Visa : Transcript ( PDF 219 KB )

Corrected Transcript

07-Jun-2022

Visa, Inc. (V)

Bank of America Global Technologies Conference

	Total Pages: 13
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Visa, Inc. (V)	Corrected Transcript
Bank of America Global Technologies Conference	07-Jun-2022

CORPORATE PARTICIPANTS

Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

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OTHER PARTICIPANTS

Jason Kupferberg

Analyst, Bank of America Merrill Lynch

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MANAGEMENT DISCUSSION SECTION

Jason Kupferberg

Analyst, Bank of America Merrill Lynch

Okay. Good morning everybody. We're going to get started. We are very excited to have the CFO of Visa here, Vasant Prabhu, who is also Vice Chairman of the company, and we're going to run through a whole bunch of fireside chat topics. Lots of interesting data points coming out of Visa recently.

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QUESTION AND ANSWER SECTION

Jason Kupferberg

Analyst, Bank of America Merrill Lynch

Q

And I guess where I wanted to start with, Vasant, is just, we see some of this recent commentary from other companies who are major players in the US economy, a Walmart, a Target, they're talking about consumers making some different choices or maybe trading down in terms of goods that they're buying. Your 8-K last week showed a continuation of really robust trends in the US from April to May. So is it just that what happens at Walmart and Target is just not significant enough or material enough in the scheme of things to move the needle at Visa, or just any other comments perhaps to kind of reconcile what seems like somewhat disparate data points out there?

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

A

Yeah. Well, nice to see you again, Jason, and great to be here. So as you know, we have a highly diversified basket of things that people buy. It spans all income groups. It spans goods and services. It spans essential items as well as discretionary items and so on. And yes, I mean, Walmart and Target are good, are big in their sectors. But as part of the entire volume that we see on our credentials, debit and credit, they are still a smaller portion. Having said all that, if you looked at our numbers, it suggests quite a lot of stability, and a few things I might point out. We've been fairly consistent in telling people to focus on comparisons to a pre-COVID timeframe which is 2019, because we think if you compare to last year, there's a lot of noise. People may forget that in April, May last year, we had some significant increases in spending because of the stimulus checks that went out.

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Visa, Inc. (V)	Corrected Transcript
Bank of America Global Technologies Conference	07-Jun-2022

And so when you compare to last year, you're going to see comparisons that could be misleading. So you have to be careful. The other thing to note is that, during the pandemic, we saw a big shift to people, who essentially were stuck at home buying products. You had a significant decline in consumption of services. You're seeing that pendulum swing, and so where we see the greatest growth right now is in things people couldn't do before, like travel, like restaurants, like entertainment and so on. So we get the benefit of the pendulum swing, which you may not see when you look at the numbers for people who sell goods. More broadly, as we look across our income groups, we're not seeing big differences between lower income and high income groups. If you look at the trends relative to 2019, not only were they stable between April and May, but they've been stable for quite a few months, in fact, for several quarters now.

And what we've seen is that, debit has stayed very resilient, indexing in the 150s, which is a robust growth rate when you look at the compound annual growth rate over the past three years, much higher than it was pre- COVID. Credit has now indexed at roughly 140. Again, if you look at the compound annual growth rate, that is a higher growth rate than pre-COVID, which means not only has credit recovered all the way back to the trend line, it's now starting to go past the trend line. So we're not economic forecasters. We definitely don't want to get into that business. Just based on the facts, as they stand today, there's no evidence of any slowdown in consumer spending as of the 28th of May when we released those numbers.

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Jason Kupferberg

Analyst, Bank of America Merrill Lynch

Q

Yeah. Maybe just to pick up on that comment around the travel spend, I mean, one of the data points that really jumped off the page for us, at least in the 8-K, was the cross-border travel, I mean, you accelerated 16 full points from April to May, you're at 108% of 2019 levels. I mean, your guidance had been to get to 100% by the end of September, at the end of the fiscal year. So obviously, you're way ahead of schedule there. So I guess, kind of a two-part question there, would you agree that that's what surprised you guys the most to the upside? And if so, maybe break that down by corridor where you were surprised on the upside?

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

A

Sure. So since about October, if you've been listening to us, we turned bullish on cross-border travel, because it felt to us in October that there had been a significant change in sentiment among countries about keeping borders open. We had this feeling that fundamentally most countries had decided that they were no longer going to shut borders, and that has proved to be true. So Omicron came along, and yes, we had a little bit of a slowdown, but we were also optimistic at a rebound fast and it did. So we have been bullish about cross-border travel. The good news is that, it has recovered each time even faster than we expected. It's a hard one to predict because what you see is that, when borders open you have a big jump as countries open. And then things start to stabilize and then more countries open and things start to stabilize.

So we had a whole slew of countries opening in October, and we saw big bumps between September, October, November. And then coming into March and April, we started to see, as you know, you saw Asia start to open up. When we were talking to you at the end of April, we pointed out that Asia was beginning to open up and was early days, and Canada had been fairly slow to open up and Canada was opening up. And then you have a third thing going on, the weather is improving in the Northern Hemisphere. So even though the US opened in November, it was the winter. But as the weather improves, it becomes more desirable place to go. So essentially what has happened since the end of April, March to April was relatively stable, but then we saw the big jump up in May, and that was largely driven by what we had told you in April, which is, Asia is beginning to open up.

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Visa, Inc. (V)	Corrected Transcript
Bank of America Global Technologies Conference	07-Jun-2022

So Australia and New Zealand had just opened. Canada has been opened relatively short time. And then rest of Asia, ex-China, Japan, Korea, Taiwan and Hong Kong have generally opened. Those are the countries that have not opened. So the big bump in May was largely driven most significantly by the opening up of large parts of Asia. So we said that Asia was indexing at about 40 on average through the last quarter. Asia is now indexing somewhere in the 60 range. So that's almost a 50% increase from 40 to 60. The other two places that have seen some nice bumps are, Europe in and out has been quite robust. Some of it is weather, some of it is just European visits becoming far more comfortable travelling. Ramadan ended in the Middle East and we saw some nice increases coming out of the Middle East.

And then the US, we told you inbound was one of the ones that still had ways to go, we said it was indexing around 70, and it has picked up nicely, it's probably in the mid to high 80s right now relative to 2019, and that's driven by Canadian travel coming back, European travel into the US, and just improvement in travel out of Asia, as well as weather improving. We don't think of ourselves as leading indicators, like, I don't know if you're not feeling good enough to buy something two weeks from now. I'll only know that when you don't buy it. But there's one part of our business where we do see a little bit ahead and that's travel because people do make booking 30 to 60 days ahead of time.

And based on that and also from what you're hearing from travel companies, the pent-up demand for travel remains extremely high. The summer travel season, especially into Europe is looking very good. There's no indication that consumers are pulling back on travel. Now, there's always the hypothetical which is, could you have seen an even bigger bump if consumers were more confident, that's hard to know. All we know is that there's plenty of demand for travel regardless of higher prices for airline tickets or hotels.

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Jason Kupferberg

Analyst, Bank of America Merrill Lynch

Q

And so coming back on the APAC comment, so I think you said, investing around 60% of 2019 levels. Now the 40%, that was for the March quarter?

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

Yeah. We're investing around 40% for the previous quarter.

A

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Jason Kupferberg

Analyst, Bank of America Merrill Lynch

[indiscernible] (09:04).

Q

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

So it's now moved up a decent amount. But still as you can see, well below where it was.

A

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Jason Kupferberg	Q
Analyst, Bank of America Merrill Lynch

Right. So do we need China to stop pursuing zero-COVID to potentially get that back to 100 in APAC?

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

A

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Visa, Inc. (V)	Corrected Transcript
Bank of America Global Technologies Conference	07-Jun-2022

Well, I mean, there's still more recovery to come from the countries that have opened. We've seen a big chunk of it already because we wouldn't jump like this without people travelling out of Australia and New Zealand and so on. Clearly, Japan is slowly opening up. So I think we used to get about 100,000 people inbound to Japan. I believe that's a monthly number, I may be wrong. But Japan was allowing about 1/10th of that, it was very sort of restricted entry. Now, they've doubled it a bit. So it's not quite there. Things are opening up slowly in Korea and Taiwan. China has clearly shut. At some point, there'll be another leg up in Asia when these countries open. When that is, we don't know.

Having said that, if you just look at our cross-border business in total, ex intra-Europe, it's indexing around 130 right now, which if you look at the growth rate pre-COVID, it sort of gets us back to the pre-COVID growth rate.

The reason is because, cross-bordere-commerce has been incredibly strong, and that's here to stay. So cross- border e-commerce is indexing in the 160s, and that's a compound annual growth rate over three years. That's well above what it was pre-COVID. And the mix of the business now is more e-commerce than it was before. Now travel has more to recover. It used to be two-thirds travel, one-thirde-commerce. Now, it's 55% e-commerce, 45% travel roughly. Travel still has to recover, but it's very likely that we come out of this with cross-bordere-commerce being a much larger component of the mix, and it is a faster-growing business. So that's a good thing for the cross-border business overall. So again, it's interesting to note that even with travel still not where it was, the overall cross-border business is pretty much back to the trend line.

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Jason Kupferberg

Analyst, Bank of America Merrill Lynch

Q

Yeah. Those numbers are really strong. So coming back to what you said earlier, obviously, you guys aren't forecasters by trade. But I'm just wondering, are there certain leading indicators that perhaps you guys look at in the economy to get a sense of maybe where things are going over the next six months? I mean, we see data points like consumer confidence, for example, which I think slipped a bit in May, at least according to one index that I saw. So just wondering to what extent there are data points that you guys look at to try and get a bead on things, because obviously, there's some general concern out there that at some point the consumer is going to kind of run out of gas, no pun intended.

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

Yeah. Right.

A

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Jason Kupferberg

Analyst, Bank of America Merrill Lynch

But with inflation and rates, et cetera.

Q

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Vasant M. Prabhu

Vice Chairman & Chief Financial Officer, Visa, Inc.

A

Yeah. I mean, I tend to be in the camp where I don't think anybody has a great crystal ball. We have a Visa economist who puts out his own points of view. Everybody has a point of view. I don't think anybody really knows. So we look at all the data available. But fundamentally, we look at our own data every day, and we look at it, as soon as we get it every morning, you look at it from as many different angles as you can. And you look at it down category by category, you look at it across many dimensions. And I have to say that, so far what you see is actually quite intuitive.

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