Visa's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Visa (V)

Q1 2012 Earnings Call

February 08, 2012 5:00 pm ET

Executives

Jack Carsky - Global Head of Investor Relations

Joseph W. Saunders - Executive Chairman and Chief Executive Officer

Byron H. Pollitt - Chief Financial Officer and Principal Accounting Officer

Analysts

Craig J. Maurer - Credit Agricole Securities (USA) Inc., Research Division

Darrin D. Peller - Barclays Capital, Research Division

Glenn Fodor - Morgan Stanley, Research Division

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

James E. Friedman - Susquehanna Financial Group, LLLP, Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Rod Bourgeois - Sanford C. Bernstein & Co., LLC., Research Division

David Togut - Evercore Partners Inc., Research Division

Kenneth Bruce - BofA Merrill Lynch, Research Division

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Bill Carcache - Nomura Securities Co. Ltd., Research Division

Presentation

Operator

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Welcome to Visa Inc.'s Fiscal Q1 2012 Earnings Conference Call. [Operator Instructions] 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, Mr. Jack Carsky, Head of Global Investor Relations. Mr. Carsky, you may begin.

Jack Carsky

Good afternoon, and welcome to Visa Inc.'s Fiscal First Quarter 2012 Earnings Conference Call. With us today are Joe Saunders, Visa's Chairman and Chief Executive Officer; and Byron Pollitt, Visa's Chief Financial Officer. This call is currently being webcast over the Internet, and can be accessed on the Investor Relations section of our website at www.investor.visa.com. The replay of the webcast will also be archived on our site for 30 days. A PowerPoint deck containing highlights of today's commentary was posted to our website prior to this call.

Let me also remind you that this presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. By their nature, forward-looking statements are not guarantees of future performance. And as a result of a variety of factors, actual results could differ materially from such statements. These include setbacks in the global economy and the impact of new financial reform regulations.

Additional information concerning these factors is available in our last 10-K on file with the SEC. It can be accessed through the SEC website and in the Investor Relations section of our website. For historical non-GAAP or pro forma-related financial information disclosed on this call, related GAAP measures and other information required by Regulation G of the SEC are available in the financial and statistical summary accompanying today's earnings press release. This release can also be accessed through the Investor Relations section of our website.

And with that, I'll turn the call over to Joe.

Joseph W. Saunders

Thanks, Jack. And as always, thank you for joining us. I plan to walk you through 3 key areas during today's call. First, I'll provide a brief update on Visa's financial performance and outlook, including some perspective on key environmental and event-specific factors that could impact our business over the balance of fiscal 2012.

Following that, I'll walk through our progress of growing Visa's core business both in the United States and internationally, including an update on U.S. debit. And finally, I'll discuss Visa's investments and innovation, which can help us expand our core business and generate new revenue streams.

Visa's global enterprise outpaced our own expectations during the first quarter, an encouraging opening to our fiscal year. Net operating revenues were $2.5 billion, a 14% increase over the same period last year. These revenue gains were driven by robust growth in our international businesses, continued resilience in U.S. credit, sustained cross border spending and strong e-commerce growth. Net income for the quarter was $1 billion, a 16% increase over last year. This equates to diluted earnings per share of $1.49 or a 21% increase over the first quarter of 2011.

Overall, our first quarter performance clearly demonstrates the strength and resilience of Visa's global model and our ability to grow even in a challenging global economy. While we look ahead to the rest of fiscal 2012, it is clear we must carefully navigate a complex and uncertain business environment.

We see signs of modest global GP -- GDP expansion for the rest of our fiscal year, with emerging markets continuing to grow at rates faster than the global average. That being said, we are closely watching the economic conditions that could impact our business, including continued volatility in Europe.

Additionally, we are still working through the implementation of debit regulation in the United States. I will provide details shortly. But it's fair to say, the dust is still settling.

Overall, Visa is successfully executing its plan, and I continue to be encouraged that the net impact is consistent with our guidance outlook.

Taking these macro and issue-specific factors into account, as well as our better-than-expected first quarter, we are raising our FY '12 revenue guidance to low double-digit growth from high single to low double-digit growth and our adjusted diluted earnings per share guidance from mid to high teens to just high teens.

As I stated last quarter, we are reaffirming our belief that 2012 will take the brunt of the impact related to the U.S. debit regulation, and growth in 2013 will accelerate off of 2012 levels. And based on that outlook, we continue to deliver our commitment to return excess cash back to shareholders.

We used $1.6 billion of our operating cash to reduce the as-converted Class A common stock by 16.2 million shares during the 3 months ended December 31, 2011. Of the $1.6 billion, $75 million was used to repurchase Class A common stock in the open market, while we deposited $1.57 billion of our operating cash into the litigation escrow account previously established under the retrospective responsibility plan.

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