Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Visa Inc (V, Financial) reported strong third-quarter results with $8.9 billion in net revenue, up 10% year-over-year, and EPS up 12%.
- Cross-border volume excluding intra-Europe rose 14%, and processed transactions grew 10% year-over-year.
- Visa Inc (V) achieved a global Net Promoter Score (NPS) of 76, up 3 points from last year, indicating strong client satisfaction.
- Value-added services revenue grew 23% in the third quarter in constant dollars, driven by issuing solutions, acceptance solutions, and advisory services.
- Visa Direct overall transactions grew 41% for the quarter to 2.6 billion, showcasing strong growth in new flows revenue.
Negative Points
- US payments volume growth was relatively modest at 5% year-over-year, with a slight deceleration to 4% in July.
- Asia Pacific payments volume slowed to less than 0.5 point of year-over-year growth in constant dollars, driven primarily by the macroeconomic environment in Mainland China.
- International transaction revenue was up 9% versus the 14% increase in constant dollar cross-border volume, impacted by lapping higher currency volatility from last year.
- Operating expenses grew 14%, primarily due to increases in general and administrative personnel and marketing expenses, including spend related to the Olympics.
- The settlement reached for the injunctive relief class was rejected by the court, creating uncertainty around future legal outcomes.
Q & A Highlights
Q: The US volume growth rate is a bit softer. Can you help us understand if the company can grow double-digit revenue with mid-single-digit US volume growth?
A: (Christopher Suh, CFO) In Q3, US payment volumes grew 5%, and in the first 21 days of July, it ticked down to 4%. Factors like Hurricane Beryl, timing of promotional e-commerce events, and a major tech outage impacted this. Despite these, we feel good about the results. Our consistent strong performance in value-added services (VAS) and new flows business, along with stable cross-border growth, supports our confidence in achieving low double-digit revenue growth.
Q: Can you talk about the impressive value-added services (VAS) growth and its future impact on Visa's consolidated growth?
A: (Ryan McInerney, CEO) We've shown consistent growth in VAS, with $2.2 billion in revenue this quarter, up 23%. We see opportunities in enhancing Visa transactions, adding value for non-Visa transactions, and expanding beyond payments. Our product pipeline and go-to-market approach globally make us optimistic about continued growth.
Q: Can you discuss the expectations for incentives in the fourth quarter and into the next fiscal year?
A: (Christopher Suh, CFO) We had a high volume of renewals last year, impacting FY '24 incentives. This year, the volume of renewals is lower, and incentives have been better than anticipated. We expect Q4 incentives to benefit from lapping high incentives from last year. We'll provide more details on FY '25 in the next earnings call.
Q: How do you view the cyclicality of VAS and its performance in a lower volume growth environment?
A: (Ryan McInerney, CEO) Our ability to price for value is strong due to the value we bring to the market. The largest portion of VAS is tied to Visa transactions, but we also see growth from selling more services. We have significant opportunities to penetrate our clients globally, and we're optimistic about continued growth.
Q: Have you updated your US outlook for the second half, especially regarding transaction sizes?
A: (Christopher Suh, CFO) We saw slight improvement in average transaction size (ATS) in Q3, reaching flat year-over-year. We expect continued slight improvement in Q4, though fuel prices could impact this trajectory. Overall, ATS is improving as anticipated.
Q: Can you highlight the gap in contactless payments penetration across different demographics?
A: (Ryan McInerney, CEO) Globally, 80% of Visa face-to-face transactions are contactless. In the US, one out of every two transactions are taps, with New York City above 75%. This growth is across all segments, demographics, and product types, and we expect it to continue accelerating.
Q: How might a larger reduction in interchange rates from the MDL litigation impact the ecosystem and Visa's renewal negotiations with issuers?
A: (Ryan McInerney, CEO) We strongly disagree with the judge's decision and believe the settlement was fair. We're pursuing a revised settlement, but it's too early to speculate on its impact. A settlement can occur at any point before, during, or after the trial.
Q: Can you discuss the evolution of Visa Direct yields and the impact of Reg II on the business?
A: (Ryan McInerney, CEO) We're in the early stages of Visa Direct growth, with new use cases and partners driving transaction growth. Cross-border transactions, which have higher yields, are a significant success. Regarding Reg II, the e-commerce debit market remains competitive, and we feel good about our win rate and the capabilities of Visa data transactions.
Q: What are the potential accelerants for volume growth in FY '25?
A: (Christopher Suh, CFO) For Q4, we expect payment volume and processed transactions to be consistent with Q3, with cross-border slightly below Q3 levels. For FY '25, we'll share our expectations at the end of Q4, but we see stable growth drivers and opportunities in new flows and value-added services.
Q: Can you discuss Visa's AI and generative AI investments and their potential impact?
A: (Ryan McInerney, CEO) We're all in on generative AI, applying it to drive productivity and enhance the payment ecosystem. We're seeing great results in productivity across the company and using AI to reduce fraud and drive sales for both issuers and merchants. We're optimistic about the positive impact of AI on our business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
