Q1 2024 Visa Inc Earnings Call
Welcome to Visa's fiscal first quarter 2024 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 <unk> Senior Vice President and global head of Investor Relations.
MS <unk> you may begin.
Good afternoon, everyone and welcome to Visa's fiscal first quarter 2024 earnings call.
Joining us today are Ryan Mcinerney, Visa's, Chief Executive Officer.
Chris: Chris saw visas Chief financial Officer.
Chris: This call is being webcast on the Investor Relations section of our website at Investor Visa Dot com.
Chris: A replay will be archived on our site for 30 days.
Chris: 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.
Chris: Additional information concerning those factors is available in our most recent annual report on Form 10-K, and any subsequent reports on forms 10-Q, and 8-K, which you can find on the Sec's website and the Investor Relations section of our website.
Chris: Our non-GAAP financial information disclosed in this call the related GAAP measures and reconciliation are available in today's earnings release and related materials available on our IR website and with that let me turn the call over to Ryan.
Ryan: Hi, everyone.
Ryan: Good afternoon, and thank you for joining us.
Ryan: We are off to a solid start in 2024.
Ryan: Consumer spending remained resilient.
Ryan: With first quarter year over year payments volume growth at 8%.
Ryan: U S payments volume grew 5% year over year.
Ryan: International payments volume grew 11%.
Ryan: Cross border volume, excluding intra Europe rose, 16% year over year in constant dollars.
Ryan: With cross border travel at 142% of 2019 levels up from 139% in the fourth quarter.
Ryan: Processed transactions rose 9%.
Ryan: Our net revenues increased 9% with GAAP, EPS up 20% and non-GAAP EPS up 11%.
Ryan: As I reflect on the execution of our strategy this quarter across consumer payments, new flows and value added services.
I wanted to highlight a few key themes.
Ryan: One we.
Ryan: We remain obsessed about serving our customers.
Ryan: Including traditional bank partners Neo banks fin techs, wallets sellers acquirers and everyone else.
Ryan: Our focus on clients has enabled us to deepen our relationships with partners across all three pillars of our strategy.
Ryan: Two.
Ryan: We continue to seek new partnerships, new use cases, and new verticals to drive our business forward with a particular emphasis on cross border.
Ryan: Three.
Ryan: We have gone to market with innovative solutions across our network of networks seeking to add value for all transactions no matter the network.
Ryan: And four we.
We're always looking for new and innovative ways to amplify our brand in service of our partners.
Ryan: With those themes in mind, let me provide some more details on the quarter.
Ryan: Let's start with consumer payments.
Ryan: We saw continued growth in credentials acceptance and engagement.
Ryan: Credentials grew 6% and we now have more than $8 7 billion network tokens up 55%.
Ryan: Acceptance locations grew 17%.
Ryan: And let me highlight two recent examples of where we've expanded acceptance.
Ryan: The first was in Brazil with <unk>.
Ryan: For cash conversion at there over 10000 lottery branches.
Ryan: They are now accepting visa credit and debit cards to pay for utilities.
Speaker Change: Tax collection, lotteries, and voucher payments, which are called bulldoze.
Speaker Change: Another example was in Asia Pacific, where we signed an agreement with be cash.
Speaker Change: The largest mobile financial services player in Bangladesh.
Speaker Change: Already a client with visa direct.
be cash: They now have enabled visa's 15 million plus card holders in the country.
be cash: To use their in App QR code to pay at more than 550000 be cash merchants.
be cash: These examples demonstrate our local approach to expanding our global acceptance footprint.
be cash: Tap to pay grew five percentage points from last year to 77% of face to face transactions globally, excluding the U S.
In the U S. We reached 45% penetration.
be cash: One highlight from the first quarter is that Lowe's has enabled tap to pay acceptance.
be cash: We believe the tapping provides the best buyer and seller experience in the face to face environment and we've seen that play out in the results.
be cash: In a recent visa study in the U S. We saw on average two more transactions a month.
be cash: And spend lift of $70 a month for those who tap with a visa debit card versus those who don't tap.
Now on to some noteworthy updates from the quarter, which demonstrate our ability to deepen and expand partnerships as well as create new ones.
be cash: In Europe.
be cash: We renewed our agreement with <unk> Bank, the largest private bank in Turkey, with 33 million cards for its consumer and commercial credit and debit portfolios.
be cash: As part of that renewal.
be cash: They will be issuing the first Olympic and Paralympic games credit card in Europe outside of France, leveraging our sponsorship.
be cash: In Poland.
be cash: We signed a new issuing agreement with <unk> Bank Polsky, the largest issuer and acquirer in Poland and central Eastern Europe for consumer and commercial debit.
Speaker Change: In Greece, we expanded our partnership with <unk> Bank.
Larger bank in the country to become their exclusive payment network across their consumer and commercial credit and debit portfolios.
Speaker Change: These are all fantastic examples of the attractive position.
Speaker Change: And strong pipeline in Continental Europe, I spoke about last quarter.
Speaker Change: In Japan, we expanded our credit issuance partnership with E. Pas one of the fastest growing issuers in the country affiliated with Department store My Rewey.
Speaker Change: They will use visa managed services, which is a part of our advisory solutions, where we embed visa employees within a client organization to help execute against key initiatives.
Speaker Change: In Korea.
Shinhan card: We renewed and expanded our partnership with Shinhan card the largest issuer in the country for our consumer and commercial credit and debit.
Shinhan card: Shinhan has also committed to utilizing a suite of visa's value added services, including consulting and marketing to advance their business.
Shinhan card: In Mexico, we renewed our agreement with BBVA across consumer and commercial credit and debit.
Shinhan card: Along with value added services, including risk advisory and data tools.
Shinhan card: And last in the U S. We extended our agreement with Bank of America for multiple value added services.
Shinhan card: Including visa is loyalty platform service car.
Shinhan card: Cardinal Commerce three D secure service.
Shinhan card: Verify order insight digital service.
Shinhan card: And Dps debit processing.
Shinhan card: We also continued to be a partner of choice for Fintech around the world.
Shinhan card: First in the U S. We renewed with leading Fintech shine for their debit and credit builder secured card portfolios as well as for visa direct.
Speaker Change: In Latin America, we renewed our debit and credit contracts with Rappee, one of the largest fintech and merchant clients in the region with more than 30 million customers.
Speaker Change: They will also utilize numerous value added services, including Cybersource and decision manager.
Speaker Change: And finally, we.
Speaker Change: We are excited about a new global partnership with HSBC for their Fintech initiative Zing.
Speaker Change: Starting with the U K.
Speaker Change: We are supporting the ambition to launch this multi currency proposition and more than 30 markets.
Speaker Change: Visa's capabilities through tank.
Speaker Change: Currency cloud and our consumer payment solutions.
For a powerful customer proposition and rapid deployment for zing and HSBC.
Speaker Change: Through these renewals and new partnerships you can see how we are focused on building a deep relationship across all of the capabilities visa offers.
Speaker Change: Now moving to new flows.
Speaker Change: We have updated our sizing of the new flows opportunity using the latest market data available.
Speaker Change: Excluding Russia and China.
Speaker Change: We see 200 trillion dollars of opportunity annually across B to B B to C. P to P and G to C C.
Speaker Change: Certainly an enormous number.
Speaker Change: We are working with our clients to deliver visa's commercial and money movement solutions to help digitize. These flows on our network of networks.
Speaker Change: Starting with visa direct.
Speaker Change: Total transactions this quarter grew 20% to $2 $2 billion.
Speaker Change: And on the PDP Cross border front transactions grew more than 65% year over year.
In terms of.
Speaker Change: Client highlights for this quarter, we have been developing partnerships for new use cases and verticals and we are continuing to drive cross border volumes.
Speaker Change: First in new use cases.
meta: In addition to our existing PDP partnership in the U S. We have expanded our visa direct relationship with meta launching the ability for content creators on <unk> family of apps to cash out their earnings to a debit card.
meta: This launch now live in the U S U K, France and Italy.
meta: Laos for creators to receive their payouts quickly and safely.
meta: Second on cross border volumes, we have continued to make progress in enabling global money movement across our $8 5 billion endpoints in nearly 200 countries and territories.
meta: Western Union is a great example.
meta: We just signed a long term global partnership agreement with Western Union.
Western Union: <unk> issuance.
Western Union: These are direct.
Western Union: And other services across 40 countries and five regions.
Western Union: This long term collaboration will bring product innovations and digital first customer experiences to enhance cross border money movement.
Western Union: We also expanded our relationship with <unk> to enable customers from 30 countries to send cross border payments to eligible debit cards and bank accounts in over 100 countries globally.
Western Union: In Canada.
We recently announced our agreement with CIBC and simply.
Western Union: To provide millions of clients the ability to send money to digital wallets in key remittance destinations, including the Philippines.
Western Union: China and Bangladesh.
Western Union: Onto the commercial side.
Western Union: Total payments volume grew 8% in constant dollars.
Western Union: And throughout the quarter, we continued to focus on new verticals.
Western Union: Let me highlight a few specific areas.
Western Union: First in the cross border travel vertical.
Western Union: We recently expanded our agreement with Singapore based B to B platform NIM.
Western Union: Their virtual card <unk> travel program will expand from the U S and Europe into Australia, Singapore, Hong Kong and Japan.
Western Union: Also in <unk> travel, we signed a new virtual card agreement with worldwide.
A leading global payments provider for travel intermediaries to pay their suppliers more quickly.
Western Union: In the contractor vertical we recently signed an agreement with United Overseas Bank, and Baxter, our Singapore Fintech for contractors.
Western Union: In partnership with visa the Dax platform has further been enhanced to provide embedded financing capabilities.
Western Union: Subcontractors will be given the option to be paid for their services through you Obi virtual cards.
Western Union: And also with <unk>, we renewed and expanded our commercial relationship across commercial debit and credit, including the enablement of payment flows for the Singapore government.
Western Union: Let me move on to value added services.
Western Union: Our network of networks strategy is also playing a key role in value added services.
Western Union: As a reminder, this has three components.
Western Union: One <unk>.
Western Union: Moving money to all endpoints and to all form factors.
Western Union: <unk>.
Western Union: Using all available networks and being a single connection point for our partners.
Western Union: And three providing our value added services on all transactions no matter the network.
Western Union: We have continued to develop and expand our value added services as part of this strategy.
Western Union: Let me cover three recent examples.
Western Union: Processing capabilities for RTP networks.
Western Union: Pismo.
Western Union: And process.
Western Union: Last quarter I noted that visa is becoming a certified service provider for fed now, enabling financial institutions to receive funds through the fed now service.
Western Union: We have now enabled the ability to also send funds.
Pismo: The second examples Pismo, which we just closed last week.
Pismo: As I talk to clients around the world, particularly issuing clients.
There are two priorities that are increasingly on the minds of Ceos.
Western Union: The first is for many of our issuing clients.
Western Union: Either recently embarked on or are considering embarking on a transformation of their tech stack from their legacy infrastructure to cloud native API based tech stacks.
Western Union: The second is that many clients, whether they be traditional issuers of fintech.
Western Union: Are increasingly looking to rapidly expand their issuance to new regions and countries, especially the more developing markets around the world.
Western Union: Our clients are looking to visa to help them with both of these priorities and.
Western Union: And with Pismo, we will be able to deliver to our clients. The best cloud native issuer processor and core banking platform in the world.
Pismo: <unk> offers global core banking and multi product issuer processing covering credit debit and commercial.
Western Union: With connectivity to local payment networks, such as pics.
Pismo: Our goal is for Pismo to be the platform of choice for our issuing partners around the world.
Enabling them to accelerate their global expansion and transition to cloud native platforms.
Pismo: And the third example of our network of networks is our announcement to acquire a majority interest in process a payments processor in Mexico.
Pismo: A couple of things about the Mexican market.
Pismo: One cash and check represent more than 50% of personal consumption expenditures.
Pismo: And two.
Pismo: Today visa has limited ability to process domestically.
Pismo: We believe we can bring enhanced technology infrastructure and lay the groundwork to develop new innovative ways for consumers small businesses, and local issuers and acquirers and Mexico to pay and be paid.
Western Union: This includes improving safety.
Western Union: Security and reliability and providing better experiences through our value added services, such as <unk> risk products and more.
Western Union: We can also bring our innovation and commitment to continued investment for both face to face and online transactions.
Western Union: Together these efforts will help further digitized payments in the country.
Western Union: The investment is subject to regulatory review and we hope to close in the second half of calendar year 2024.
Western Union: And finally I want to highlight the opportunities to drive further growth and value added services via the development of new partnerships.
Western Union: These enable us to enhance our overall offering and distribution reach.
Western Union: Yesterday, we announced an agreement with digital workflow leader service now to build solutions and distribute visa products and solutions to joint customers.
Western Union: To start service now will launch an end to end dispute management solution for issuers.
Western Union: With plans to expand to additional segments and products over time.
Western Union: This partnership showcases the demand for our value added services and provides a compelling distribution channel to reach more customers around the globe.
Western Union: So across consumer payments, new flows and value added services, you can see the enormous opportunity as well as visa strong relationships commitments to our clients and innovation in new ways to pay and be paid.
Western Union: What helps to amplify all of these efforts is our brand.
Western Union: We recently renewed our long standing partnership with FIFA create.
Western Union: Creating a powerful opportunity to drive business for both visa and our clients improve.
Western Union: Improved brand lift.
Western Union: And maximize global reach not to mention providing an opportunity to showcase and implement visa's innovative payment technology.
Western Union: We are also launching our first new global sports sponsorship and more than 15 years with the Red Bull Formula one teams.
Western Union: The partnership aligns our brand with two teams within Formula one.
Which is one of the fastest growing sports on the planet.
Western Union: Providing another opportunity to drive business for our clients.
Western Union: As we look ahead. This year, we're excited to be activating our brand with our clients across all of these partnerships as well as the Olympic and Paralympic games in Paris.
Chris Visas: Before I hand, it over to Chris.
Chris Visas: I wanted to mention that we hold our annual meeting on Tuesday.
Chris: All of the proposals that the board recommended past.
Chris Visas: Including the exchange offer program proposal.
Chris Visas: As such we will be moving promptly to file an S. Four with the SEC relating to the initial exchange offer.
Chris Visas: I also wanted to give a special thanks to my colleague partner and friend Al Kelly as.
Alfred F. Kelly: As Tuesday, he officially retired as executive chairman.
Now on behalf of the entire visa family.
Alfred F. Kelly: Thank you for your exceptional leadership.
Alfred F. Kelly: You led this business to incredible Heights, while also driving innovation deep.
Alfred F. Kelly: Deepening our client relationships and strengthening our culture in so many ways.
Alfred F. Kelly: Your impact on visa will be visible for generations.
Alfred F. Kelly: In closing.
In the first quarter visa once again demonstrated the effective execution of our strategy across the globe.
Alfred F. Kelly: While uncertainty seems to be the norm.
Visa has the experience and discipline to manage through the challenging environments and I remain optimistic and confident about our future.
Chris: Now over to Chris.
Chris: Thanks, Brian Good afternoon, everyone.
Chris: As Ryan said Q1 was a solid quarter with relative stable growth in overall payments volume and processed transactions and strong growth in cross border volume.
Chris: Looking at our drivers in constant dollars global payments volume was up 8% year over year and processed transactions grew 9% year over year.
Chris: Cross border volume growth, excluding intra Europe was up 16% year over year in constant dollars.
Chris: Fiscal first quarter net revenues were up 9% in nominal and constant dollars.
Chris: Which was on the high end of our expectations, primarily due to lower than expected incentives and less FX drag gap.
Chris: GAAP EPS was up 20% and non-GAAP EPS was up 11% in nominal and 10% in constant dollars.
Chris: Now onto the details starting with the U S U.
Chris Visas: U S payment volumes grew 5% year over year credit grew 6% and debit grew 5%.
Chris Visas: Card present spend grew 3% and card not present volume grew 7%.
Chris Visas: As we look at the monthly total U S payments volume growth rates throughout the quarter, we saw low in October and a peak in November with December and between.
Chris Visas: Putting it altogether the step down of about 80 basis points in total U S payments volume growth from Q4 to Q1 was primarily due to a less favorable mix of weekends and weekdays compared to last year and a combination of a few small items, including a softer October and modest impact from Reg II.
Chris Visas: Consumer spend across all segments from low to high spend has remained relatively stable our data does not indicate any meaningful behavior change across consumer segments.
Chris Visas: Moving to holiday spend which is the period from November one to December 31 in the U S. Consumer holiday spend growth was in the mid single digits on a year over year basis.
Chris Visas: Consumer retail spending growth was similar to last year, However, retail spending growth on key shopping days from Thanksgiving to cyber Monday was much stronger.
Chris Visas: E Commerce increased its share of retail spending versus last year.
Chris Visas: Moving to international markets, where total payments volume growth was up 11% in constant dollars stable to Q4.
Chris Visas: Payments volume growth rates were strong for the quarter in most major regions with Latin America, EMEA and Europe ex UK, each growing about 20% in constant dollars.
Chris Visas: Now onto cross border, which I'll speak to in constant dollars and excluding intra Europe transactions.
Chris Visas: Total cross border volume was up 16% year over year.
Chris Visas: Cross border card not present volume growth, excluding travel grew slightly faster than expected in the low teens adjusted for crypto currency purchases.
Chris Visas: Cross border travel related spend grew 19% year over year.
Chris Visas: The cross border travel volume indexed to 2019 increased from 139% in Q4 to 142% in Q1.
Chris Visas: Travel volume into Asia index at 132% of 2019 levels for the quarter up three points from Q4, while travel volume out of Asia was up four points to 118%.
Chris Visas: This was lower than last quarter's expansion, primarily due to relative weakness in Australia and Japan.
Chris Visas: Travel in and out of mainland China continued to improve but both remain below 2019 levels.
Chris Visas: U S travel inbound continued to improve several points from Q4 versus 2019 levels.
Chris Visas: And we continued to see healthy travel volumes in and out of Europe.
Chris Visas: Europe, and EMEA and out of the U S ranging from 145% to 170% of 2019 levels now.
Chris Visas: Now, let's review, our first quarter financial results, starting with the revenue components.
Chris Visas: First is any new pricing usually goes into effect in April and October this quarter each of our revenue components benefited as a result, and the growth rates were either further enhanced are offset by the additional factors as follows.
Chris Visas: Service revenues grew 11% year over year versus the 9% growth in Q4, our constant dollar payments volume with some additional help from card benefits.
Chris Visas: Data processing revenues grew 14% versus 9% process transaction growth helped by business mix and value added services.
Chris Visas: International transaction revenues were up 8% versus the 16% increase in constant dollar cross border volume, excluding intra Europe impacted by lapping strong currency volatility from last year.
Other revenues grew 18% with strong consulting revenue growth, but impacted by lapping 31% growth from 2023, primarily from FIFA related value added services revenue.
Chris Visas: Client incentives grew 20%, but ended up lower than expected due to client performance and deal timing.
Chris Visas: Across our three growth engines consumer payments growth was driven by relative stability in payments volume growth in processed transactions as well as strong growth in cross border volume.
Chris Visas: This quarter in new flows the underlying drivers remained relatively stable commercial volumes rose, 8% year over year in constant dollars and visa direct transactions grew 20%.
Chris Visas: Total new flows revenue grew in the low single digits year over year in constant dollars due to several onetime items and business mix impact as you know for any given period. There can be puts and takes but most importantly drivers are stable and we continue to expect full year 2024, new flows revenue to grow faster than consumer payments.
Chris Visas: Revenue.
Chris Visas: In Q1 value added services revenue grew 20% in constant dollars to $2 $1 billion.
Chris Visas: With strength in issuing and acceptance solutions.
Chris Visas: GAAP operating expenses declined 6% the decrease in expenses was driven by a decrease in the litigation provision somewhat offset by an increase in personnel expenses.
Chris Visas: non-GAAP operating expenses grew 7%, primarily due to an increase in personnel expenses.
Chris Visas: Excluding net gains from our equity investments of $4 million non.
Chris Visas: non-GAAP non operating income was $84 million.
Chris Visas: Our GAAP tax rate was 19, 1% and our non-GAAP was 19%.
Chris Visas: Helped by a larger than expected tax benefits.
Chris Visas: GAAP EPS was $2 39.
non-GAAP EPS was $2 41 up 11% over last year inclusive of an approximately half point benefit from exchange rates.
Chris Visas: In Q1, we bought back approximately $3 4 billion in stock and distributed over $1 billion in dividends to our stockholders at the end of December we had $26 4 billion remaining in our buyback authorization.
Chris Visas: Now, let's move to what we've seen so far in January through the 20 <unk>.
Chris Visas: U S payment volume was up 4% with debit up 3% and credit up 4% year over year down from December largely due to severe weather conditions in parts of the U S.
Chris Visas: Processed transactions grew 8% year over year.
Chris Visas: Constant dollar cross border volume, excluding transactions within Europe grew 16% year over year.
Chris Visas: Travel related cross border volume, excluding intra Europe grew 16% year over year or 146% indexed to 2019.
Chris Visas: In cross border card not present ex travel grew 16% now onto our expectations remember that adjusted basis as defined as non-GAAP results in constant dollar and excluding acquisition impacts you can review these disclosures in our earnings presentation for more detail.
Chris Visas: For the full year, we have no material changes to our prior outlook for drivers adjusted net revenues or EPS growth.
Chris Visas: Remember that our drivers assume no recession or a further increase in Reg II impacts.
<unk> is expected to have minimal benefit to full year net revenues growth.
Chris Visas: And an approximately half point headwind to non-GAAP operating expense and EPS growth.
Chris Visas: FX is expected to have an approximately half point drag to net revenues growth and approximately one point benefit to non-GAAP operating expense growth and a minimal drag to non-GAAP EPS growth.
Chris Visas: GAAP and non-GAAP non operating income is expected to be between 350 and $400 million.
With nearly half in Q2 due to the resolution of some non U S tax matters.
Chris Visas: Putting it altogether adjusted net revenues growth is unchanged at low double digits.
Chris Visas: <unk> operating expense growth is updated to low double digits and adjusted EPS growth is unchanged at low teens.
Chris Visas: For the second quarter similar to the full year <unk> is expected to have a minimal benefit to net revenues growth and an approximately half point headwind to non-GAAP operating expense and EPS growth.
Chris Visas: FX is expected to have minimal drag to net revenues growth and then approximately half point benefit to non-GAAP operating expense growth and minimal benefit to non-GAAP EPS growth.
Chris Visas: We expect adjusted net revenues growth in the upper mid to high single digits and adjusted operating expense growth in the low double digits north of 10%.
Chris Visas: Non operating income is expected to be highest in Q2 due to the resolution of some tax matters as I noted earlier.
Chris Visas: As such the tax rate is expected to be between 16% and 16, 5% in Q2 with the full year unchanged.
Chris Visas: The split second quarter, adjusted EPS growth in the high teens.
Chris Visas: In summary, we're off to a solid start in the first quarter. The fundamental drivers remained relatively stable and with no material changes to our full year guidance. We remain focused on the execution of our growth strategy for the rest of 2024.
Chris Visas: As always if the environment changes and there is an event that impacts our business. We will of course adjust our spending plans we remain thoughtful on balancing between short and long term considerations.
Chris Visas: And now Jennifer let's go to Q&A.
Jennifer Smith: Thanks, Chris and with that we're ready to take questions.
Jennifer Smith: If you would like to ask a question. Please press star one and clearly record. Your name you will be announced prior to asking your question to ensure all questioners are Harry we ask that you. Please limit yourself to one question once again to ask a question. Please press star one to withdraw your question Press Star two.
Jennifer Smith: Our first question comes from Tien Tsin Huang with Jpmorgan. Your line is open.
Jennifer Smith: Hey, Thanks, So I just want a clarification on that.
Jennifer Smith: The bigger question here is just on the clarification is the new flows up low single digits versus mid teens last quarter did that how did that come in versus plan, where there's some.
Jennifer Smith: One time issues because it sounds like the other metrics were in line and then my question was just on U S volume running in the mid single digits, here's pretty tight to PCE.
Jennifer Smith: I know there are a lot of factors like gas and E comm and rigor, but just can you clarify your view on.
Jennifer Smith: U S volume here in relation to PCE growth in the in the short to midterm. Thank you.
Jennifer Smith: Hey, Tien tsin, its Ryan why don't I start on the second part of your question and then Chris can answer the first part and adequate I think on the second part I think it is back way up for a second in the U S. U S remains a significant opportunity for us in consumer payments I mean, there is still a lot of cash a lot of checks a lot of <unk>.
Chris Visas: H, we're having great work with Fintech and banks to bring more people in on the card front, we're doing work in order to expand acceptance the service industry, whether it's plumbers or contractors charities vending parking tap to pay I mean, we continue to be very very excited about the U S market I think as you said in <unk>.
Chris: Chris can add some detail in the quarter. There is some visa specific factors.
Chris Visas: The growth rate in the U S.
Chris: As it relates to PC like you were talking about but as we look forward continues to be a big opportunity for us we continue to be excited about it Chris you want to take the first part attendance question to add anything on the second sure.
Chris Visas: The new flow so the underlying fundamentals of our commercial business remains sound commercial payment volume grew 8% and visa direct transactions grew 20%.
Chris: And importantly, the new flows business continues to be a growth engine for <unk>. So we do expect the full year revenue growth to exceed consumer revenue growth now specific to your question around the first quarter. It was impacted by a couple of factors first the mix of business with cross border volume growth slowing in Q1 as travel continue to normalize and.
Chris: And second the growth was also impacted by a few one time items that happened to be larger than we might typically see in any given quarter, but all in all we feel great about the business and the long term growth trajectory ahead.
Bob: That's helpful. Thank you Bob next question Jordan.
Bob: Our next question comes from Dan Perlin with RBC capital market. Your line is open.
Dan Perlin: Thanks, Hey, I just wanted to I wanted to ask a question around the new partnerships within value added services.
Dan Perlin: Yes, Brian it sounds like as part of the priorities you want to get value added services on all the networks and I think you were alluding to the fact that this is going to be maybe a bigger shared responsibility with this partnership growth.
Brian Good: And surface now is obviously a great example, but I'm just trying to reconcile how we should be thinking about visa maybe opening up those opportunities.
Dan Perlin: With all these new partnerships and what that May do at some point to the financial picture of the company.
Yes.
Dan Perlin: Again, if I back up before I answer the specific question about service now and partners. We're very excited about the progress that we've made on our value added services strategy. We're excited about the momentum that we're seeing kind of in the market. We're excited to see our sales efforts really really driving success and performance across issuers.
Dan Perlin: Acceptance risks and identity advisory and open banking.
Dan Perlin: And it's exactly as you were saying with partners like service now what we're finding is we can have great efforts selling to our partners directly around the world, but we're also getting a lot of demand from various different platforms that already have relationship with thousands or tens of thousands or in some cases more.
Dan Perlin: <unk> in any one country.
Chris Visas: Or region.
They are very excited to sell through our value added services as a way of differentiating their platform and deepening relationships with their users and their customers and so in the example of service now.
Chris Visas: They had been talking to their bank clients and their bank clients had asked for and been interested in some of the dispute services that we provide and so we're going to market first as I said in my prepared remarks with our dispute services via service now we've got a pipeline of other products and services that we're working with them on.
Chris Visas: And we are deep in discussions with other platforms around the world about bringing our money movement solutions in our value added services solutions as a way to differentiate their platform and add value to their users.
Chris Visas: Next question Jordan.
Chris Visas: Our next question comes from Craig Maurer with Ft Partners. Your line is open.
Craig Jared Maurer: Greg are you there.
Greg: Yes, sorry can you hear me.
Ken: We sure Ken.
Ken: Okay great.
Ken: Wanted to ask if you can be a little bit more detail in the comments around <unk> and.
Ken: How you are.
Ken: Seeing volume move.
Ken: Perhaps off your network and second if you can just add some detail around the one time items that impacted visa in the U S. In the quarter I would appreciate it. Thank you.
Chris: So why don't I, let me talk a little bit about the business aspect of Reg II and then Chris you can hit both of those specific questions. The rig II and the onetime items I think it's important at this point.
Chris: To just observe.
Chris Visas: We're six months in now since <unk> II in the U S.
Chris Visas: And we've had a chance to really engage with our clients and partners.
Chris Visas: On the merchant side of what we do and we're having really good discussions really good dialogues its been a great opportunity for us to highlight our products, our services and especially the various different things that differentiate a visa debit transaction from other alternatives and to be honest, we're getting a chance to have conversations.
Chris Visas: <unk> at more senior levels in the organization about the details of our products than we've ever had before which is great and so far we're having great success.
Chris Visas: The sales conversations have been positive.
Chris Visas: The results.
Chris Visas: By client that we're finding as we're able to talk to them about the features and benefits of visa direct are great. So far in <unk>.
Chris Visas: Feel really good about our results six months into this so far so Chris.
Chris: Chris you want to hit the two pieces specifically, yes, we will do so yes on Reg II.
Chris: As we indicated we did see some modest impact.
Chris Visas: In the U S payment volume growth in the U S was down about 80 basis points from Q4 to Q1 and.
Chris Visas: That slowdown was primarily due to a couple of things one is the mix of spend data.
Chris Visas: But also there were a few smaller things a softer October and the modest impact from that.
Chris Visas: We're talking about so a couple of things it's important to note, we've actually not seen any meaningful changes to volumes being routed away since October so all in all the impact is modest really hasnt changed over the past quarter and that's actually what we have assumed in the outlook that we shared for the rest of the year.
Chris Visas: Now to your second part of your question about one time items.
Chris Visas: I talked a little bit about the things in the U S rig II and the slow October.
Chris Visas: The other place where I talked about one time items was in the new flows business as I said the revenue growth.
Chris Visas: It was impacted by a couple of things one I talked about the cross border normalization is on travel and then secondly, there were these one time items and I'll give you. An example of one in the normal course of our business, we regularly true up or true down our incentives and rebates with our clients based on their reported metrics and in the first quarter the net.
Jennifer Smith: <unk> of these adjustments ended up being larger than we might typically see in a quarter, but.
Jennifer Smith: But all in all it's not something that gives us concern the underlying business fundamentals remain healthy doesn't change our expectations for the full year growth for new flows revenue, which will continue to outpace consumer revenue.
Jennifer Smith: Next question Jordan.
Jennifer Smith: Our next question comes from Sanjay <unk> with <unk>. Your line is open.
Jennifer Smith: Thanks, Good evening.
Jennifer Smith: I guess just a question on the slower volumes year to date on the severe weather I'm just curious if theres been any softness be beyond that.
And then maybe do you expect that spending to sort of reaccelerate because the weather has gotten better or maybe you can just speak about that a little bit. Thanks.
Jennifer Smith: Yeah. Thanks, Sanjay, Yes, we did see that growth slowed down the first week of January and we've looked really closely at it and it's directly correlated to the extreme cold weather Thats at many parts of the U S. I'll give you a few example.
Sanjay: For anyone in Kansas City. They know this we went from 45 degrees in the last week of December to negative 10 in the first few weeks of January and so no one was out and about and we saw growth in Kansas City go from mid single digits growing the declining mid single digits.
Sanjay: Another example in San Diego those that are lucky enough to be their 60 degrees and we've seen stable mid single digit volume growth into January and maybe a third example that highlights the swings that we saw in Dallas. It was nearly 60 in the first two weeks of January.
Sanjay: And then dropped to below 20 degrees in the third week and we saw the exact same pattern following with a card present volumes in that third week and so to the second part of your question. The good news is we've seen these type of weather related patterns before they tend to be short blips and over the course of the quarter tend to get some of that back out.
Jordan Smith: Our next question Jordan.
Jordan Smith: Our next question comes from Ken Zuchowski with Autonomous Research Your line is open.
Ken Zuchowski: Hi, good afternoon. Thanks for taking the question I wanted to ask about the EPS growth outlook. It looks like Youre guiding to high teens EPS growth in fiscal <unk>, which I think implies a mid single digit decline in the share count quarter over quarter, but I'm just trying to figure out why that doesn't flow through to the full year EPS growth figure.
Where you are.
Ken Zuchowski: <unk> to low teens growth. So if you can help us reconcile that that'd be great. Maybe there's some tax certain opex impacts in the back half of the year is that we're not accounting for thanks. So much.
Ken Zuchowski: Yes, yes.
Ken Zuchowski: It is specific to Q2.
Jennifer Smith: I mentioned on the call there were some tax level tax matters that were resolved outside of the U S that brought our tax rate down in Q2 into the 16% range that same matter also have had some benefit that hit the NOI line, which also then helped.
Jennifer Smith: <unk>.
Jennifer Smith: The high teens growth rate on EPS in Q2, specifically for the full year. It doesn't change the tax rate doesn't change our prior outlook for for EPS growth.
Jennifer Smith: Next question Jamie.
Jennifer Smith: Our next question comes from Harsha <unk> with Bernstein. Your line is open.
Jennifer Smith: Good afternoon, I wanted to follow up on services, given how increasingly important. These ikea revenue closed can you give us some.
Any quantification on the composition of your value added services.
Jennifer Smith: Yes.
Jennifer Smith: Gotcha.
Jennifer Smith: Maybe I'll take spanned the krill quite right, yes, okay.
Jennifer Smith: With that change possible qualification and Geo expansion.
Speaker Change: They are growing <unk> faster than your card volumes overall services trying to discern.
Speaker Change: Yes. Thank you.
Speaker Change: It is as I was saying earlier I think the strategy is really firing on all cylinders. Our execution is firing on all cylinders. The client demand remains strong. The tans are large as you were saying.
Jennifer Smith: Last year.
Chris Visas: We generated about $7 billion in revenue.
Chris Visas: And the value added services business.
Chris Visas: Yes, I think we said in the quarter it was a little more than $2 billion and up 20% in constant dollars.
Chris Visas: Those are great results.
The.
Chris Visas: To get in a little bit.
Chris Visas: The details of your question I mean, we run these businesses.
Chris Visas: Segment by segment and issuing solutions.
Chris Visas: We're having great success with our network products around the World Dps continues.
Chris Visas: Have great success with clients in the U S. I mentioned in my prepared remarks that we had.
Chris Visas: Renewed with with Bank of America, that's one of our as you might expect largest clients in Dps a fantastic partner.
Well as a number of the other value added services I mentioned.
Chris Visas: And the acceptance solutions business Cybersource continues to have great success around the world both.
Chris Visas: With their Omnichannel services as well as.
Chris Visas: Some of the value added services, they have like token management servicing and alike.
Chris Visas: Our disputes business beyond just what I mentioned earlier around service now is having great success verify is really firing on all cylinders, especially as it expands outside the U S.
Chris Visas: Our risk and identity solutions business is.
Chris Visas: Is really proving to be very resilient and high growth both our advanced authorization platform visa risk manager. These are secure all the various different products that we've been bringing to market and then our advisory services continue to do well I mentioned in a few of the the client wins in my prepared remarks.
Chris Visas: The success, we've had with our managed services platforms, where we're embedding teams of visa employees in our clients.
Chris Visas: Working shoulder to shoulder with our client partners day in and day out weekend and week out month in month out helping them drive their business forward.
Chris Visas: That drives revenue growth that diversifies, our revenue, but more importantly than any of that that embeds us in the building with our clients helping them grow their businesses makes are our core business, even more sticky so.
Chris Visas: Yes, we're just it's execution its product pipeline is delivery and we feel really good about the results. Thanks for the question next question Jordan.
Chris Visas: Our next question comes from Bryan Keane with Deutsche Bank. Your line is open.
Bryan C. Keane: Hi, guys just wanted to get a couple of clarifications I think last quarter, Chris we've talked about.
Bryan C. Keane: Growth would be at a low point in the first quarter and then you would see it.
You can see that trough accelerate going forward is the nuance of the guidance mid <unk> mid to high single digits. So just trying to make sure. If there was anything else New report on Q2 versus Q1 being the trough and then secondly, just a slightly higher operating expense in constant currency from I think it was high <unk>.
Bryan C. Keane: The low double check with low double now was there anything.
Bryan C. Keane: Thank you.
Brian Good: Yes, Thanks, Brian.
As we entered so just backing up to your point going into Q1.
You outlined the guidance that I gave.
Brian Good: We set an expectation at that time similar language.
Hi to mid single digit to high sorry, mid high to high single digits and we did come in at the high end of that range.
Brian Good: Again, largely benefiting from the timing of incentive performance.
Brian Good: We have a similar expectation in terms of the range of growth in Q2, but many of the variables that I talked about in terms of the half one versus half two.
Brian Good: Order ago, which was lapping high volatility lapping high cross border performance from a year ago, and lapping lower incentive growth from a year ago. Those we continue to believe hold true and we do anticipate that.
Brian Good: That growth will accelerate into the second half of the year.
Brian Good: In terms of your question on Opex, yes, the changes in that that you picked up on in terms of the full year guide primarily has to do with two things. One is we're now including the impact of the acquisition of T cell into the guide for Opex and Theres been some slight updates based on FX.
Brian Good: FX the current FX rate.
Jordan Smith: Next question Jordan.
Jordan Smith: Our next question comes from Andrew Jeffrey with True Securities. Your line is open.
Andrew Jeffrey: Thanks, I appreciate you taking the question.
Andrew Jeffrey: Brian I wanted to dig in a little bit an impressive 17% merchant acceptance growth it sounds like that really highlights.
Brian Good: The possibility or the opportunity for continued.
Brian Good: Volume growth even in markets, maybe where the secular growth rate is slowing a little bit is that sustainable should we continue to think about that kind of mid teens acceptance growth as being a key driver of overall volume expansion.
Brian Good: Listen what I am talking to our sales teams around the world I'm pushing them for as much as possible and more I mean, there as you travel around the world there are still.
Brian Good: Hundreds of millions of small businesses that arent on our network and then you add to that.
Speaker Change: Andrew you add to that kind of the creator economy and whats happening. There you literally can think about the acceptance opportunity in billions. So our sales teams around the world are out there working hard getting creative figuring out different ways around the world that we can serve those 100 plus million small and micro.
Andrew Jeffrey: Businesses, and ultimately 123 plus billion individuals around the world that ultimately could become acceptors of our products as you think about things like tap to phone rolling out at scale. I mean, you can imagine a world where every handheld device becomes a tap acceptor in every.
Andrew Jeffrey: Device is a tap to pay opportunity, where we can not only penetrate further into the <unk> space, but the PDP space and others. So we felt really good as you were alluding to for the last I think its last several quarters, we've been 17 18, 19%.
Andrew Jeffrey: Growth in acceptance locations I tried to in my prepared remarks, just to give you a little bit of color on the types of things that were out there doing with players like <unk> cash and Kai Asia.
Speaker Change: And we'll be pushing hard to continue to light up all of those other opportunities in emerging markets and developed markets around the world.
Jordan Smith: Next question Jordan.
Speaker Change: Our next question comes from James Fawcett with Morgan Stanley. Your line is open.
James E. Faucette: Thank you I wanted to touch on the cross border travel volume growth.
James E. Faucette: Looks like it slowed from roughly 25%, maybe 16% to 17% in January and back when Youre kind of outlining your assumptions for fiscal 'twenty four you thought it would be in the low 20%.
James E. Faucette: We see 4% to five percentage point improvement.
James E. Faucette: Compared to 2019, just wondering how we should think about that as an assumption.
Andrew Jeffrey: Going forward do you think will bounce back to that low twenty's or do you think something closer to where you have seen in January makes more sense.
Andrew Jeffrey: Sometimes you have at least some forward visibility so I'm trying to get a sense of where we should be thinking about that component.
Andrew Jeffrey: Yeah, great. Thanks James.
James E. Faucette: Really good quarter in Q1 to start the year on our cross border business Cross border volumes. As you said was up 16%, we feel great about that.
James E. Faucette: As you click into those E comm growth in the low teens, a 19% growth in travel.
James E. Faucette: With the index going from 139 to $1 42, and I'll just clarify one thing you said in terms of the guidance that we had provided.
James E. Faucette: Into the low 20 of that was related to the travel portion of that which came in at 19% almost 20% I do think when.
James E. Faucette: Understanding the composition of by region of our performance and some of this is.
Andrew Jeffrey: Little repetitious, but I think important to go through.
Andrew Jeffrey: Looking at it region by region is helpful and let's see EMEA Europe and U S. Outbound strong result, indexing between $1 45 to 170 relative to the 2019 level.
Andrew Jeffrey: U S inbound, which up until Q4 had lagged 2019 also continued to improve in Q1 and in line with our expectations.
Andrew Jeffrey: We did see continued expansion in and out of AP, but a little bit slower than we saw in Q4 and that was specific to Australia and Japan and.
Andrew Jeffrey: And it's probably also also worth mentioning while not necessarily.
Andrew Jeffrey: Large number the warrant in the Middle East did have some impact on on the cross border numbers as well, but again stepping back we feel really good about our cross border business. In total the Q1 results were strong 16% growth healthy growth for both travel and E com and we feel good about the outlook for the rest of the year.
Jordan Smith: Next question Jordan.
Ashwin Shirvaikar: Our next question comes from Ashwin <unk> with Citi. Your line is open.
Ashwin Shirvaikar: Hey, Ryan.
Ashwin Shirvaikar: Alright.
Ashwin Shirvaikar: Yes.
Ashwin Shirvaikar: Got it down.
Ashwin Shirvaikar: Down into sort of expectations are implied expectations for second half of fiscal 'twenty four given.
Ashwin Shirvaikar: Q1 results upper.
Ashwin Shirvaikar: Upper single digits Q2 expectations.
Ashwin Shirvaikar: Mid to high single digit so there is an acceleration that's implied.
Ashwin Shirvaikar: The question is what drives it.
Ashwin Shirvaikar: Yeah, Thanks, I'm going to break that down into two questions. Because one you said how do we feel about the revenue guide and then I think the second question implied there was was on drivers and so let me talk to those because they are a little bit different.
Ashwin Shirvaikar: And maybe I'll, even start with the second part first which is.
Ashwin Shirvaikar: With drivers for one quarter into the fiscal year with a solid quarter stable stable trends from Q4 and importantly, the consumer has remained resilient as we look into the rest of the year. We do anticipate drivers to continue to tick up slightly in the second half of the year for two reasons, one average ticket sizes should improve.
Jennifer Smith: In particular, as we lap lower ticket sizes in the second half of last year in the U S and we see continued inflation in certain international regions and second we're continuing to execute against our growth initiatives in our global markets. For example, the processing wins that we've seen and like that we shared progress throughout previously.
Jennifer Smith: So that's sort of the underlying drivers and then your second your first question actually was on revenue we had a solid start to the year a really good Q1 stable Q4 trends today, we've reaffirmed our full year guide on net revenue.
Jennifer Smith: In constant dollars and that includes the modest impact of <unk> II that we talked about so we feel good about Q1, we feel good about the outlook for the rest of the year and we will continue to focus on execution.
Jordan Smith: Next question Jordan.
Timothy <unk>: Our next question comes from Timothy <unk> with UBS. Your line is open.
Jordan Smith: Great. Thanks for taking the question I wanted to dig into <unk>, a little bit the website talks about large banks marketplaces and index and you mentioned earlier the movement away from the legacy systems into more modern cores I wanted to talk a little bit about the ambitions of the potential in terms of the bank sizing and also.
Jordan Smith: If these core conversions are they for new product and sort of sidecar quarters, if you will row.
Timothy <unk>: Talking about the potential for your core.
Timothy <unk>: Issuing clients in the U S mid sized banks to be moving their legacy core potentially over to something offered by <unk> in the future.
Timothy <unk>: Okay.
Timothy <unk>: So step back.
Timothy <unk>: And talk a bit about how we found Pismo and then answer your question directly.
Jennifer Smith: I mentioned my prepared remarks, these narratives and these priorities that we've been hearing from.
Jennifer Smith: Ceos of banks all over the world in the U S. All over the world.
Jennifer Smith: A medium sized big sized banks, which is.
Jennifer Smith: One they're trying to make this transition.
Jennifer Smith: From their legacy Tech stacks to the cloud and the second is they want to expand.
Jennifer Smith: Especially in emerging markets, where they don't have enough options of issuer processor to help them.
Jennifer Smith: That led us hearing that over and over and over again led us to go search the world for what we thought was the best cloud based processor core bank provider that we can find and that led us to pismo.
Jennifer Smith: And so while pismo.
Jennifer Smith: Is based down in Brazil their platform as global their clients today are a mix of some of the biggest and most sophisticated banks in the world as well as medium sized banks and fintech. So they already today have a mix of different client types.
Jennifer Smith: And our ambitions our ambitions are what I said in my prepared remarks, which is we want this to be the preferred provider of banks around the world.
Jennifer Smith: You asked specifically about midsize banks in the U S for their core banking platform. The short answer is absolutely.
Jennifer Smith: As you think about large banks and their issuer processing capability is not just for debit, which we have today in the U S. But for debit credit prepaid commercial not just in the U S. But globally, we think pismo is absolutely.
Jennifer Smith: Our solution that our issuers could be using around the world. So yes. It is it is a global platform, we have global ambitions given the relationships that we have the privilege relationships that we have with banks big and small in the U S and around the world we feel good about our ability to distribute the product to them.
Jordan Smith: Last question Jordan.
Jordan Smith: Our final question comes from Jason Kupferberg with Bank of America. Your line is open.
Jason Kupferberg: Thank you just wanted to ask if we're still comfortable with low double digit processed volume and transaction growth for this year I know both of those started off kind of in the high single digit range ticked down a little bit in January and.
Jason Kupferberg: So any change in your thoughts around fiscal 'twenty four incentive guidance I think we were looking for modestly less dollar growth than in F. 'twenty three but you did a little better than expected in Q1.
Jason Kupferberg: Yeah. Thanks, Jason I think I answered some of the driver of questions, but I'll just recap very quickly at a summary level, where we're reaffirming the outlook for the full year on drivers.
Jason Kupferberg: Second half benefiting from average ticket sizes in the U S and inflation in certain international regions and.
Jason Kupferberg: Continuing to executing a number of our growth initiatives and global markets processing wins in <unk> as an example that I used.
Jason Kupferberg: A minute ago and so yes to your first question about reaffirming the guide on drivers.
And then.
Jason Kupferberg: Sorry repeat your second question for me just on the incentive incentive yes, yes on incentive yes also no change in outlook for the full year as you know we manage the business. The net revenue growth, that's where we're focused we have updated our guidance for the full year and Q2 on that and we'll continue to like I said focused on execution.
Jason Kupferberg: Thanks, Kristen with that great and with that we'd like to thank you for joining US today. If you have additional questions. Please feel free to call or email our investor relations team. Thanks, again and have a great day.
Jason Kupferberg: Thank you for your participation in today's conference you may disconnect at this time.