Visa Inc.

Welcome to Visa's Fiscal First Quarter 2023 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, Ms. Jennifer Como, Senior Vice President and Global Head of Investor Relations. Ms. Como, you may begin.

Thanks, Jordan. Good afternoon, everyone, and welcome to Visa's Fiscal First Quarter 2023 Earnings Call. Joining us today are Al Kelly, Visa's chairman and chief executive officer, Basant Prabhu, Visa's vice chair and chief financial officer, and Ryan McInerney, who will become the chief executive officer of Visa next week. This call is being webcast on the investor relations section of our website at 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 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 the result of many factors. Additional information concerning those factors is available in our most recent reports on Form 10-K, which you can find on the SEC's website and the investor relations section of our website. For 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.

Jennifer, thank you, and good afternoon, everybody, and thank you for joining us. Visa's performance in the first quarter of 2023 reflects stable domestic volumes and transactions and a continued recovery of cross-border travel. Total Q1 payments volume was up 7% year-over-year or 135% versus three years ago, flat with Q4. Excluding Russia and China, payments volume was up 12% or 146% of 2019. U.S. Q1 payments volume was up 9% year-over-year or 144% of 2019, down one point from Q4. International volume excluding Russia and China was up 15% or 147% of 2019, up one point from Q4. Q1 cross-border volumes excluding inter-Europe grew 31% year-over-year and 132% versus three years ago, up five points from Q4. Excluding Russia, cross-border year-over-year growth was higher by four points. Travel-related cross-border volumes rose six points from 112 percent of 2019 in Q4 to 118 percent in Q1, driven by Asia Pacific, helped by China lifting restrictions, continued modest improvements inbound into the United States, and Samia benefiting from the FIFA World Cup. Processed transactions were up 10 percent year-over-year, or 139 percent versus 2019, And we processed 571 million transactions a day during the quarter. Although first quarter net revenues grew altogether, I should say, first quarter net revenues grew 12% year over year, and non-GAAP EPS was $2.18, up 21%. In each of our growth levers, consumer payments, new flows, and value-added services, we saw strong revenue growth. In our consumer payments business, we made significant progress this quarter through large deals with traditional issuers and co-brands. And with the pandemic largely behind us, we saw many businesses focus on payments through Visa's new flows capabilities. In addition, we continued to develop and expand our global value-added services globally. Now let me explore each of these growth areas. In consumer payments, credentials grew 8% overall, 11% excluding Russia. with strong double-digit growth in the United States, India, and Brazil. Tap-to-pay penetration of face-to-face transactions globally was 72%, excluding Russia and the United States. In the United States, we surpassed a notable 30%, with San Jose, San Francisco, and New York City all above 50%. U.S. drug stores went above 40% for the first time in the United States, and nearly 65 percent of Costco's face-to-face credit transactions were made with a tap. In the United States, we had several important renewals. First, we renewed our partnership with Bank of America in the United States, maintaining our current debit and credit business, including their cash rewards, travel rewards, premium rewards, and newly launched premium rewards elite consumer credit cards. We're excited to continue to invest together in the growth of our joint business and to innovate with Bank of America to deliver enhanced capabilities and improved experiences for their customers. Second, we renewed with Commerce Bank a top 25 Visa U.S. issuer across their consumer and commercial portfolios. Finally, we also renewed our agreement with Capital One. In Australia, we renewed our agreement with the country's largest independent payment solutions provider, Costco, with over 4 million cardholders for debit and prepaid, and also signed a new agreement for credit issuance. Also in the region, we extended our exclusive relationship with Kiwi Bank, the largest New Zealand-owned bank. In Latin America, we renewed with ICBC Argentina one of the largest issuers in the country, and with Banco de Brazil, one of the largest Visa issuers in the region. In addition, we entered into a new agreement with one of the largest banks in Panama, Banco Nacional de Panama. Also in Latin America, we reached a new strategic deal with fintech platform, Tigo Money, and parent company, Millicom, a leading provider of telecommunication services in the region. Visa and Millicom, expect to offer Tigo Money's more than 5 million wallet users the ability to digitize their cash in an easy and secure way, making purchases wherever Visa is accepted with the Visa Tigo Money Access Card. Another strategic fintech deal is with NEO in India, a fast-growing cross-border-focused NEO bank with 5 million customers. We've extended our relationship from debit into credit to grow cross-border spending with affluent as well as corporate customers. We're also happy to share that we renewed and extended our global partnership with HSBC. Our agreement covers consumer and commercial, and it will foster growth and digital acceleration. This deal also cuts across all of Visa's five regions. As you know, Visa is the leader in travel co-brands globally. And I'm happy to report that we recently reached agreements with three important travel relationships. First, Qatar Airways Privilege Club, which today has a split portfolio across networks around the world, has signed a new 10-year exclusive partnership with Visa to enhance and expand its portfolio of co-branded payment initiatives with key financial partners across key markets worldwide. This expanded partnership creates a new world of opportunities for our Visa customers and Privileged Club members to collect and spend Avios, the rewards currency of Privileged Club. Second, with Southwest Airlines in the United States, Visa will continue to be the exclusive payment network for their co-brand credit card issued by JPMorgan Chase. It represents one of the largest co-brand partnerships in the world. Third, with Star Alliance and HSBC in Australia, This is the world's first credit card created with an airline alliance and is issued exclusively on Visa credit. At the time of the launch, it brought together seven Star Alliance carriers in a single credit card platform. Also, we recently advanced our co-brand partnership with Flipkart, one of India's leading digital commerce entities, with a registered customer base of 450 million. So whether it's with traditional issuers or co-brand partners, We are continuing to position Visa well for the future. On to new flows, where this past quarter, new flows continued to grow with revenue up more than 20% in constant dollars, led by strong growth in B2B payments volume and Visa Direct transactions. First, on the Visa Direct side, Visa Direct had 1.9 billion transactions in Q1, up 39% year over year, excluding Russia. We continue to grow globally. Non-US visa direct transactions as a percentage of total transactions expanded nearly 20 points, excluding Russia, from Q1 21 to Q1 23. Building on the success of our remittance program with Standard Chartered Bank in Hong Kong, we recently launched Malaysia as an additional origination market, bending across six currency pairs with more currencies to come. We also continue to bring existing use cases to new markets. First, in Australia, Visa Direct is now enabling driver payouts with DoorDash. Second, we launched our inaugural P2P program in South Africa with FNB, one of the country's largest banks, to enable their 10 million active customers to move money within their mobile app using Visa Direct Rails. Third, we launched our wallet cash payout program in Bangladesh with Bcash. With this launch, the nearly 65 million Bcash users can make wallet to money bank transfers 24 by 7 in near real time using Visa Direct. We are enabling several use cases including seller payouts in the United States on Poshmark, a social media marketplace where more than 80 million registered users and card top-offs with FinTech GoHenry. As a follow-on to the issuance deal we announced last quarter with them, GoHenry is enabling its members to top up their child's prepaid Visa card with Visa Direct, first in the UK, with plans to expand this service across Europe in the future. In addition to Visa Direct, we had noteworthy developments in the B2B space this past quarter, where commercial payments volume grew 15% in constant dollars. In traditional issuance, we signed an agreement with Ryerson Bank for a new commercial credit partnership in addition to renewing consumer credit across their 3 million clients in Austria. And in the United States, we renewed with UBS for consumer credit and debit, as well as several business credit portfolios and Visa spend clarity for business. Another issuing partnership was with Stone, one of the largest acquirers in Brazil, focused on small businesses. Stone has recently become a Visa debit and credit issuer of cards that can be embedded digitally in its wallet. On the virtual card front, for accounts receivable and payable, we completed several agreements. First, Divi, an expense management platform owned by Bill, has renewed its agreement to offer Visa virtual cards for small and mid-sized businesses in the United States as part of its expense and vendor payment solutions. Second, ViewPost converts U.S.-based B2B check payments to Visa virtual cards. And together, we are expanding card opportunities for issuers and corporates by offering a solution that can be deployed easily to every commercial business that still produces checks. Third, we've reached an agreement with PlateIQ, a leading end-to-end accounts payable automation provider in the United States with direct integrations to accounting systems. PlateIQ will be offering a Visa Virtual Card solution to commercial partners across multiple industries, including restaurants and hospitality, retail, and accounting and bookkeeping, among others. Fourth, in our Asia Pacific region, Sunrate, a global payment and treasury management platform, has launched Visa Virtual Cards as part of its solution for more than 1,000 B2B clients, including global online travel agencies, and small business customers. Fleet issuance continues to grow as well. This quarter, we signed with Zemo, a European fleet and mobility solutions provider, to issue Visa, Open Loop, fleet, and fuel commercial cards as they expand from three European markets to 10. In the United States, HiNote, a cloud-native card issuance and embedded finance platform, expanded its relationship with Visa with a five-year card issuance agreement across credit, debit, virtual solutions, and fleet. In addition, High Note became certified as a Visa fleet card processor, which provides businesses with more specific product category level controls and more detailed and faster data for real-time decisions on new fleet and fuel card programs. B2B is an active space for fintechs, and Visa continues to partner with new players to drive innovation for businesses. A recent example is Confio, a fintech in Mexico that has already issued approximately 50,000 Visa small business cards and recently expanded its agreement to issue Visa business infinite cards. In addition, they are positioned to grow acceptance in the market with their newly established acquiring business, Senior Pago. Now moving to value-added services, which had about $1.7 billion in revenue this first quarter, up more than 20 percent in constant dollars. Remember that our focus for value-added services is threefold. One, to deepen client penetration of existing products. Two, to build and launch new solutions. And three, to expand geographically. Cybersource is a great example on all three areas of focus. First, on deepening client penetration of existing products. CyberSource's decision manager offering provides broad capabilities to existing CyberSource clients and has experienced strong growth throughout the pandemic, more than doubling transactions in the last three years. In Q1, transactions utilizing decision manager grew in the low teens year over year, demonstrating the continued demand for this solution even as we enter a post-pandemic environment. Another area of growth we have mentioned is with acquirers. who utilize CyberSource's capabilities to offer them to their merchant clients. In Q1, we signed agreements with several acquirers for gateway services, including Elbon in North America. In Saudi Arabia, Saudi British Bank has announced its strategic partnership with our CyberSource payment gateway and risk platform to enhance the overall capabilities of Saab's payment gateway with the aim of fostering the bank's growth in an evolving and dynamic e-commerce space. On extended geographically, we've continued our efforts to strengthen our global presence. Our non-US CyberSource transactions have nearly quadrupled since the first quarter of 2019, and they now comprise the majority of our transactions led in particular by the Asia Pacific region. CyberSource has also created new offerings. While historically CyberSource has been an e-commerce capability, Over the past few years, we have accelerated the product development of our card-present and omnichannel offerings, including with the acquisition of Payworks back in 2019. In the past quarter, we saw a nearly 50% year-over-year increase in card-present authorized cyber-source transactions. Other value-added services highlights this quarter include our innovative dispute capability through Verify, which saw nearly 40% growth in cases processed this quarter as we expanded globally with more than one-third of our cases from outside of North America. This rapid dispute resolution solution automatically resolves disputes between merchants and issuers through the acquirer rails, reducing the average time to resolve a dispute from 24 days to typically seconds. And TINC, our open banking platform, continued to deepen and develop relationships across Europe. Tink recently signed a master agreement with BNP Paribas to be their main open banking and money movement services provider for millions of customers across Europe. Tink is already live with several businesses in the group. Three million customers use Tink's money management, data enrichment, and transactions products at BNP Paribas Fortress in Belgium and BNL in Italy. Tink has also renewed and expanded its commitment ABN AMRO to integrate Tink's Money Manager and data enrichment products into the bank's app for more than 3 million customers. In conclusion, in the first quarter, Visa delivered very strong results and continued to effectively execute our growth strategy. The SOC will go into detail on our thoughts for the rest of the year, but I'd like to make a few other brief closing comments. We will continue to manage our business for the medium to long term, and will invest in initiatives that are compelling and will provide future growth, all while being very mindful of the current environment. I continue to see a bright future for these as we look ahead to the rest of this year and beyond, and I believe we have the right strategy to continue to deliver great results. As we announced in November, effective February 1st, 2023, I'll be stepping down as CEO and assuming the full-time role as executive chairman. I'm exceedingly grateful to the board and leadership of Visa, in addition to all of our passionate 26,500 employee colleagues who helped make this job so rewarding. I'm proud of all that we have accomplished together since I started in 2016. Ryan McInerney will become Visa CEO, and I cannot think of a finer leader to continue to position Visa at the center of money movement in increasingly innovative ways. I worked side by side with Ryan for almost six and a half years. He knows our business, our clients, and he is deeply respected by our employees. He and his team will do a great job, and I expect this transition to be totally seamless. With that in mind, and as Jennifer alluded to, I've asked Ryan to join the Q&A portion of our call today. But before that, let me hand it over to Vasad to provide financial highlights for the quarter and our thoughts on the second quarter and beyond.