Visa's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Visa (V)

Q2 2012 Earnings Call

May 02, 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

Jason Kupferberg - Jefferies & Company, Inc., Research Division

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

Glenn Fodor - Morgan Stanley, Research Division

Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc., Research Division

John T. Williams - UBS Investment Bank, Research Division

Robert P. Napoli - William Blair & Company L.L.C., Research Division

Moshe Katri - Cowen and Company, LLC, Research Division

Moshe Orenbuch - Crédit Suisse AG, Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

Leonard A. DeProspo - Janney Montgomery Scott LLC, Research Division

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

Timothy W. Willi - Wells Fargo Securities, LLC, Research Division

Christopher Brendler - Stifel, Nicolaus & Co., Inc., Research Division

Presentation

Operator

Welcome to Visa Inc.'s Fiscal Q2 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. Carksy, you may begin.

Jack Carsky

Good afternoon, and welcome to Visa Inc.'s Fiscal Second Quarter 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 and can be accessed on the Investor Relations section of our website at www.investor.visa.com. A replay will also be archived on our site for 30 days. A PowerPoint deck containing highlights of today's commentary was posted to our site 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 those factors is available on our last 10-K on file with the SEC. It can be accessed through the SEC website and the Investor Relations section of our website. For historical non-GAAP or pro forma-related financial information disclosed on this call, the 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 site.

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

Joseph W. Saunders

Thanks, Jack. And as always, thank you for joining us today.

Visa delivered another quarter of strong financial performance, posting net operating revenues of $2.6 billion, a 15% increase over the same period last year. These revenue gains were driven by double-digit payment volume growth globally, continued outperformance of credit spend worldwide and a strong cross-border activity.

Adjusted net income for the quarter was $1.1 billion, a 23% increase over the same period last year. This equates to adjusted diluted earnings per share of $1.60, a 30% increase over the second fiscal quarter of 2011.

Our performance reaffirms Visa's solid business foundation and strategy, including our diversified product and service offerings, our strong client relationships and our commitment to accelerating growth in key markets worldwide.

With 2 strong quarters under our belt and insight into our fiscal third quarter service revenues, we are upgrading our guidance for fiscal 2012 by raising EPS growth to high teens to low 20s and reaffirming our 2013 guidance.

Visa's global business continues to expand at a healthy pace. A strong March followed the solid results we posted in our first quarter and will drive service revenues in the current June quarter. During the March quarter, Visa's credit and debit payment volumes worldwide grew 14% and 7%, respectively. Cross-border volume also posted healthy gains, increasing 16% globally. Processed transactions grew 8%.

In the U.S., payment volumes increased 6% for all products. Our star performer for fiscal second quarter was credit. Building on that, we continue to invest in new and expanded long-term credit relationships with our largest U.S. clients to drive growth in our core business. In fact, of the largest U.S. issuers that consider multiyear partnership agreements, we now have 9 of the top 10 signed into fiscal 2015 and beyond. From a volume perspective, that equates to more than 3 quarters of our U.S. credit volume secured into 2015 and beyond. During the March quarter, we also continued to have success, winning important new credit business from multiple U.S. issuers.

On the co-brand front, I'm pleased that Visa has finalized a multiyear extension of our successful credit co-branded partnership with Alaska Airlines, a portfolio [ph] of the benefits from a large number of affluent cardholders and a high cross-border usage. Additionally, we are now seeing early results of our previously announced contract with United Airlines. As a reminder, the recent merger of United and Continental Airlines resulted in the consolidation of their credit card portfolios under MileagePlus, and the combined entity has chosen Visa as the exclusive brand for newly issued MileagePlus cards.

As for acceptance, we are expanding our popular Visa Easy Payment Service, our no-signature-required program in the United States for selected merchant categories. Under our current program, which is available through the majority of merchant categories in the U.S., merchants have the option to complete purchases up to $25 without requiring a cardholder's signature or a PIN. Building on the success of that program, we see an opportunity to help our merchant and financial institution partners better serve their customers, reduce their costs and grow their businesses. That's why beginning in October 2012, we are raising the limit to $50 for discount stores and supermarkets with the intent of expanding this service to additional merchant categories over time.

Read the rest of this transcript for free on seekingalpha.com

More from Stocks

Finding Stocks Right for You: Cramer's 'Mad Money' Recap (Friday 8/25/18)

Finding Stocks Right for You: Cramer's 'Mad Money' Recap (Friday 8/25/18)

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%

Replay: Jim Cramer on the Markets, 10-Year Yield, Oil Prices and Foot Locker

Replay: Jim Cramer on the Markets, 10-Year Yield, Oil Prices and Foot Locker