • Specific Factors:
        • Pismo: Minimal benefit to net revenue growth, 1 point headwind to non-GAAP operating expense, 0.5 point drag to non-GAAP EPS growth.
        • FX Impact: 1 point drag to net revenue growth, 1.5 point benefit to non-GAAP operating expense growth, 0.5 point drag to non-GAAP EPS growth.
      • Cross-Border Volume: Mid-teens growth.
      • Payments Volume: High single digits .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024 and Q2 2024
    • Guidance:
      • Revenue Growth: Low double-digit growth for the full year.
      • Operating Expense Growth: Low double digits for the full year and Q2.
      • EPS Growth: Low teens for the full year, high teens for Q2.
      • Non-GAAP Nonoperating Income: $350 million to $400 million for the full year.
      • Tax Rate: 16% to 16.5% for Q2.
      • FX Impact: 0.5 point drag on net revenues growth, 1 point benefit to non-GAAP operating expense growth.
      • Pismo Acquisition Impact: Minimal benefit to full-year net revenue growth, 0.5 point headwind to non-GAAP operating expense and EPS growth .

    Competitors mentioned in the company's latest 10K filing.

    • American Express: Competes with Visa's network and payment solutions .
    • Diners Club/Discover: Competes with Visa's network and payment solutions .
    • JCB: Competes with Visa's network and payment solutions .
    • Mastercard: Competes with Visa's network and payment solutions .
    • UnionPay: Competes with Visa's network and payment solutions .
    • Alipay: Operates closed-loop payment systems with direct connections to both merchants and consumers .
    • WeChat Pay: Operates closed-loop payment systems with direct connections to both merchants and consumers .
    • Zelle: A bank-offered alternative network providing a platform for faster funds or real-time payments .
    • The Clearing House: Developed its own faster payments system .
    • Early Warning Services: Operates Zelle, providing another platform for faster funds or real-time payments .