Visa Inc (V)

• 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. - -

• 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. -

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. -

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)