Visa Inc.

Welcome to Visa's fiscal first quarter 2021 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, Michelle. Good afternoon, everyone, and welcome to Visa's fiscal first quarter 2021 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 will be posted on our IR website. Let me 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. With that, let me turn the call over to Al.

Thank you, Mike, and good afternoon, and thank you for joining us today. Even with vaccine proliferation on the horizon, COVID-19 infections really continue to rise, causing restrictions to be implemented in many parts of the world. Amidst the pandemic, Visa delivered strong financial results in our fiscal first quarter, and our strategy to enable money movement globally remains clear, pursuing growth through consumer payments, new flows, and value-added services. On our call today, let me discuss our Q1 results, and they provide detail on our momentum this quarter with clients and the valuable solutions they utilize to drive money movement globally. As we review our Q1 results, recall we are growing over a quarter where no one had ever heard of COVID-19. Payments volume, process transactions, and cross-border volume all improved from Q4. Payments volume improved half a point, processing transaction growth improved a point, and cross-border volume improved eight points. Net revenues in the fiscal first quarter were $5.7 billion a year over year decrease of 6%. Non-GAAP EPS was $1.42, a decrease of 3%. Through our dividends and buybacks, we returned $2.5 billion of capital to shareholders in Q1. The site will cover spending in great detail, so I'll only make a few high-level comments on holiday spending. U.S. holiday spending was quite different this year, but had a similar overall growth to the last three years of holiday season, led by strong retail growth, somewhat offset by travel, entertainment, and fuel. This year in the U.S., we generally saw a continuation of the trends that have been occurring during COVID, strong debit and e-commerce, and weaker credit and card presence. Outside the United States, holiday retail spending growth broadly accelerated with growth in Canada, the U.K., Brazil, and Australia all rising by five or more points over last year. Now let me transition to our progress with clients. We continue to win and renew business as we transfer money movement globally through consumer payments, new flows, and valuated services. In consumer payments, we continue to focus on digitizing the $18 trillion spent in cash and check globally by working with partners to grow endpoints and deepen customer engagement with innovation. We are growing credentials with traditional issuers, fintechs, and wallets. Let me start with North America. We are very pleased to have renewed our long-standing partnership with Wells Fargo across consumer debits, credit, small business, and commercial for the next six years. The Bank of Montreal, Canada's fourth-largest bank and the only top five Canadian bank not previously issuing with Visa, announced a new partnership with us to issue two affluent lifestyle credit card products in the Canadian market. These products are digital first, targeting the affluent millennial segment, and offer strong rewards and value to cardholders in a differentiated and innovative way. In our Asia-Pacific region, we won the debit business of Malaysia's AmBank after winning the credit business just a quarter ago. Our relationship with LinePay also deepened this quarter on two fronts. First, in Japan, LinePay is now issuing a Visa virtual prepaid card. And second, Visa secured an exclusive partnership with LineBK, Thailand's first social banking platform, for issuance of Visa debit cards. Within the first month, LineBK issued 180,000 Visa debit credentials. In Russia, YoMoney, one of the country's largest electronic payment services, with more than 120,000 merchants worldwide and 40 million endpoints, signed on to issue Visa credentials in their wallet and enable Visa Direct. In Europe, we had several notable wins as we continued to increase our business on the continent. Visa secured a business agreement with Santander Group, becoming the preferred partner in credit and commercial for Santander banks across Europe. seven countries in continental Europe. We also want the prepaid issuance of Mooney, the first proximity banking and payments company in Italy, which offers its services through both digital and retail channels, with over 45,000 points of sale in rural and urban areas that can reach 20 million customers. Ishbank, the largest private bank in Turkey, with 20 million cards as selected visa for its consumer and commercial credit and debit portfolios. Last, we renewed two portfolios with a leading U.K. issuer, one for consumer credit and one for commercial charge card. We also continue to deepen engagement with our partners to find new ways to remove friction and enhance the client experience through innovation. Just yesterday, we announced a global partnership with TransferWise and the first use case of Visa Cloud Connect, a new way to securely connect to VisaNet through the cloud. The new platform will enable the expansion of TransferWise's multi-currency debit cards in Asia Pacific, Europe, the Middle East, the U.K., and the U.S., and deliver a range of financial services via a mobile app to their customers, including currency exchange and P2P payments, all linked to a Visa card. Tap-to-pay continues to expand, representing almost two-thirds of all face-to-face transactions, excluding the United States. In the United States, we have approximately 300 million contactless cards in place now and have high single-digit penetration of face-to-face transactions. Even at this level, the U.S. is now the fourth largest country in the number of tap-to-pay transactions. Enablement continues to grow as all 500 of Costco's fuel locations and Chipotle and Nordstrom stores now accept tap-to-pay. I'm also pleased to report that the New York City MTA has completed their rollout to all subways and buses. Processing is also a way to bring Visa's innovations to market, and we have made significant progress in Latin America this past quarter, in Ecuador, Colombia, and Peru, and now have reached 100% processing penetration in Chile. As I close out the consumer payment section, I wanted to note some progress in India. We continue to grow credentials. The Amazon Pay ICICI bank co-branded credit card in India has set a country record by issuing over a million cards in just 20 months. On the acceptance front, India now has 6.5 million acceptance points, including over 1 million QR points, up almost 20 percentage points from a year ago, and 65% of all terminals are tap-to-pay enabled. The Reserve Bank of India recently raised the contactless limit, which will soon cover 90% plus of all transactions in India. Visa has entered into new partnerships with leading acquirers such as SBI Payments to launch acceptance solutions such as Tap to Phone and Contactless. And Visa is partnering with the largest acquirer in India, HDFC Bank, in the launch and scale-up of Smart Hub, an app solution bundling payments, banking, and value-added services to help small merchants grow their businesses. We're also contributing to India's Payment Infrastructure Development Fund to encourage growth of physical and digital acceptance in under-penetrated geographies by adding 1 million points of sale and 2 million QR points per year over the next three years. All of these efforts build on our leading credit and debit market share in India. Now on to the second lever of growth, new flows, which represents $185 trillion in opportunity. We are pursuing this opportunity with our traditional commercial card solutions as well as newer capabilities like Visa Direct and Visa B2B Connect. While we're making progress across all new flows, I'll highlight a few advancements from this quarter. In B2C, big economy payouts and earned wage assets continue to grow meaningfully in the wake of COVID. This quarter with DoorDash, we launched the Dasher Direct business prepaid card in the U.S., offering the over 1 million Dashers on the DoorDash platform access to daily deposits of earned wages and rich card benefits. In Canada, Skip the Dishes, the country's largest food delivery network, rolled out their Visa Direct-enabled courier payouts called Fast Cash. P2P, which represents $20 trillion of the flows, was Visa Direct's first use case and continues to grow substantially. A key area of future growth is cross-border P2P or remittance. Four of the top five global money transfer operators were onboarded in fiscal year 20, TransferWise, Western Union, Remitly, and MoneyGram, which noted a 500% increase year-over-year in real-time transfers in December alone. Our efforts to expand remittance also extends to fintechs and banks who can enable this capability. ZPay... A fast-growing African fintech will use Visa Direct to allow Africans to send money across European and North American corridors and soon will expand to all major corridors globally. TransferGo, a global money transfer company that supports migrant workers to send money back to their relatives without paying unnecessary bank fees, has enabled Visa Direct in 55 markets and has the potential to expand to a total of 178 countries in the future with upcoming additions such as the UK, Italy, and Nigeria. Across the globe, in the first quarter, Visa Direct transactions grew almost 60%. Now on to B2B. In cross-border, Goldman Sachs Transaction Banking recently signed on to employ Visa B2B Connect for cross-border B2B money movement, offering its corporate clients the ability to transact in over 80 markets globally. We are very pleased that our partnership with Goldman continues to deepen on multiple fronts. In the virtual card-based business, we've expanded our relationship with UK-based Conforma Pay, to launch Visa Commercial Pay, which has three offerings, a mobile app enabling virtual card issuance and management for business incidentals, two, a solution to manage business travel spend with enhanced data, and three, an integrated payables platform that can seamlessly send payments to suppliers. Barclays has already launched this functionality for their commercial clients. Currently, essentially all of these new flows are transacted in traditional fiat currencies. But there's a growing interest in digital currencies, and I wanted to take a minute to talk about how Visa thinks about crypto in general and our approach. In this space, we see ways that we can add differentiated value to the ecosystem, and we believe that we are uniquely positioned to help make cryptocurrencies more safe, useful, and applicable for payments through our global presence, our partnership approach, and our trusted brand. We think of the crypto market in two segments. First, there are cryptocurrencies that represent new assets, such as Bitcoin. Second, there are digital currencies or stablecoins that are directly backed by existing fiat currencies. We see all currencies in that first segment as digital gold. They are predominantly held as assets that are not used as a form of payment in a significant way at this point. Our strategy here is to work with wallets and exchanges to enable users to purchase these currencies using their Visa credentials, or to cash out onto a Visa credential to make a fiat purchase at any of the 70 million merchants where Visa is accepted globally. This is similar to our approach to connect closed-loop wallets, such as LinePay and PayTM. For the second segment, fiat-backed digital currencies, including stablecoins and central bank digital currencies, These are an emerging payments innovation that could have the potential to be used for global commerce, much like any other fiat currency. We think of digital currencies running on public blockchains as additional networks, just like RTP or ACH networks. So we see them as part of our network of network strategy. Across both of these segments, we are the clear leader in this space. Today, 35 of the leading digital currency platforms and wallets have already chosen to issue Visa, including Coinbase, Crypto.com, BlockFi, Fold, and BitPanda. These wallet relationships represent the potential for more than 50 million Visa credentials. The next leading network has a fraction of that. And it goes without saying, to the extent... specific digital currency becomes a recognized means of exchange, there's no reason why we cannot add it to our network, which already supports over 160 currencies today. Let me now turn to our third growth lever, value-added services. Here we saw revenue grow at 19% in Q1. And let me name a few services with notable progress this quarter. As e-commerce explodes, interest in Cybersource remains strong for merchants, as well as from fintechs and acquirers looking to leverage our capabilities to offer to their clients. This quarter, two additional leading acquirers signed on to use Cybersource, KBank in Thailand and NAB in Australia. As one of the largest debit and prepaid issuer processors, we've been looking to expand Visa DPS globally. In that vein, we are pleased to share that we're bringing our Visa debit processing system to Europe. DKB, our largest issuing bank in Germany, has chosen DPS as its debit processor and recently processed Visa's inaugural European DPS transaction via their platform. DKB will also be able to take advantage of nearly 20 value-added services through this connection. We have believed for years that installments represent an important opportunity in payments. To enable this capability, we offer our own network solution for issuers, merchants, and fintech installment providers to use directly, and we also work with many installment providers to develop new solutions. This quarter, we had updates on both fronts. We signed a global deal with Afterpay, extending our U.S. relationship to an additional seven countries, where Afterpay will use Visa technology to accelerate its global expansion. In addition, Visa and Afterpay will test and collaborate on the application of new technologies like tokenization and Visa Direct. We announced in July that Commerce Bank in the United States was piloting the network solution, and it has now launched with about 300,000 customers live. Visa also signed Scotiabank as the first Canadian bank to launch a post-purchase installment pilot with employees in December with a full market rollout slated for mid-2021. All of these growth levers, consumer payments, new flows, and value-added services, are driven by our network-of-network strategy, which is enabling all forms of payment, utilizing all networks, and providing the value-added services you would expect from Visa as we enable money movement. In closing, a few points. Domestic volumes driven by debit and e-commerce are really holding up well. Holiday spending, while different in terms of categories and timing, was quite good. Q1 overall was a very solid quarter and positive momentum continued, albeit we are still impacted by COVID-19. We are continuing to work very hard to balance expense management in recognition of the short-term realities and investing in an exciting set of growth opportunities as we always manage the business for the long term. We continue to be focused on our three growth levers, all of which are supported by our network of networks. And lastly, we are hopeful that as vaccines roll out and become more readily available, lockdowns, travel restrictions, and capacity constraints will be lessened or eliminated, enabling travel, entertainment, and other commerce to grow. With that, over to Vasant for more color on our volumes and our financials.