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    Visa Inc (V)

    Q1 2024 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$272.61Last close (Jan 25, 2024)
    Post-Earnings Price$265.94Open (Jan 26, 2024)
    Price Change
    $-6.67(-2.45%)

    What went well

    • Visa reaffirmed its outlook for fiscal year 2024, expecting low double-digit growth in processed volumes and transactions, indicating confidence in stable drivers and resilient consumer spending.
    • The company reported a strong 17% growth in merchant acceptance locations and sees significant opportunities ahead, targeting hundreds of millions of small businesses and leveraging mobile payments to drive further volume expansion.
    • Cross-border volumes grew 16% year-over-year, with healthy growth in both travel and e-commerce, and Visa feels positive about the outlook for this segment for the rest of the year.

    What went wrong

    • Visa's U.S. payment volumes growth slowed down by about 80 basis points from Q4 to Q1, partly due to a "modest impact from Reg II," leading to decreased routing of transactions through Visa's network.
    • Cross-border travel-related spend growth decelerated to 16% year-over-year in January, down from higher growth rates, potentially indicating a slowdown in this revenue stream.
    • Visa's projected high-teens EPS growth in Q2 is driven by one-time tax benefits from the resolution of tax matters outside the U.S., which will not contribute to full-year EPS growth, expected to remain in the low teens.

    Q&A Summary

    1. Reg II Impact on U.S. Volume
      Q: How is Reg II affecting U.S. volumes?
      A: Visa saw a modest impact from Reg II, with U.S. payment volume growth down about 80 basis points from Q4 to Q1. However, there have been no meaningful changes in volumes being routed away since October, and the impact remains consistent with Visa's expectations for the rest of the year.

    2. Cross-Border Travel Growth Expectations
      Q: What's the outlook for cross-border travel growth?
      A: Cross-border volumes grew 16% in Q1, with travel up 19%. While growth slowed slightly in January, Visa feels confident about the outlook, expecting continued strong performance supported by regional expansions and recovery in travel sectors.

    3. New Flows Growth Impact
      Q: Why did new flows growth slow this quarter?
      A: New flows were impacted by a mix shift as cross-border volume growth slowed due to normalizing travel. Additionally, a few onetime items larger than typical affected growth in Q1. Despite this, Visa expects full-year new flows revenue growth to exceed consumer revenue growth.

    4. Pismo Acquisition and Cloud Core Banking
      Q: How does Pismo fit into Visa's strategy?
      A: Visa views Pismo as a global, cloud-based processor and core banking provider that meets banks' needs to transition from legacy systems to the cloud. They aim for Pismo to be the preferred provider for banks worldwide, including midsized banks in the U.S. moving their legacy cores.

    5. Value-Added Services Growth and Drivers
      Q: Can you expand on value-added services growth?
      A: Value-added services generated over $2 billion in revenue this quarter, up 20% in constant dollars. Growth is driven across issuing solutions, acceptance solutions like CyberSource, disputes services like Verifi, and risk and identity solutions. Client demand remains strong, and Visa continues to expand these services globally.

    6. Second Half Revenue Acceleration Drivers
      Q: What will drive revenue acceleration in H2?
      A: Visa anticipates drivers to tick up in the second half due to improving average ticket sizes as they lap lower sizes in the U.S. and see continued inflation in certain international regions. They're also executing growth initiatives in global markets, such as processing wins in Latin America.

    7. EPS Growth Outlook Reconciliation
      Q: Why won't high Q2 EPS growth carry over to the year?
      A: The high-teens EPS growth in Q2 is due to specific tax matters resolved outside the U.S., reducing the tax rate to about 16% for the quarter. This benefit does not affect the full-year tax rate or EPS growth outlook, which remains unchanged.

    8. Merchant Acceptance Growth Sustainability
      Q: Is 17% merchant acceptance growth sustainable?
      A: Visa believes there is significant opportunity to sustain or exceed the 17% growth in acceptance locations. With hundreds of millions of small businesses still not on their network and innovations like Tap to Phone, they are pushing to expand acceptance globally.

    9. Onetime Items Affecting U.S. Results
      Q: What onetime items impacted U.S. results?
      A: In Q1, Visa had larger-than-typical adjustments from truing up incentives and rebates with clients based on reported metrics. This net impact affected new flows growth, but underlying business fundamentals remain healthy.

    10. Impact of Severe Weather on Volumes
      Q: Did severe weather affect recent volumes?
      A: Yes, growth slowed in early January due to extreme cold weather in parts of the U.S., directly correlating to lower card-present volumes. Such weather impacts are typically short-lived and expected to smooth out over the quarter.

    11. Reaffirmed Guidance on Volume Growth and Incentives
      Q: Any changes to volume growth or incentive guidance?
      A: Visa reaffirms the full-year outlook on key drivers, expecting acceleration in the second half due to factors like average ticket size improvements. There's no change in incentive outlook; they continue to manage the business to net revenue growth.

    12. Clarification on Growth Outlook and OpEx Guidance
      Q: Any updates on growth and operating expenses?
      A: Visa expects growth to accelerate in the second half, consistent with prior expectations. Operating expenses will be slightly higher due to including the impact of the Pismo acquisition and updates based on current FX rates.

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