Visa Inc.

Welcome to Visa's Fiscal Fourth Quarter and Full Year 2019 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, Mr. Mike Milotic, Senior Vice President of Investor Relations. Mr. Milotic, you may now begin.

Thank you, Jordan. Good afternoon, everyone, and welcome to Visa's fiscal fourth quarter and full year 2019 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 to 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. Additional information concerning those factors is available in our most recent forms, 10-K and 10-Q, which you can find on the SEC's website and the investor relations section of our website. For historical non-GAAP financial information disclosed on 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.

Mike, thank you, and good afternoon, everyone, and thank you for joining us today. The fourth quarter cast another strong year for Visa as we continue to grow our business across a number of dimensions. In our time today, I'd like to touch on our results, then discuss how we are strengthening our network with the power of partnerships and a focus on customers. and finally provide our initial thoughts on fiscal 2020. To start, our fourth quarter results demonstrate our ability to grow the top line, invest thoughtfully in the business to drive future growth, and return capital to shareholders. An important indication relative to the health of our network is transaction growth. In this regard, Q4 ended strongly with over 47 billion payment transactions, an increase of $5.3 billion, or 12.6% compared to this quarter last year. Payments volume grew at 9% globally, 10% excluding China. We also saw a strong growth in payments volume across every region and growth accelerated versus the last quarter in every international region. Net revenue growth accelerated to 13% or 15% on a constant dollar basis. Non-GAAP EPS growth was 21% or 23% on a constant dollar basis. We also returned $2.7 billion of capital to shareholders in the fourth quarter, consisting of $2.2 billion in share repurchases and a half a billion dollars in dividends. Our fourth quarter performance brought our full-year net revenue growth to 13% on a constant dollar basis and non-GAAP EPS growth to 20% on a constant dollar basis. Total capital return for the year was $10.9 billion. As I reflect on all of 2019, Visa has made tremendous progress leading a dynamic industry and advancing the growth of digital payments. This has manifested itself on a variety of fronts. To start, over 180 billion payment transactions leveraged our network in fiscal 2019, of which we processed about 75%. This represented almost $9 trillion in commerce on 3.4 billion credentials, all with the security and protections that our customers value. Relative to growing acceptance, we now have over 61 million physical merchant locations, increasing 14% from 2018. And again, keep in mind that this number is tens of millions higher as partners like PayPal, Stripe, and Square only count as one location each. In new payment flows, we crossed the $1 trillion mark for B2B payments volume, representing 12% of our business. We also continue to grow Visa Direct, which supports P2P, B2B, and P2C in triple digits with over 2 billion transactions. And on our capabilities and value-added services, we acquired four companies, that will help extend the reach of our network and enhance our merchant fraud and tokenization solutions. Our organic revenue growth driven by these capabilities and all value-added services exceeded 20% this year. This growth was fueled by the expansion of our issuer processing and network services, an increase in our acquirer and merchant offerings, including CyberSource, greater adoption of our risk and authentication tools, and consulting project work. In fact, we help more than 1,000 clients grow their businesses by leveraging insights from our consultants and data scientists. Our strategic focus throughout 2019 and going into 2020 is clear. Drive deeper partnerships with traditional clients. Expand access with new players, including new sellers, fintechs, neobanks, acquirers, and wallets. Increase customer engagement by enabling a variety of platforms and simplifying the payment experience. Extending value-added capabilities across the ecosystem and enabling new money movement with our network of networks. Let me elaborate on these focus areas, starting with driving deeper partnerships with traditional clients. We had significant deals in the pipeline, and our efforts have paid off. with us completing agreements in the fourth quarter that represents over 15% of our payment volume. This brings our full year number to about 30% of our global payment volume. This 30% renewal level is substantially higher than our average of the past five years of 20%. Let me highlight a few clients from this quarter. We renewed our partnership with Bank of America in the United States for several years, maintaining our current debit and credit business while also expanding to capture the new issuance of their cash rewards consumer credit card. We're excited to continue to collaborate with Bank of America on innovations such as tap-to-pay and tokenization, and utilize data analytics and insights to help uncover growth opportunities. In Central Europe, Middle East, and Africa, we had a number of large issuer deals this quarter, including our credit and debit business with Spurbank and Alphabank, two of the largest banks in Russia, and the debit business with Emirates NBD, one of the largest banks in the UAE. We also renewed the debit portfolio with Standard Chartered Bank across all of Sub-Saharan Africa. In Latin America, we signed a multi-year agreement to renew our longstanding relationship with Scotiabank covering 16 countries and territories across Latin America. In Europe, we're focused on driving growth in the continent of Europe while also deepening our existing partnerships in the UK. This quarter, we renewed two portfolios with leading UK issuers, one in debit and one in commercial credit. In continental Europe, we renewed our strategic partnership with BBVA in Spain for the next seven years. This agreement will allow Visa and BBVA to grow much faster during this period. Additionally, Zurak Bank, the largest state-owned bank in Turkey, renewed their consumer credit and debit business, and we won new issuance of their commercial credit portfolio. Now let me turn to expanding access with new players such as fintechs and wallets, which are critical to expanding credentials and acceptance globally. We established and deepened relationships with several fintech partners across the globe. First, we're pleased that Visa and Europe-based Revolut reached an agreement naming Visa their leading issuing partner as they seek to expand globally. In addition to increasing our share, Of their large European business, Revolut will leverage Visa's brand, scale, and global acceptance footprint to bring its product offerings to five new regions, reaching 24 new markets for a total of 56 markets globally. In the United States, we signed an exclusive five-year deal with the consumer debit and credit business with Chime, a challenger bank that offers its members access to a suite of intuitive banking services. Also in the U.S., we signed a debit deal with N26, a mobile banking solution which offers goal-based saving features and early paycheck access. In India, we're partnering with Open, a neo-bank which offers businesses everything from banking to automated bookkeeping to launch a suite of innovative products, including a business credit card. We also continue to expand our credentials, signing a debit issuance deal with Rails Bank, a U.K. fintech. In Korea, we are announcing a partnership with TOS to significantly expand collaboration on the payment business in Korea and globally. TOS is a major fintech startup in Korea and Korea's leading B2B remittance and financial services platform. We recently deepened our partnership with Remitly, a mobile payment service that utilizes Visa Direct to enable users to make P2P international money transfers from the United States, and they will now issue Visa debit cards. Focusing specifically on merchant acceptance, in Mexico, we are expanding access with Clip, a mobile point of sale solutions provider to enable merchants to accept digital payments. We're also teaming up with Samsung to allow merchants to accept contactless payments with just an app download and no hardware. So in essence, the phone becomes the terminal. Finally, mobile phone users in India who are Visa card holders will soon be able to use Google Pay to make simple and secure tokenized payments. We are currently the only card network supported on Google Pay in India. Over time, we look to build more relationships with the entire ecosystem to grow credentials and acceptance globally. Now let me move to the third category. focus area of increasing customer engagement by enabling a variety of platforms. We are continuing to improve the point of sale experience and reduce friction for the entire ecosystem. In the card present environment, we continue to see progress in tap to pay. In the United States, I'm pleased to say that of the top 10 issuers, eight are now participating. More than 100 million Visa contactless cards have been now issued, and we expect 300 million cards by the end of calendar year 2020. In the Cardiff present environment, we have spoken before about how secure remote commerce, or SRC, is a way to streamline the digital payment experience across networks, offer greater security, and improve sales. I'm pleased that this month, together with our network peers, we launched Quick to Pay, enabled by SRC, with our number of merchants and acquirers in the United States. Broader merchant adoption will take place after the holiday season. We're also enabling a variety of platforms to bring improvements to the payment experience, whether or not a card is present. And the most recent example is with installments. In June, we announced the launch of an installment solution API, a beta version, through our Visa Next platform, where issuers can offer installments to their Visa cardholders directly through participating merchants. At the same time, we're making it possible for third parties like Karner and PayD to leverage our assets and offer a variety of installment options. As we always say, we're not in the business of picking winners and losers. We enable the ecosystem and let the customer determine success. In the fourth quarter, a firm converted their virtual issuance to Visa, and we established a partnership with Afterpay to support the development of innovative installment solutions in the United States. And we continue to focus on new payment flow opportunities as we expand partnerships to remove friction. Visa Direct continues to grow driven by three vectors, increasing the volume with existing use cases and markets, extending existing use cases to new geographies, and expanding into new use cases. In our effort to expand P2P payment capabilities in new markets, we teamed up with the platform V.Way, in Guatemala to utilize Visa Direct to enable the simple and secure transfer of funds with just a mobile number or email address reaching the unbanked. In Russia, taxi payouts and on-demand loan disbursements are now available, and there's a new use case enabling tipping capabilities with Visa Direct so tips can be paid directly to waiters electronically. In B2B this quarter, Intuit announced Instant Deposit, a new feature that enables real-time disbursements for small business owners using QuickBooks payments directly to their eligible debit cards using Visa Direct. Most recently, we announced that Oracle ERP customers will be able to make Visa Direct payments right from their accounts payable system, reducing the time and investment needed for companies to adopt new push-to-card payment technology. JPMorgan will offer its commercial clients the ability to more efficiently send digital payments with access to Business Payments Network, a collaboration we have with BuildTrust that routes electronic payments from buyers to suppliers through their existing AR provider. We have also opened our Visa B2B Connect Network to over 60 markets and added InfoSys as a distribution partner to enable financial institutions to send and receive cross-border funds using this new B2B network. We're also working to integrate the four recent acquisitions to expand our value-added capabilities. With Earthport, we expect to have an integrated Visa Direct and Earthport offering in the market in the next few months, where clients can send payouts to cards or accounts through a single connection to Visa. For PayWorks, we're extending our pipeline for omni-commerce solutions beyond merchants to include more acquirers who can leverage an integrated cyber source and payworks platform. With Verify, as we combine this capability with our traditional dispute process, we plan to grow the Verify client base through our existing merchant and issuer relationships. For the Rambis token capabilities, we look to grow in two ways. One, by deepening relationships with existing Rambus clients through our large portfolio of value-added services. And two, by expanding the tokenization offerings to more alternative payment rails. And lastly, network of networks, all of these partnerships and capabilities we've discussed, as well as many others, come together in our offering to provide a powerful network of networks for consumers, businesses, and governments to move money to anyone, anywhere. Each new network endpoint, be it a card, an account, or a business, compounds the value of the capabilities we offer to partners and improves the customer experience through a single Visa connection. To close, in 2019, we delivered strong, broad-based results, and we made great progress positioning the business for future growth. We deepened partnerships. We expanded access with new players. We increased customer engagement and value-added capabilities. and we expanded our acceptance points and our network of networks. As we look ahead to next year, we're excited to remain the official payment technology partner of the Tokyo 2020 Olympics and Paralympics, and the only card accepted at next summer's Games. As the world's third largest economy, Japan is a market that has tremendous growth potential for Visa, and we have an aligned national interest in expanding digital payments. While occurring in Japan, Tokyo 2020 will be a major global media event, projected to be the biggest in history, with 7,000 hours of broadcast programming and 3 billion minutes of streamed content in the United States alone. We will aim to expand this platform to Visa clients all over the world and expect to have a record number of sponsorship activations with our partners. As it relates to the 2020 fiscal year, our financial outlook includes annual revenue growth of low double digits, and mid-teens adjusted EPS growth on a constant dollar basis. Before I turn it over to Vasant to go into a lot more details on our results, as well as our 2020 outlook, I want to note that as I look ahead, I'm excited about the multi-year journey we're on to get more involved in all money movement. And I can't recall a time in Visa's history with so much opportunity ahead. To that end, we want to spend some time with all of you discussing our future growth, So we're going to host an investor day on February 11th here in San Francisco. With that, for more details, let me turn it over to Basav.