Visa Inc.

Thanks, Jordan. Good afternoon, everyone, and welcome to Visa's fiscal fourth quarter and full year 2023 earnings call. Joining us today are Ryan McInerney, Visa's chief executive officer, and Chris Suh, Visa's chief financial officer. 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 annual report on Form 10-K and any subsequent reports on Forms 10Q and 8K, 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 Ryan.

Good afternoon, and thank you for joining us. Before we begin, I wanted to take a moment to acknowledge the tragic loss of life and suffering in Israel and Gaza. We are in constant contact with our teams in Israel and throughout the region, and I have the deepest admiration for their commitment to each other and their clients during this exceptionally challenging time. We continue to monitor the situation, prioritize the safety of our people, and stay close to our clients to ensure the continuity of business operations. Turning now to our results. At the beginning of 2023, there was a lot of uncertainty around the macroeconomic environment with fears of a recession. There were many unknowns around FX, volatility, interest rates, and inflation. There was also some noise in our growth rates in early 2023, due to the effects of Omicron and the suspension of operations in Russia. Against that backdrop, Visa delivered. Total full fiscal year net revenues grew 11%, with GAAP EPS up 18% and non-GAAP EPS up 17%. Credentials grew 7%. We also surpassed 7.5 billion tokens. Total transactions, including cash and payment transactions, were $276 billion, which means that Visa credentials were used on average 757 million times a day during the fiscal year. We signed over 500 commercial partnerships with fintechs globally, from early-stage companies to growing and mature players, up 25% versus last year. Merchant locations were up 17%, helped by strong growth in Latin America and Samia. Global tap-to-pay penetration, excluding the U.S., grew five points from last year to 76% of total face-to-face transactions. And in the U.S., penetration expanded 13 points to surpass 40%. Global tap-to-ride transactions were 1.6 billion for the full year 2023, up over 30%, and we added nearly 150 new transit systems throughout the year, such as in Philadelphia and Bangkok, bringing the footprint to more than 750 systems. More than 40% of our transit system launches this year also included our value-added services acceptance solutions. On the new flow side, Total revenue grew 17% in constant dollars for the full year. I'll note a few highlights. Total commercial volume was $1.57 trillion, up 12% in constant dollars. We have increased the number of banks that have signed on to Visa B2B Connect by more than 70% this year, and activation continues to happen with the number of transacting banks more than doubling. Visa Direct had 7.5 billion transactions, up 19% year-over-year and nearly 30%, excluding Russia, across 65-plus use cases and over 2,800 programs, helped by more than 500 enablers. Cross-border P2P transactions grew 65% year-over-year and reached a new record for payments volume in the fourth quarter. Value-added services revenue grew 18% for the full year in constant dollars. Across our hundreds of products, our top 265 largest clients used 22 products on average, up 8% from last year, versus our overall clients who used 11 products on average. With all of this strong momentum and performance, we finished the fourth quarter with net revenue growth of 11%, and GAAP EPS growth of 22 percent. Other highlights from the fourth quarter include the following in constant dollars. Global payments volume grew 9 percent. U.S. payments volume grew 6 percent. International payments volume grew 11 percent. Cross-border volume, excluding intra-Europe, grew 18 percent, with cross-border travel up 26 percent year over year. and process transactions were up 10%. Across all our growth levers, we continued to drive progress and innovation in money movement. As I mentioned last quarter, when asked why Visa, our clients tell us they are choosing to deepen and expand their partnerships with us for a number of reasons, including our people, our products, our value-added services, our new flows capabilities, and our brand. We continued to see that play out in our fourth quarter. I'll walk through each one and highlight some examples. First, our people. We have the best team in the business and our clients tell us that they deeply value the advice, local support, and partnership from our outstanding teams who are laser focused on helping our clients grow their businesses. Our clients also appreciate our thoughtful leadership on important and and complex industry issues across the ecosystem. An example this quarter was with US Bank, one of the largest issuers in the United States. They have renewed our long-term agreement for their consumer and commercial portfolios. In addition, we are engaging on consulting services and co-marketing projects that include leveraging our NFL sponsorship. Also in the US, we are very pleased to have renewed our longstanding relationship with top 20 U.S. issuer FNBO across consumer, commercial, and value-added services. In Brazil, credit unions, or cooperatives, are fast growing, and we recently reached an expanded relationship with Cicobi, whose system spans nearly 340 cooperatives and 7.5 million members. In addition to our people, our payment products and innovations consistently help us win. We are constantly driving innovation and delivering next generation payment solutions and experiences that enable our clients to better serve their customers and grow their businesses. In terms of our capabilities to serve FinTechs, in Colombia, we expanded our partnership with Neki, the first digital wallet in the country to enable their 17 million plus account holders for tap to pay with digital credentials. We also provide targeted offerings for certain customers. In India, we are focused on delivering market leading offerings for affluent customers. With that in mind, we have signed with FinTech Epify for a consumer credit offering for high net worth and mass affluent customers. We also recently expanded our acceptance with FinTech Razorpay to enable Visa debit cards to purchase mutual funds and securities, offering greater convenience to customers with higher payment success rates versus traditional methods. And in the e-commerce seller space, we renewed our agreement with Shopify for the balance card, allowing Shopify's U.S. sellers to access funds from sales by the next business day and receive cash back on everyday business expenses like shipping and marketing. We also signed a new issuing agreement for small business credit. Next, our value-added services are helping us win. They help our clients innovate and grow, provide risk management solutions, and drive better outcomes for them, and in turn for Visa. Our acceptance solutions, including CyberSource, have really resonated with clients this year. We sold more than 2,600 new acceptance services in over 100 countries. In North America, Costco has chosen visa acceptance solutions, including CyberSource, for all of their US and Canadian e-commerce transactions. Alaska Airlines has selected CyberSource to process their kiosk payments in support of their initiative to transform the airport lobby experience. In Asia Pacific, China Merchants Bank, the largest issuer in mainland China, has renewed its consumer and small business portfolios. In addition to our flagship risk management services, Visa Advanced Authorization and Visa Risk Manager, they will also expand their use of consulting services. Bank of China and Aon Financial Service in Japan have also signed on to use VAA and VRM. In Latin America, we have been focused on expanding our processing penetration as it allows us to offer more value-added services to our customers. In Colombia, we have recently expanded our processing penetration through the addition of four more banks under our strategic agreement with Credibanco, the market's largest acquirer and issuer processor. This positions us to reach nearly 80 percent of domestic transactions by the end of FY24 from essentially zero in 2019. As part of these agreements, banks have added anywhere from four to 11 value-added services, including risk and acceptance services. As part of our network of network strategy, we continue to both collaborate with and offer our solutions in the real-time payment space, most recently with FedNow. In Q4, Visa became a certified service provider for FedNow. Using our service, Visa financial institution clients can receive funds in real time through the FedNow service with origination capabilities to follow. This means that Visa is now processing FedNow payments with the Clearinghouse RTP to follow in the next few months. Now onto our new flows capabilities, which are increasingly an important differentiator to our clients. On the B2B side, we are pleased to have reached an expanded long-term global agreement across more than 60 countries with Citibank for their commercial card business, which also encompasses over 20 value-added services. We also recently won the IBM commercial card business spanning T&E, meeting and purchasing card programs in over 60 countries also with Citibank as the issuer. In Singapore, we renewed our longstanding partnership with DBS, the largest bank in Southeast Asia, to continue offering commercial debit and credit services for consumers and expanded into new commercial products for small businesses. On the Visa Direct side, we continue to expand Visa Direct's reach, especially to wallet endpoints. Most recently, we signed an agreement with Tencent for the Visa Direct cross-border remittance business. This will bring the total wallet reach for Visa Direct to over 2.5 billion. We've expanded our partnership with PaySend from U.S. and U.K. payments to enable all of PaySend's customers across the globe to send money in real time to eligible Visa cards across 170 countries and territories. PaySend is also a currency cloud customer, offering compelling cross-border solutions. We also recently renewed with the largest issuer in Korea, Shinhan Card, for consumer and business credit, which also incorporates the provision of our data capabilities in value-added services and the enablement of Visa Direct for cross-border remittances. We have also continued to add new Visa Direct use cases with our partners, such as with small ticket B2B payments and bill pay. In Brazil, Banco RB will enable Visa Direct for low-value, high-velocity cross-border payments as part of their corporate banking business. In the U.S., payment platform everywhere will be enabling bill payments with Visa Direct. And last, But certainly not least, our brand. Visa's brand strength helps deliver added value to our clients and their customers, financial institutions, merchants, and partners through a wide range of products and services as well as innovative brand and marketing efforts. We are pleased to have signed an agreement with Universal Destinations and Experiences to be the exclusive payment network for their new co-branded credit card that will be issued by FNBO. In addition, Visa is now the official way to pay at universal destinations and experiences. And together, we will provide compelling benefits to Visa cardholders across their Orlando and Hollywood properties. Also in the US, we have recently renewed the Fidelity Investments co-brand credit portfolio issued by US Bank. And we signed with Coupang, a large retailer with 20 million customers in Korea for their inaugural co-brand card. And in Samia, we have signed a Saudi Airlines co-brand with Riyadh Bank, and we renewed our co-brand partnership with Etihad Guest, the loyalty program of Etihad Airways. As we look ahead, we're excited to be activating our brand with clients and partners at the Paris 2024 and Milano Cortina 2026 Olympic and Paralympic Summer and Winter Games. Since 1986, Visa has been a proud sponsor of the Olympic movement, which provides an unparalleled opportunity to promote the Visa brand at a regional and global level, while also facilitating partnerships and joint business initiatives with clients. The Games provide a unique platform for showcasing product innovation and engaging consumers and clients with exclusive experiences. We are looking forward to the upcoming games and we have been building momentum in the business across Europe with a particular focus on the continent. I'll share a few recent highlights for our European business. On the people front, payments is a local business and we have expanded into seven new locations over the past five years and have more than doubled our workforce in the market. On innovative products, We have well over 100 FinTech relationships and have expanded our capabilities through the acquisitions of Tink and Currency Cloud. In new flows, Visa Direct has more than 100 enablers and over 1,000 programs with transactions more than doubling over the past two years. And in value-added services, we have increased our client penetration. In VAA alone, The number of clients enrolled in the service has more than doubled since three years ago, and we will be introducing nearly 20 additional products in 2024. We have been steadily building an attractive position on the continent and have built a strong pipeline of signed deals for the future by competing uniquely in each market. Active cards across continental Europe have grown nearly 50 percent since 2019. Over the next few years, we expect to migrate more than 40 million cards across nearly 40 clients. And the nature of the portfolios we are winning in continental Europe tend to include more cross-border volume, resulting in higher yields. So our brand, our capabilities, our people, all of these make a difference for Visa's clients. 2023 had many milestones and solid financial performance. As we are now three weeks into our new fiscal year, I would like to make a few general points and then Chris will go into more detail. One, there is still macro uncertainty. But just like in fiscal year 23, I am confident that we can manage through it. Our strategy and focus remain the same, propelling growth across consumer payments, new flows, and value added services. Two, we are focused on delivering for our stockholders. In that light, I am sure that you saw that we released an 8K back in September regarding our potential exchange offer program. We appreciate the dialogue we've had with Class A, B, and C stockholders, and the Board is evaluating next steps as we continue to engage with investors. Finally, You may have seen today that we announced a $25 billion multi-year share repurchase program, which reflects our board's confidence in our strategy and future potential. I continue to see tremendous opportunity ahead. Visa has the brand, the capabilities, the strategy, and most importantly, the people to propel our growth for years to come.

And with that, let me hand it over to Chris. Thanks, Ryan. Good afternoon, everyone. As Ryan said, Q4 was another good quarter, closing out a strong fiscal 23, driven by healthy growth in payments volume, cross-border volume, and process transactions, and continued solid execution of our strategy with new flows and value-added services revenue growing faster than consumer payments. I'll first start with a high-level summary of our Q4 performance and then click into more details. Looking at our drivers, in constant dollars, global payments volume was up 9% year-over-year, and process transactions grew 10% year-over-year. both stable to Q3. Cross-border volume excluding intra-Europe growth was strong, up 18% year-over-year in constant dollars. Fiscal fourth quarter net revenues were up 11% and 10% in constant dollars with minimal impact from FX in line with our expectations. Gap EPS was up 22% and non-gap EPS was up 21% in both nominal and constant dollars. Now, on to the details starting with the U.S. Payments volume was up 6% year-over-year, stable to Q3. Credit volume grew 6% year-over-year, and debit volume grew 7%. Card present spend grew 3%, and U.S. card not present volume, excluding travel, grew 9%. U.S. process transactions growth was stable at 8%. Over the course of the quarter, we saw payments volume growth tick up from July to September, primarily driven by sequential improvement in ticket size growth that was mostly led by fuel, with higher gas prices and easier year-over-year comparisons, as well as a positive days mix impact. Consumer spend across all segments, from high to low spend, has remained stable since March. Our data did not indicate any behavior change across consumer segments. In international markets, total payments volume growth was up 11% in constant dollars. Payments volume growth rates were strong through the quarter in most major regions, with Latin America, Samia, and Europe ex-UK growing about 20% or more in constant dollars. Now to cross-border, which I'll speak to in constant dollars, excluding intra-Europe transactions. Total cross-border volume was up 18% and up 152% versus 2019. Cross-border card-not-present volume growth excluding travel grew 9% year-over-year and 173% versus 2019. Adjusted for cryptocurrency purchases, cross-border e-commerce spending grew year-over-year in the low double digits in line with pre-COVID growth rates and consistent with the trends we have seen for most of the fiscal year. Cross-border travel-related spend grew 26% year-over-year, The cross-border travel volume index to 2019 increased from 139% in June to 143% in September, totaling 141% for the quarter, a five-point improvement from Q3. We continued to see healthy travel volume levels in and out of LAC, Europe, and Samia, ranging from 145% to 165% of 2019 levels. Travel volume into Asia continued to improve, indexing at 128% to 2019 levels for the quarter, up 10 points from Q3, while travel volume out of Asia was up 7 points to 114%. Looking at mainland China specifically, cross-border travel volume continued to improve but remained below 2019 levels. Travel volume outbound from the U.S. to all geographies continued to be strong. in the mid-150s indexed to 2019. U.S. inbound travel recovery accelerated this quarter, pushing the index above 2019 levels for the first time, even as the dollar continued to remain strong relative to pre-COVID levels. Now let's review our fourth quarter financial results. Service revenues grew 12% year-over-year versus the 9% growth in Q3 constant dollar payments volume. primarily due to business mix, pricing, and card benefits. Data processing revenues grew 13% versus 10% process transaction growth, led by value-added services and pricing. International transaction revenues were up 10% versus the 18% increase in constant dollar cross-border volumes, excluding intra-Europe. Revenue growth lagged volume growth, primarily due to declining currency volatility. Other revenues grew 35% led by pricing, consulting, and marketing services, and client incentives grew 20%. Now let me dive into revenues growth across our three growth engines. Consumer payments growth was driven by stability in domestic volume growth and process transactions, as well as strong growth in cross-border volumes. New flows revenue grew 14% in constant dollars. Commercial volumes are up 9% in constant dollars and up 156% versus 2019. Remember that revenue is recorded based on last quarter's payment volumes growth, which was 9% in constant dollars in Q3. Visa direct transactions grew 19%, and as we mentioned last quarter, were impacted by a client that transitioned its domestic P2P transactions to an internal ledger system, and that was not meaningful to revenues. Value-added services grew 19% in constant dollars, driven primarily by strong advisory services, select pricing actions, and higher volume. Gap operating expenses increased 13%. Non-gap operating expenses grew 9%, primarily due to personnel expenses from growth in headcount, and FX had a nearly two-point drag. Excluding net gains from our equity investments of $7 million, non-gap non-operating income was $79 million, benefiting from higher interest income due to rising rates. Our GAAP tax rate was 16.9%, and non-GAAP was 17% due to a tax benefit related to the extension of the U.S. foreign tax credit regulations, which resulted in an indirect tax expense in the operating expense line and a much larger tax benefit in the income tax provision. GAAP EPS was $2.27. Non-GAAP EPS was $2.33, up 21% over last year, inclusive of a little more than half a point of drag from exchange rates. In Q4, we bought back approximately $4.1 billion in stock and distributed $928 million in dividends to our stockholders. We also added $150 million to the litigation escrow account, which has the same effect as a stock buyback. At the end of September, we had $4.7 billion remaining in our buyback authorization. For the full fiscal year 2023, net revenues increased 11%. Gap EPS of $8.28 was up 18%, and non-gap EPS of $8.77 was up 17%, inclusive of an over two-point drag from exchange rates. Now let's move to fiscal year 2024. Before we share our perspectives on the year, I want to make a few brief comments. In many ways, FY24 will be as close to a normal year as we've had in a while. We have fully lapped the Russia and Omicron impacts, and overall inflation continues to moderate in many of our markets. As such, we're pleased to resume our pre-COVID guidance practices and will provide our outlook for FY24, which we will update each quarter. At the same time, we will no longer be providing the intra-quarter 8Ks associated with interim driver updates. Now, let's look at what we've seen through the first three weeks of October. U.S. payment volume was up 5%, with debit and credit both up 5%. The sequential step down from September was primarily driven by the day's mixed impact in September and declining fuel prices in October, excluding those two items Payments volume growth was relatively stable from September to October. Reg II has not meaningfully impacted volume so far. Process transactions grew 10% year-over-year. Constant dollar cross-border volume excluding transactions within Europe grew 19%, and travel-related cross-border volumes were 144% indexed to 2019. Turning now to our key assumptions. As we've said consistently, we're not economic forecasters, and so at a macro level, we are assuming no recession in our outlook. We're also not factoring in any impacts from Reg II and student loan repayments because, as I mentioned before, we've yet to see any meaningful impact. As the year progresses and we gather more information with regard to these assumptions, we will continue to provide updates. For key drivers, we're assuming that the trends we saw in Q4 generally continue throughout the year. Overall payments volume growth and process transaction growth are expected to be in the low double digits on a year-over-year basis. Cross-border, card-not-present, ex-travel, and ex-crypto volume growth will continue to be in the low double digits year-over-year on a constant dollar basis. Cross-border travel volume excluding intra-Europe year-over-year growth will moderate to the low 20s in constant dollars and when compared to 2019, would equate to a four- to five-point improvement each quarter. This assumption is driven primarily by improving AP cross-border travel volume, mostly from China, and to a lesser extent, improving U.S. inbound travel volume. In terms of what this means for the financials, I'll speak to the numbers on an adjusted basis, which we define as non-GAAP results presented in constant dollars and excluding acquisition impacts. which you can review in the footnotes in our earnings release and earnings presentation for more detail. Okay. First, let's discuss net revenues. For the full year, we expect low double-digit adjusted net revenue growth. Based on current currency forward curves, FX will be approximately a one-point drag for the year. We're assuming that currency volatility moderates slightly from Q4 levels but remains relatively stable throughout the year. On a year-over-year basis, incentives are expected to grow slightly less than what we saw in FY23. For new flows and value-added services, we continue to expect those to grow faster than consumer payments in FY24. Now moving to expenses. Our current plans are to grow adjusted operating expense in the high single-digit to low double-digits with approximately 1.5 points of FX benefit to nominal non-gap growth. non-operating income is expected to be between $250 and $300 million. The tax rate is expected to be slightly favorable to our typical rate of 19 to 19.5% due to some offsetting factors. On the one hand, we have the impact of tax rate increases in certain countries, which puts our new run rate closer to 19.5 to 20%. However, we also anticipate some one-time tax benefits in the second half related to the resolution of certain tax matters. In total, this will put us between 18.5 and 19% for the full fiscal year. Putting all this together, we expect full year adjusted EPS growth in the low teens with about half a point of FX drag to nominal non-gap growth. Also, FY24 will likely be a tail of two halves with variability in our growth rate from the first half to the second half. A few aspects to keep in mind. First, Cross-border volume ex-intra-Europe grew 31% year-over-year in the first half of FY23 and 20% in the second half. Second, recall that we had relatively high currency volatility in the first half of FY23, and it moderated considerably in the second half. Third, incentives were 16% higher in the second half of FY23 versus the first half, due primarily to deal timing and client performance. As a result, we expect overall adjusted net revenue growth to be lower in the first half than in the second half of FY24. This will also be the case on a nominal basis, even with a slightly larger FX headwind in the second half of FY24 than the first half. On the expense side, as Ryan mentioned, this is an Olympics year, and we expect Q2 and Q3 expense to have the largest percentage increases as we ramp. But adjusted operating expense growth and the FX impact will roughly be the same in both halves. The tax rate is expected to be lower in the second half than the first due to the anticipated one-time tax benefits I mentioned. So for the first quarter specifically, given the variables I just described, Q1 is expected to have the lowest adjusted year-over-year net revenues growth rate with an improving trend throughout the year, and Q4 is expected to be at the highest adjusted growth rate. We expect first quarter net revenues growth in the upper mid to high single digits on an adjusted basis. A few factors to keep in mind. Again, one, currency volatility was the highest in Q1 of 23. Two, cross-border volume grew 31% in Q1 of 23. And three, Q1-23 other revenue was strong due to FIFA World Cup-related value-added services revenue, and incentives were lower than expected due to client performance and other items. Adjusted operating expense growth is expected to be in the high single digits, driven by headcount growth and salary increases. We anticipate approximately half a point FX headwind to nominal net revenues growth and approximately one-and-a-half point benefit to nominal non-GAAP expense growth. The tax rate is expected to be closer to our new run rate of between 19.5 and 20% in Q1. This puts first quarter adjusted EPS growth in the upper mid-single digits with minimal impact from FX. Keep in mind that the adjusted basis is defined as non-gap results presented in constant dollars and excluding acquisition impact. And non-GAAP expenses in EPS exclude acquisition-related items and the litigation provision for the first quarter of 2023. For FY24, the estimated results exclude approximately $20 million, or one cent, of acquisition-related costs and approximately $40 million, or two cents, from the amortization of acquired intangibles. And finally, moving to capital return. As Ryan said, the Board has authorized a $25 billion multi-year share repurchase program and increased our quarterly dividend by 16%. In summary, Visa's underlying business continues to be healthy and stable, and the growth opportunities are significant. While there continue to be macro uncertainties, we feel confident in our ability to manage the business through a changing environment and deliver value for our stockholders. And now, Jennifer, let's move to Q&A.