Visa Inc.

Welcome to Visa's fiscal first quarter 2020 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 Miletic, Senior Vice President of Investor Relations. Mr. Miletic, you may now begin.

Thank you, Jordan. Good afternoon, everyone, and welcome to Visa's fiscal first quarter 2020 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. The slide deck containing financial and statistical highlights has been posted on 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 reports on 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 in 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. 2020 is off to a strong start with Visa's first quarter performance. It's a reflection of our focus on clients and commitment to moving money globally, seamlessly, and safely. In our time today, let me first touch on our results and then discuss how we're going to grow our core C2B, or consumer payments business, and capture new payment flows, which is all part of our network and network strategies. To start, our first quarter results We had a terrific quarter and the business is performing well. We reported net revenue growth of 10%, but if you adjust for exchange rates and very low currency volatility, our net revenue growth was approximately 13%. Our EPS growth was 12% or 14% on a constant dollar basis, excluding the impact of acquisitions made after Q1 last year. Key business drivers were largely consistent with the fourth quarter as we expected. For the first time in our history, total network volume this quarter was over $3 trillion. Payment volume grew at 8% globally, 10%, excluding China and the UK. Cross-border volume rose 9% on a constant dollar basis, and we processed nearly 38 billion total transactions on our network, up 11%. Let me touch briefly on holiday spending, starting with the United States. where growth was similar to the 2018 and 2017 holiday seasons, which were both strong years. Credit growth was slightly better than last year, and debit growth slowed slightly due to lapping tax reform, which had a positive impact on U.S. debit growth throughout all of last year, including the holiday season. E-commerce grew three to four times faster than non-e-commerce, E-commerce also drove more than one-third of all consumer spend, up two percentage points versus last year. Retail spend growth was stronger than last year, fueled mostly by e-commerce. However, that was offset by slower growth in travel and restaurant spending. To give you a brief sense of the holiday season in the other major markets, Brazil and Canada saw slightly stronger growth than last year, The UK's growth was similar to last year's levels, and growth in Australia slowed slightly. Now let's look at the core business overall for the first quarter. We are growing our core payments business in three ways, through large clients and markets, number two, making progress to capture the opportunity in emerging and other markets through new partnerships, including Wallet and FinTech, and three, all while helping the ecosystem remove friction. We continue to have significant renewals and wins among some of our largest financial institutions. Visa renewed our issuing agreement with Capital One effective January 1 of this year. We're very pleased to continue our long-standing relationship with Capital One. We recently renewed our agreement with DKB, our largest issuing bank in Germany, and we're looking forward to developing new services and products within this exclusive innovation partnership. In the Caribbean, we have renewed a multi-year contract with Royal Bank of Canada for credit and debit. This agreement also includes some new debit wins covering 17 Caribbean countries and territories. In Latin America, we're pleased to have won the credit and debit business for Santander in Brazil, Argentina, and Uruguay. This leadership position with financial institutions also extends to merchants, as we are the leader in co-brands with 13 of the top 20 portfolios globally. This quarter, we continue to solidify our leadership position. In the United States, we were selected for the new Venmo co-brand credit card, a reflection of our strong partnership with PayPal. The opportunity for this product is quite significant, as Venmo has over 52 million users currently. We're excited to continue growing our longstanding co-brand relationships with Caesars, Rewards, and Harley-Davidson. Sony has relaunched both of their co-branded credit cards connected with the Sony Rewards Program. Together, Sony and Visa are partnering in a number of ways to grow these programs and bring compelling offers to their cardholders. We already have a strong relationship with Costco as their co-brand provider in the United States, Taiwan, South Korea, and Mexico, and just this quarter secured the China co-brand. In Europe, Visa extended our co-brand partnerships with Norwegian Air Shuttle, and S Group, respectively. In Samia, we renew the Emirates NDD's credit business, and half of that portfolio is represented by the Emirates Skywards co-brand program exclusively with Visa, and the rest of the portfolio is bank-branded credit. Our wins are not limited to just large issuers and merchants as we continue to make progress to capture the opportunity in emerging and other markets through wallets and investments. In Africa, we have recently taken several steps to help accelerate the shift to digital payments. On the credential side, mobile money wallets are already prevalent across Africa, but without a virtual or physical network credential associated with them, many international online services are unavailable to users. To help solve this problem, we announced a collaboration with MFF Africa, which is Africa's largest digital payments hub, connecting through one API to more than 180 million mobile wallets on the continent to distribute visa payment credentials across the continent. In an effort to build acceptance, we recently announced an investment in partnership with FlutterWave, a pan-African digital payments platform that enables multi-payment acceptance and processing. Together, FlutterWave will further scale its consumer payment service called BARDA, and its merchant acquiring service called RAVE through Visa products such as Visa Direct, Visa QR, and Virtual Card. In addition, Visa established a strategic partnership and will acquire a minority equity stake in InterSwitch, a company focused on the digitization of payments that processes more than 80% of domestic transactions in Nigeria and sells payment processing across 23 other countries in Africa. and operates the largest domestic debit card scheme on the continent with 23 million cardholders. Our partnership will help accelerate visa deployments of payment experiences, leveraging inter-switches processing and integration capabilities, and scale their bill pay services across Africa. As we grow our business in emerging markets and with new players across the globe, we're ever focused on improving the point of sale experience and reducing friction for the entire ecosystem. In the card-present environment, we continue to see meaningful momentum in tax-to-pay, what we consider to be the most friction-free way to pay in person. We have reached a point where one in every three card-present transactions that runs over our network is taxed versus one in four a year ago this quarter. This past year, we doubled the number of countries whose face-to-face transactions are at least two-thirds contactless. Transit continues to be a key user case and an important way to habituate tapping behavior. In New York City, on the MTA, Visa crossed 2 million taps in November from the beginning of the pilot and 3 million in January. The MTA recently announced a tax-to-pay expansion to their entire system by the end of 2020, and we are currently pacing at 350,000 Visa taps a week on the MTA and nearly one in every ten transactions in the New York metro area is attached to pay on a Visa card. We also launched Africa's first contactless transit system in Johannesburg this quarter, in addition to launches in Ho Chi Minh City, as well as Taiwan, Sweden, and Ukraine. In the e-commerce environment, Click2Pay, or what we once called secure remote commerce, seeks to streamline the digital payment experience across networks, offering greater security and improved sales. You may recall we launched with a select number of merchants in October, and by the end of December, more than 40 merchants had adopted the new click-to-pay solution. Now that the holiday season is over, we recently completed the migration of 5,500 U.S. merchants to click-to-pay. We expect to complete the migration of the remainder of Visa checkout merchants in the United States over the coming months. Additionally, all 50 million consumers who were already enrolled with Visa Checkout were automatically converted to click-to-pay. Globally, we continue to make progress on securing the ecosystem with tokens. Introduced in 2014, tokens have expanded into 107 countries, equating to 6 billion tokenized transactions in 2019. We now have over 750 million tokens globally. Over the past 18 months, Visa signed and is now live with the majority of large e-commerce platforms for card-on-file tokenizations, including Audion, Braintree, Cybersource, PayPal, Stripe, as well as some big e-commerce companies, including Amazon and Netflix, amounting to hundreds of millions of new tokens, which is accelerating the pace of e-commerce transactions now processed over the Visa token service. Collectively, we have secured merchant and partner commitments for tokenization in the e-com space that will add up to approximately $1 trillion in Visa payment volume. Putting it together, our core business remains strong as we continue to win with traditional players, new players, and seek to remove friction. Outside of our traditional C2B business, we're making progress in capturing new payment flows. B2B states, we had several wins in the first quarter. In Singapore, we won the government procurement card for Oversea Chinese Banking Corporation, or OCBC. With the Singapore government mandating to digitize payments by 2023, OCBC is targeted to capture a significant public sector procurement volume. Within the Samia region, Visa signed a partnership with NEC Payments, a digital banking and payments processing platform to expand NEC's regional and international issuing business focused on virtual cards for B2B payments such as travel and insurance. In Hong Kong, we partnered with NEET, a fintech offering digital business account services, to be an exclusive partner with Visa to issue virtual commercial cards. Visa Direct served P2P, B2C, and even B2 small business with over 700 million transactions in the first quarter of 2020. This quarter, we wanted to highlight significant progress in the B2B cross-border space. MoneyGram announced it is now live, enabling international transfers that rely on Visa Direct. The new service, which has been available within the United States since September, is starting with transfers to Spain and the Philippines. TransferWise, the global technology company for international payments, will also begin offering its customers the ability to send and receive funds in real time through Visa Direct. The integrated capability currently available in six countries, including Spain and Poland, will soon be available across more countries in Europe. Our continued progress with Visa Direct speaks to our network of network strategy for consumers, businesses, and governments to move money to anyone, anywhere. Each new network endpoint, be it a card, a consumer, or a business account, or a wallet, compounds the value of the capabilities we offer to partners and improves the customer experience through a single Visa connection. As I talk about networks, it's hard not to mention Plaid, although I'm not going to cover it in too much detail until the transaction closes. We see Plaid as having the potential to deliver real value to Visa in multiple ways. We have received a number of questions on their revenue model, so I thought I would cover it quickly. Similar to us, they have a usage-based revenue model. Pricing is structured on a pay-per-API call basis and varies by product depending on the type of financial data consumed by the customers of the FinTech, which speaks to the power of their network. We are truly excited about the acquisition. We're off to a strong start in the first quarter with much to be excited about as we look forward. We are deepening partnerships with traditional players in markets and expanding assets with new players. We're removing friction in the ecosystem, and we're making significant progress to capture new flows. This is all part of our network and network strategy as we continue to focus on clients and moving money globally, seamlessly, and safely. I want to take a quick moment to mention our Investor Day on February 11th here in San Francisco, which will simultaneously be webcast. You will hear from our knowledgeable and deep bench of leaders who will discuss our view on the evolution of the ecosystem and how we intend to deliver Visa's future growth to our consumer payments business, new flows, and value-added services. The formal presentation should run from about 8 a.m. to 2.30 p.m. Pacific time, and we look forward to your participation. With that, let me turn it over to Vasat.