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7,400 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | John Rex : Thank you, Andrew. I'll start by walking through several updates to our ‘25 outlook and then elaborate on the reasons for them. As Andrew said, we now expect adjusted earnings of $26 to $26.50 per share. It's an outlook that I'm extremely disappointed to share with you. This reflects the profile of patients served at Optum Health. It also reflects significantly increased care activity across the UnitedHealthcare Medicare Advantage plans. Within that outlook, we expect about 50% to come in the first half of the year. We're affirming the consolidated revenue outlook of $450 billion to $455 billion we shared with you in December. Within this, we expect revenues for both UnitedHealthcare and Optum Rx to be better than our initial view, offsetting a reduced outlook at Optum Health. The full year medical care ratio is now expected to be 87.5% plus or minus 50 basis points, reflecting higher utilization across senior populations and the patient mix and revenue profile of Optum Health. Within this range, expect the first half of the year to be below the midpoint and the second half to be above. At Optum Health, our revenue outlook is $106 billion to $107 billion and operating earnings is $6.2 billion to $6.4 billion based on the factors discussed and which I'll get into more deeply in a moment. Over half of the $10 billion revenue change is the result of transitioning some legacy risk based arrangements to fee base and is neutral to earnings. We expect about half of Optum Health's operating earnings to be in the first half. At UnitedHealthcare, the operating earnings outlook is updated to $16 billion to $16.5 billion and reflects the higher care activity we're seeing. Within UnitedHealthcare, pressure was largely contained within the senior business where we saw a sharp increase in care activities that became apparent as we closed out the quarter. As noted, this was most significant for both physician and outpatient care and to a lesser extent inpatient care. In years past, this is an insight we may not have |
7,401 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | for both physician and outpatient care and to a lesser extent inpatient care. In years past, this is an insight we may not have picked up until the second quarter, so it is useful to have the information with ample time to incorporate into our 2026 planning. In the quarter, we experienced percentage increases in care activity about double last year's level. Unit prices behaved as expected. Let me start with the obvious fact that it is early in the year and we don't know everything that might be driving our experience or how long the increase in care activity might last. But care activity was broad based across our senior individual and group populations. One example, in group MA, member retention was about 98% and as a result serves well as a same member metric. Here we observed significant increases in elective care activity in the first quarter. Of note in this population, we believe the behavior may have been impacted by the meaningfully higher member premiums, which were driven by the Medicare funding cuts. Another example across senior populations was the earlier and higher wellness visit activity we saw, which of course drives specialty and outpatient utilization. Some of this may be a seasonal shift in consumption patterns as wellness visits happen once a year. Turning to Optum Health, as it relates to the patient profile, we experienced a couple of key elements here. First, growth in certain markets where there were meaningful plan exits. These new patients had not been engaged by their prior plans for most of last year and we're seeing revenues associated with the patient profiles meaningfully below expected and normal levels. This is very addressable. Second, the ongoing execution to the new CMS risk model, while complicated given the multiyear phase in, has not been to our operational standards. Transitioning to a new model and concurrently running two distinct versions has been more operationally complex than anticipated. But no question, we need to execute better and we will. Across the enterprise, |
7,402 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | more operationally complex than anticipated. But no question, we need to execute better and we will. Across the enterprise, we continue to focus on operating costs to help mitigate external pressures, while ensuring our workforce aligns to the areas of greatest opportunities and customer needs. Looking ahead, we see a long runway for further technology advances that will translate to more and sustained operating efficiency, which in turn drives opportunity for further innovation and advancements in the company and across the industry. Before we get to Q&A, I want to provide a few business highlights. At UnitedHealthcare, we still expect to serve up to 800,000 more people in Medicare Advantage this year across our individual group and dual special needs offerings. This underscores our long standing commitment to stability and differentiated value. Our growth demonstrates UHC's deep relationship with our members. People served by our community and state business increased to $7.6 million. We continue to have growth momentum with recent service expansions in Kentucky, New York and Florida. We're also encouraged by the updated Medicaid rates so far in 2025 that more closely align with underlying member acuity, but funding remains insufficient to meet the health needs of patients. Commercial self-funded membership increased by approximately $700,000 in the first quarter, a result of our continued strong product innovation. Commercial insured membership was impacted by the individual exchange products. Our disciplined pricing approach remains consistent and as a result, we experienced some member attrition. Overall in our commercial book, we are encouraged by the early ’26 selling season indications, which are showing strong retention rates. Turning to Optum. At Optum Health, we continue to expect to add 650,000 new value based care patients this year. We're working to engage with these new members ever more rapidly. By the end of ’25, we expect to have about 5.4 million value based care patients. At Optum Insight, we |
7,403 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | ever more rapidly. By the end of ’25, we expect to have about 5.4 million value based care patients. At Optum Insight, we have a pipeline of new products coming to market this year with exceptional customer interest. For example, in the first quarter, we launched AI powered claims efficiency tools that increase productivity by over 20% for our revenue cycle management customers. Lastly, Optum Rx revenues grew 14%, exceeding $35 billion for the quarter. Both customer retention and new customer wins contributed to script growth of 3%. As Andrew noted, performance in the quarter was below the standards we expect. But with disciplined and urgent execution and attention to detail, we expect a return to form in the quarters ahead. With that, I'll hand it back to Andrew. |
7,404 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Andrew Witty : Thanks, John. Even with the growth of our -- I'm sorry. Even with the growth our people generated this quarter, this was far from the performance we expect of ourselves. We're acutely aware it's a privilege to be a part of an organization with the capabilities to make a meaningful contribution to modernizing and simplifying the health system. And we're committed to improving our performance in the rest of 2025 and into ‘26. And in doing so to delivering consistent positive results for you and returning to our long term earnings per share growth target of 13% to 16%. With that, we can now turn to your questions. Operator?
Operator: [Operator Instructions] We'll take our first question from Justin Lake with Wolfe Research.
Justin Lake : Thanks. Good morning. My question is on Medicare Advantage cost trend. You said that you came into the year assuming trend at similar levels 2024. Can you share with us precisely what that trend estimate was? Meaning, what did you expect for this year? And what are you expecting now? And can you tell us how much of that you actually saw in the first quarter? For instance, how much did you miss your MLR by, your own estimate of MLR? And how much you are expecting that to accelerate or how different the back three quarters is versus what you saw in the first quarter? Maybe I’ll jump the margin on the --
Andrew Witty : Yeah. Justin, thanks so much for the question. I'll ask Tim Noel to respond just in a second in detail to your question. I mean, obviously, it's still very early in the year, but we have clearly seen a pickup in trend in a specific part of the UHC business again, the senior business. Tim will talk a little more about that to you in a second. It's still early, still even our first quarter is only partially complete, but unusually we've seen this pickup and which is what's obviously influencing our position here. So let me get ask Tim to give you a little bit more detail on that. |
7,405 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Tim Noel: Good morning, Justin. Thanks for the question. Yes, I'll attempt to break it all down for you here. So as was mentioned in the opening remarks, in 2025, we anticipated care levels consistent with what we observed in 2024, which felt appropriate as we stepped into the year. And what we were assuming and if you think about this as units consumed, we're assuming that in 2025, we'd see a similar increase by that metric that we observe in 2024. And if you break that down in the Medicare book, you can think that in total in terms of total trend drivers, about one-third of that is related to increase in care activity or units consumed. And what we are seeing and again that's focused on physician and outpatient, but driving an overall 2x increase in that level of units consumed in Q1 of 2025. And again, that metric is about one-third of the total trend drivers in the Medicare book. We are seeing that inside of the first quarter of this year, but we are making the assumption right now that, that trend will persist throughout 2025 and then also making the same assumption that it will persist into 2026 and that will shape our overall pricing assumptions. Now some of the drivers that John mentioned behind what we're seeing. You might presume that some of those would result in a change in our seasonal consumption patterns. But at this distance, we feel like we need to make the assumption that that activity will persist throughout the year and into 2026.
Operator: And we'll take our next question from Josh Raskin with Nephron Research. |
7,406 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Operator: And we'll take our next question from Josh Raskin with Nephron Research.
Josh Raskin: Hi, thanks. Good morning. Can you help us connect the higher incidence of primary care visits and the Optum Health pressure? I assume you don't have that that primary care issue in Optum Health, which should also mitigate the downstream impact. So why are you expecting the higher follow through if you control primary care? And then based on the fact that you're seeing worse performance in Optum Health or value based care, could you remind us why you think you can control cost better in that environment and it's probably a good time to get the refresher on why the strategy to allocate a lot more capital to VBC in the ecosystem totally is best in long term?
Andrew Witty : Yeah, Josh, thanks so much for the question. So I'm going to ask Tim just to address the first part of your question, then Amar to talk a little Dr. Desai to talk a little bit around the Optum Health experience during the quarter and the differences of what we're seeing there and the like. And as I said in my commentary at the beginning, the businesses do operate very different kind of models and it's not completely surprising to see somewhat different experiences. And then I'm going to ask Heather to just do as you kindly requested a kind of refresher on the value based care position. So we'll do that also for you. So bear with us. This sounds probably going to take a little a few minutes. But Tim, if I could ask you to start and then we'll pass over to Dr. Amar Desai. |
7,407 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Tim Noel: Yeah. Thanks, Josh, for the question. So yeah, let me just dive in a little bit with a little bit more detail into some of what we're seeing that's driving the increase in care activity. Now let me start with our fee for service, so kind of our non-capitated community MA members. We have seen increase in physician outpatient care activity in that population. And one of the dynamics that we're seeing is they are generally seeking more preventative care, which is a good thing and that also includes more in home visits, more in home clinical assessments. And that in and of itself really not the trend driver, but it's the follow on care that is more than what we have anticipated and that constitutes specialist visits, physician specialist visits as well as some other outpatient services. A dynamic at play in our group Medicare Advantage business is we are seeing a significant and disproportionate increase in utilization, largely within our public sector group retiree business. And this is a population that experienced the greatest year-over-year premium increases. And while we've seen a similar dynamic play out historically in our individual Medicare Advantage business when premium increases have been in play, we've really never seen this dynamic before in the group MA business. I mean, we're seeing it because of the pressures related to the Medicare funding cuts that are really driving up premiums in the group retiree business like they really never have before and kind of think groups with premiums going from $50 to $200. I mean, we did assume that we would see some care activity level increases in this population, but we're seeing far surpasses what we would have recently anticipated. And in that population as well, we are seeing more preventive care, more annual wellness visits, more in home clinical assessments. But again, the driver there also being really the follow on care that results from that. |
7,408 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Amar Desai: Thanks for the question, Josh. So, the results for Optum Health, to be clear, were impacted by the profile of new value based patients in Optum Health and the second year of the V28 phase. And we're taking actions to proactively address these issues. Our patient profile post AEP included many new to Medicare as well as new to Optum Health who are meaningfully less engaged by their prior health plans and providers. We believe that market specific plan exits driven by V28 caused this dynamic and because of the strength and stability of our provider network, those patients chose Optum Health. Member profile challenges were not specific to any single Medicare Advantage carrier and occurred in multi payer geographies like Texas and Washington. Additionally, we underestimated the impact of V28 in particular as it relates to the higher acuity structure of our patient population, which is more impacted by the risk model change. Our planned actions around operating cost containment and medical expense management were not able to offset the cumulative impacts of V28 and the new member profiles. As it relates to care patterns for Optum Health, in general in Q1, we see as a busier time for our physicians as we are engaging our patients. We've already engaged over 50% of all members and 75% of our complex members. This year, it's particularly important given the member profile of new Medicare and new Optum Health patients. Also within Optum Health, we're seeing some elevation in outpatient behavioral utilizations. Again, we're taking incremental actions above and beyond what we've planned for any year to improve performance. First, enhancing access for employee to network PCPs, especially around new patients to diagnose document and treat conditions. We're expanding home based revisits and wraparound services, particularly as it relates to post discharge visits after inpatient care. And as Andrew alluded to, we've accelerated EMR unification, deploying smarter clinical workflows and point of care tools to better |
7,409 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | as Andrew alluded to, we've accelerated EMR unification, deploying smarter clinical workflows and point of care tools to better adapt to the V28 related changes? Thanks for the question. |
7,410 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Andrew Witty: Great, Amar. Thanks so much. And let me ask Heather to maybe just take an overview of the value based care proposition and why we continue to believe so strongly in it. |
7,411 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Heather Cianfrocco : Sure. And just I think what you're seeing here is, as Andrew said, you've got two different business models here and it's important to keep that in mind. Couple of things I'll just point out. Again, in Optum Health capitated experience, this is specific to senior populations and our experience in a unique environment, mindful of again what's a new risk model, a year two risk model. And keeping in mind what Dr. Desai said, we assume and anticipate certain physician activity in the first part of the year. And that's part of our model because it drives not only that, that diagnosis, but the treatment so we can understand the gaps in care. So that's part of the plan and I think that's why you don't you it's a little different story in Optum Health. But as Dr. Desai said, we need to be mindful of that, particularly based on two years of elevated care activity, coming into this year. Now to your point, the outcomes based model or what we call the value based care model should naturally offset some of that for a few reasons as Dr. Desai mentioned. Number one, engagement is key, and that early engagement by a network that's aligned and activated, can better identify gaps in care, manage them, and support higher preventive health care and reduced emergency visits and hospital visits. In addition to that, what's unique about Optum Health's model is the wrap around services and the in home services, which not only help assess our members in the home, but they're able to then kick off things like post-discharge visits, high, the more acute condition management programs They're critical to those transitions of care and help reduce total cost of care and naturally offset some of trend, but in addition to that result in a better health outcome for our patients and a better experience and help them with a healthier life. So those are kind of the basis of our model. You then wrap the integration of our behavioral health into our model, which is increasingly more an integrated part of our care delivery |
7,412 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | the integration of our behavioral health into our model, which is increasingly more an integrated part of our care delivery systems. That's what I think is differentiated about the model. And even though to be incredibly direct and respectful of this year, we will see the impact of the revenue, through the year. But the differentiated value based care model has meant growth for Optum Health above industry in the past and we believe you'll continue to see that. Why is that? Because again, a better care delivery model, a better experience for our patients, but in addition to that, we see very high retention. So these members that need the services, that have higher acuity, that need a more intensive care model, they stay with us. And so the work we do today will support the growth in '26, and that's why we're confident in not only the growth in '26 from a membership perspective, but because there's more members to serve out there. In many cases, we're serving few of the seniors in any respective geography and we have more capacity in our network. But in addition to that, it supports our performance. Now I'll just note one last thing and that is, I think through the year you're going to watch us pace that. While we're still committed to our membership growth, we're going to be looking at particular geographies pacing through that to ensure that we're focusing on the new membership with our PCP network and with our in-home services. |
7,413 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Andrew Witty : Thanks, Heather. And I think Josh, I really appreciate the question and thanks everybody for allowing us to respond to that sort of as fully as we can. I mean, just maybe add a couple of comments to that. To that last set of comments from Heather, when we look into and you've often heard us talk previously about cohorts of members who choose to join Optum Health value based care. What we're seeing in those earlier cohorts going back to say 2023, for example, those folks who first came in and started to benefit from our value based care approach. We're seeing on all basically all metrics outperformance in terms of the way in which that cohort and cohorts before them have performed. So what we're seeing here is not really a challenge to the underlying principle of value based care. What we're seeing is how to adjust to a very dramatic price cutting regime that's been implemented over the last couple of years by the administration. And it's important to recognize that that was across the average of the industry independent analysis would say that was about a 9% price cut across the industry. Now that's a significant downdraft in terms of pressure. And obviously that affects participants whether you're a payer or a provider in the marketplace. And you've seen that effect over the last first year. We're now well into the second year of all of this. And what we're seeing during the second year is some of the let's call I would call them second order derivative effects. So I'll give you just a couple of examples of that. You've heard one very explicitly and we've mentioned the other already on the call. So second order effect would be, for example, as this pricing pressure has continued to press down alongside a series of underfunded rate increases. You've seen premiums and benefits start to be affected in the marketplace. Group premiums have gone up because of these price cuts. That is now driving a different behavior from group members and that's what we've picked up in this area. And we need to do a |
7,414 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | That is now driving a different behavior from group members and that's what we've picked up in this area. And we need to do a better job of being able to predict and anticipate the second and third order effects when they come, but they are direct consequences of this transition. A second one, which we referred to and is really important within the Optum Health story for 2025 is plan exits. So we saw a very significant increase in the number of plan exits across the country last year. As plans chose to respond to the price cutting pressure by essentially withdrawing their offer in multiple geographies across the country. And what we've seen is in unusually complete vacation of offers by certain plans. So to put it a different way, 100% of participants in a particular payer's plan had to find a new home. They had no way of staying in their old home. They had to find a new home. And what we saw when they came to us where we were still offering a plan option, we saw those members had not had the level of engagement in the prior six, eight months before they vacated that plan at the level you would have expected. That has a direct consequence on how they are understood in terms of the reimbursement model of the system. And that's what's driving a lot of our issues in Optum Health this year. But again, that is a temporary phenomena, which gets fixed during 2025, but it is simply an example of one of the second order derivative effects of the transition of absorbing this 9% or more percent decrease in pricing. None of that really speaks to the value of value based care. Value based care delivers a completely different approach of trying to ensure people have more years of health and less years of approach of trying to ensure people have more years of health and less years of healthcare acute treatment, trying to get ahead of the illness, trying to avoid the high cost consequences of late diagnosis and tries to make sure that we are encouraging people to think about healthy lifestyle, early engagement, making sure that |
7,415 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | and tries to make sure that we are encouraging people to think about healthy lifestyle, early engagement, making sure that we're heading off problems before they arrive. And we know that works based on multiple cohorts of patients that we've been privileged to have the right to manage. What we're going through, like the rest of the industry, is a dramatic, really never seen before adjustment in pricing for this marketplace. And what we're seeing this year is two or three areas where the pressure that, that has created across the market is creating new dynamics we haven't seen. That's exactly what we're responding to here and we believe that they are largely addressable as we go through the rest of this year and in no way undermine our confidence in the value based care strategy of the company. Josh, thanks so much for the question and I'll move on to the next question. |
7,416 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Operator: Our next question comes from A.J. Rice with UBS.
AJ Rice: Thanks. Hi, everybody. Just to put a finer point on some of this discussion around especially what's happening at the MA side, it sounds like you're saying most of the elevated care that you're seeing is on the group side. And it sounds like you're putting more of that on the benefit and premium changes that have occurred rather than just an underlying uptick in utilization. I want to make sure I understood that. Also on the competitive exits and the impact of that, it doesn't sound like you're calling that out on the insurance side, you're just calling that out on the Optum side. And then finally on Part D, you had been cautious about that coming into the year, but you're not mentioning that at all. So is that playing out about as expected?
Andrew Witty : AJ, thank you so much for the question. Let me ask Tim to respond. |
7,417 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Andrew Witty : AJ, thank you so much for the question. Let me ask Tim to respond.
Tim Noel: Yes. Good morning, AJ. Thanks for the question. Yes, so I'll hit those last two pieces first. So yeah, you're correct. We are really seeing this focused on our community Medicare Advantage and group Medicare Advantage books. So we're not seeing it on our chronic special needs population or our dually eligible population. Also, not seeing this care activity pattern in our newer members, either new to Medicare or new to United. And the care activity items that we talked about last year, provider up coding and some of the pressures on specialty drugs, I'm not seeing that play into this either. Those elements are both tracking very much in line with how we've planned. And when you think about the split, it is slightly more pronounced on our group business. But if you think about our overall fee for service business, it's just I would say just slightly more than the contribution that you'd expect on the group side. And while we certainly do see trends that suggest that where the premiums have increased and members are paying a high portion of that that is where we're seeing this pointed pressure on care activity on the group business. However, it's very likely that some of the same underlying trends that are generating higher care activity patterns in individual community MA are also at play in the group business.
Operator: And our next question comes from Lisa Gill with JPMorgan.
Lisa Gill: Thank you very much and good morning. Andrew, I just want to go back to the path to the long term growth rate. You reiterated that you feel confident you can get back there. With the 2026 rates looking better, we're going to move into the final year of V28. How do I think about what the key elements are to get back to that long term growth rate? |
7,418 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Andrew Witty : Yeah. Lisa, thanks so much for the question. So yes, so clearly, we were pleased to see the beginning of recognition of rate increases, which actually reflect reality, which we haven't seen for last couple of years. But hopefully that will continue to be the stance and the data will drive that in the way we saw this year. So very, very pleased to see that. Also pleased to see in the Medicaid books of business come to continue to see great engagement with states that they also adjust to make sure that those rates are appropriate for what we're seeing. So those are important. Obviously, next year, there will be a further step down in terms of pricing from the V28 model. So we can't ignore that. That's clearly a reality. But the way we'd look at this, Lisa, is that we are very, very much -- we see very much the end of this transition period in terms of having to absorb the amount of pressure. I mean, clearly, we're a leader in all of this marketplace. We're taking almost certainly a bigger fraction, if you will of the pressure because of our market leadership position here. We feel like we're very much getting through this. We obviously this year have picked up these two or three second order derivative effects, which we're going to do a much better job of anticipating and managing for as we go into 2026. And we think that an awful lot of the issue that we're seeing early in ‘25, we can fix in 2025 and help us deliver stronger performance for ‘26. And we expect that to then be a kind of ramp into reacquiring our target growth rate momentum that we aspire to as an organization. Thank you very much. Next question?
Operator: And we'll move to our next question from Stephen Baxter with Wells Fargo. |
7,419 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Operator: And we'll move to our next question from Stephen Baxter with Wells Fargo.
Stephen Baxter: Yeah, hi, thanks. Just a follow-up on the trend discussion. Could you talk about where MA margins are now expected to shake out inside your 2025 guidance? And what you think is a reasonable timeline for covering the target margins? And whether there's any change to what you're thinking is as a reasonable long term margin target in this business post V28 and some of the issues you have adapting to it? And then again, the confidence level you can improve any margins in 2026 if trends stays at this level?
Andrew Witty : Stephen, thanks so much. I'll ask Tim to respond to that.
Tim Noel: Thanks, Stephen, for the question. So the margins that we're anticipating consistent with the changes we've announced today are still within our targeted margin range for Medicare Advantage for 2025. As we look forward to 2026 and we include the increases in care activity that we're seeing both in the 2025 portion of our bid and also pricing for 2026. At this distance, we can accommodate those care activity levels and return to the historical planning target levels that we've always historically assumed.
Operator: Our next question comes from Erin Wright with Morgan Stanley.
Erin Wright: Great. Thanks for taking my question. So on the policy front, I guess, what is your latest thinking in terms of just PBM reform? Your model has obviously evolved on that front, but also Medicaid funding cuts and what sort of permutations you could anticipate there and your ability to navigate that?
Andrew Witty : Yes, Erin, thanks so much. Let me ask Patrick Conway to respond to you on the PBM side and then Chris to maybe make a couple of comments on Medicaid, if that's okay. So Patrick? |
7,420 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Patrick Conway : Yes. Thanks, Erin, for the question. So first, in terms of policy, we are leading in the marketplace with transparency choice and affordability. And we've had three major announcements that I think both help drive the policy environment, but also are a reason we've had significant market growth. 100% commercial rebate pass through. First, large PBM to do that. And you're seeing that drive positive reaction in the marketplace and it's removing any lingering doubt about our incentives. We want lower list prices and lower net prices as Andrew said. Second, removing 25% of prior authorizations over 10% of reauthorizations over 10% of prior authorizations making the system simpler, better, easier for consumers and clinicians. And then third, cost based reimbursement for pharmacies. And it's really important to know this is for all pharmacies, all drugs, all clients rolling out. Already started rolling out and put across the entire book. And you heard from independent and community pharmacies their support of these changes. The last thing I'd just call out just because it's new and it concerns us significantly is the Arkansas Legislation that the governor signed yesterday around PBM and pharmacy ownership. We're honestly not sure what problem they're trying to solve, but let me be clear on the impact on patients. When you do that, we have Genoa pharmacies in the state providing integrated mental and behavioral health care. This could cut off access for those patients with things like schizophrenia, severe depression. You have specialty medicine, where we may have been serving a patient with cancer for years and imagine that patient now not getting their medicine in their home. You have home infusions for elderly Americans, where they may not be able to get out of their home and we're providing their medication. And you have home delivery for people in rural parts of Arkansas. We're significantly concerned on about this. We'll work with the state in the regulatory process post legislation to try to |
7,421 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | We're significantly concerned on about this. We'll work with the state in the regulatory process post legislation to try to address those populations and maintain access. But we want you to hear clearly from us that our concern is about patients and maintaining access to patients across the nation to these medicines. |
7,422 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Andrew Witty : All right. Patrick, thank you. Krista?
Krista Nelson: Yeah. Thanks for the question. So on the Medicaid side, I think we won't speculate on any really specifics, but, what I do want to emphasize is just regardless of any changes, our priority remains the health of our members and ensuring that they have access to high quality coverage. As it relates to our business, we have a really broad footprint across 32 states. We have a variety of programs and products and really decades of experience. So we remain confident in the value that managed care can provide to our state partners and our ability to support our states as they really navigate through any changes. |
7,423 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Andrew Witty : Thanks for the question. Krista, thanks so much. Just looking back to the pharmacy section. I think Patrick laid things out very well there, Erin, for you. But I also would just -- I was encouraged to see in the President's executive order earlier in the week a kind of an interest in really looking at multiple elements of the pharmacy value chain. I think one of the things that has been honestly most disappointing over the last year or two is the obsession with the role of the PBM versus everybody else in the system. And if you read the EO carefully, what you'll see in there are quite good sensible questions to explore what's going on either side of the PBM in terms of the manufacturers and also ultimately many of the providers in the network. And I think what you'll see from that is the PBM plays a unique role in trying to bring down drug prices for Americans. It does that at very, very narrow margins oftentimes taking very significant risk in the process. And is really the only participant in the system that has that it's the way a PBM wins more businesses by successfully bringing down drug costs for its clients and that's how it wins more accounts. That is not how the rest of the system operates. And I'm hopeful as the administration explores the questions that the EO raises that this will become a much more thoughtful review of how to reform the whole value chain and not simply one component where I think you can make very, very serious mistakes, which could really damage patient access. So I was encouraged to see that from the administration. Erin, thanks so much for the question. Next question.
Operator: And our next question comes from Andrew Mok with Barclays.
Andrew Mok: Hi, good morning. I was hoping to get your thoughts on the risks and implications of tariffs, particularly around the impact of pharmaceutical tariffs that are currently being contemplated by the administration. |
7,424 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Andrew Witty : Yeah, Andrew, thanks so much for the question. Obviously, it's a dynamic situation in terms of what may happen around pharmaceutical tariffs. Obviously, going to be a process now where the administration goes through its analysis and investigation. So we obviously don't know what may or may not come from that. But when we look at our potential exposure to that, we feel pretty good. In fact, I'd say better than pretty good in terms of the degrees of price protection mechanisms we have in preexisting contracts and also various pieces of legislation, which also limit the ability of manufacturers to pass price increases down through the system. So at this point, and again, given that we don't know what any tariff may or may not be, but when you look at the structure of the marketplace, we feel pretty well positioned for that, Andrew. Next question?
Operator: Our next question comes from Dave Windley with Jefferies.
Dave Windley: Hi, good morning. Thanks for taking my question, Andrew. I appreciate your comments about kind of the macro cost of healthcare in the United States. We have an administration that seems more focused on budget deficit reduction, which entails cutting to healthcare. I guess my philosophical question here is, why isn't modest, persistent underfunding of the system the right way to get those costs more in balance and to force innovation in the system and how does United operate in an environment that might bring that without having without having the snafus or whatever that like a V28 model brings? |
7,425 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Andrew Witty : So David, thanks so much for the question. And I think it's a good and deep question actually. So there's no question that what I think we need is continued strong innovation in new approaches of how to bring together different elements of the system to have a more patient centered impact on health care. One of the characteristics I think of all health care marketplaces, but perhaps particularly the U.S. is there is no shortage of innovation, but it tends to be point solutions, whether it's a new device or a new drug or a new model of care. These things tend to show up in very isolated ways. So we spend a lot of money on innovation in America, but we don't see the yield of that innovation. And I would argue that's because it's not brought together. We don't align incentives. We don't really rethink workflows. We don't try and center everything around what gives you the best outcome for the patient over the lifetime of the patient, not just this encounter or even this year. How do you make that patient or how do you give that patient the opportunity for maximum numbers of great health years? That for me should be the guiding principle and that's what value based cares about and it's what UnitedHealthcare is committed to innovate and drive behind. And I think we have made extraordinary progress in that. Now unfortunately, what we've seen through V28 is almost focus the price cut where the most innovation is going on. So you've seen this pressure come exactly into the program where historically the government has funded Medicare Advantage and created a very thoughtful system, which incentivizes participants to the only way a participant can win in Medicare Advantage is to incentivize, be able to deliver a great care experience and access experience for the member, release enough cost through efficiencies to provide benefits to members and then pay a rebate back to the government, right. So everybody wins in that system. And that was a very cleverly designed system by the government many years ago. |
7,426 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | right. So everybody wins in that system. And that was a very cleverly designed system by the government many years ago. It's been supported by multiple administrations of both directions since then. What we saw through V28 was really a kind of blunt instrument approach to just take money out of that system. And that's what's causing the disruption here. So I don't think any but we would never have any anxiety about say, look, we want to see the healthcare budget grow by less each year. But then we should look at the whole budget. We should look at the whole system and we should look at how we can use tools to do that. What we know is that Medicare Advantage costs less than traditional Medicare. We know that when a Medicare Advantage patient is in a fully delegated value based care managed clinic like Optum Health, they will save even more money for the system and they will have better personal experience, they have better clinical outcomes and the government spends less money. It's those sorts of integrated approaches, which we think are the response. And it's a bit I made that comment about the President's executive order on pharmacy. And I kind of invite the same. We should be thinking about the whole system and how we align the whole system, not simply looking at these kind of individual component approaches, which we've seen over the last few years. And I hope very much that just like the pharmacy agenda that the President is laying out for understanding that we might have a similar one here. And that would be very positive because the answer to your question is yes. We should be able to deliver great healthcare at lower cost with better experience, better clinical outcome for people and for the government. And that is what the mission of UHC is. And that is what the goal of value based care and Optum Care is also. Next question. |
7,427 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Operator: Our next question comes from Ben Hendrix with RBC Capital Markets.
Ben Hendrix: Hi, thank you very much. I wonder if we could touch briefly on Medicaid. Just wanted to get an update on what you're seeing from state renewals through April and if we're still on track to close that rate acuity gap by the end of the year.
Andrew Witty : Thanks so much for the question. I'm going to ask Krista to answer that for you.
Krista Nelson : Yeah, thanks for the question. We were encouraged with the progress that we made on rates in the second half of 2024, which really continued into our 1/1 rate cycle. And as John and Andrew both mentioned, overall the gap between acuity of the population and the rate funding is really narrowing with each cycle as well as through some off cycle adjustments that we have seen. We have -- it's really too early to call the rates on 7/1, but about 35% of our revenue renews in that 7/1 cycle. And with each cycle that base data continues to reflect more recent experience. And so we remain optimistic with the collaborative relationships we have with our states that over the course of the year that this gap will continue to narrow.
Operator: And our next question comes from Lance Wilkes with Bernstein.
Lance Wilkes: Great, thanks. Could you talk a little bit about the first quarter MLR impacts and maybe breaking out the impacts that were driven by the premium increases that you described and maybe any sort of deductible increases? But also were there impacts as a result of the way in which you're approaching prior authorization, any changes in that? And then do you have a sense as to maybe increased follow through from your house calls and primary care actions as far as getting follow-up visits tied to risk adjustment activity? And lastly, were there any one time good guys in the first quarter, which perhaps supported medical loss ratio and caused the distinction between 1Q versus guidance?
Andrew Witty: Thanks so much, Lance. John Rex. |
7,428 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | John Rex: Good morning, Lance. Just to your last part, no, there were no one time good guys in the quarter that would have supported that. So a few things just to point out a bit. So to your first point on any shifts on preauthorization procedures or anything element like that impacting no, nothing from that element there. Tim noted that certainly we had a much higher in addition to the group, which was a big factor, we had a much higher level of wellness business in the quarter. Those aren't the factor though. They're super effective. They're not costly. They do drive specialty care. However, a lot of follow on specialty care. And that's what we don't know is was that was that something seasonal then? Is that a slightly altered seasonal pattern that so many that we saw so much activity in wellness visits in some populations, frankly, certain populations is at 2x the year ago levels of wellness visits, others about 50%, but it was broad based in terms of that activity. So that was certainly an element in there. An element well known to all of you also just the change in seasonality due to the IRA driven Part D changes. Think of that as about roughly 90 basis points of impact or so in the quarter also. So that would have been an element that versus kind of what you would have typically seen. And I think. I know you were well aware that was kind of be a factor as we moved into this. I'm not sure that was a factor that was the well anticipated in all the -- in kind of all the analyst models out there, for a lot of good reasons, but those IRA impacts in that zone. Certainly, kind of the Medicare funding reductions as you go into that second year V28 also impactful of that. Think of that roughly in the 60 basis point zone. So that I can go through a lot of elements there, but those are kind of the key factors. But far and away the increased utilization and the member profile elements that we've highlighted throughout the course of this call being by far the most impactful things in the quarter. |
7,429 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Operator: And our next question comes from Sarah James with Cantor Fitzgerald.
Sarah James: Thank you. I just want to circle back to the tariff question quickly. Are the penalties under the IRA for pharma manufacturers who raise price above inflation enough to protect you from tariffs pass through on Medicare? And I'm not sure if that implies to exchanges as well, but with those bids due earlier, like April to June, do you have to assume that tariffs are in place or do you think the states will give you some flexibility to submit two versions of bids with and without tariffs?
Andrew Witty : Listen, Sarah, thanks so much for the question. So as I said earlier, obviously, we don't know yet what if when might happen in this territory. So like you, we're watchfully waiting. As you alluded to, there's many kind of layers of government protection, if you will within the regulations that over the drug companies in terms of their ability to increase price above inflation. There are things like Medicaid best price protections, specifically in the Medicaid area, which would also have potential applications here. And then of course, we have our various Optum Rx, where relevant in this conversation have their own contractual price protection. So there are multiple layers of that. Obviously, we're going to be very carefully making sure that we bid in the context of that kind of mesh of protection and make sure that we do that as thoughtfully as we possibly can. But I just also just want to reiterate, like everybody else, we don't know yet what the reality of this is, but we're very attuned to it. And I think I've tried to share with you our sense that it should not be a significant exposure for us, but certainly not this year. And we'd be working very thoughtfully about bids and the rest as you suggest for next year. We have time for just one last question.
Operator: And our last question comes from Jessica Tassan with Piper Sandler. |
7,430 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Operator: And our last question comes from Jessica Tassan with Piper Sandler.
Jessica Tassan: Hi, guys. Thank you so much for the question. I wanted to ask about -- so UHC has achieved really phenomenal growth in MA year-to-date, up 521,000 members through April, almost half of that growth has come from C-SNP plans. So just wondering if you all can elaborate on UHC's dominance in the C-SNP market? Do these plans offer the beneficiary? Why is UHC been so successful in this segment? And what does C-SNP enrollment mean from an economic perspective for UHC in 2025 and then over the long term?
Andrew Witty: Thanks. Jessica, thanks so much. I'll ask Bobby Hunter who looks after our M&R business to respond to that. Bobby?
Bobby Hunter : Yeah. Thanks, Jessica for the question. So I would say really just overall, we're very pleased with our year to date growth in Medicare Advantage. And as you know, we continue to be on track to deliver on the full year growth target of up to 800,000 members. The momentum we had in AEP carried over really nicely into OEP, including notably strong retention of our existing members, and then really diversified growth across our community HMO plans, full dual plans, and the plans you mentioned that are designed for members of chronic conditions. So really both from a mixed volume standpoint, we feel really good about where we sit in '25 and the outlook that that gives us around the membership growth. And I would just note really that the Medicare Advantage Plans that we offer, you know, the great work that we do from a value based care integration standpoint with a collection of our providers, both internal and external really position us well to manage these members, with chronic complex conditions. And we're very proud to continue to get to serve more of those members, as we progress throughout the year. Thanks so much for the question. |
7,431 | UNH | 1 | 2,025 | 2025-04-17 08:45:00 | UnitedHealth Group Incorporated | 104,673 | Andrew Witty : Bobby, thanks so much. And I'd like to thank everybody for all of your questions. We appreciate your engagement very much today. While we’re not satisfied with our performance to the start of 2025. I hope you heard today our determination to improve and our enthusiasm about the path forward. We remain deeply committed to the value based care strategy the company we believe that is there way to solve many of America’s healthcare problems both from a cost but most importantly from a patient experience and outcome perspective. And I think you many of you who know United well will also know and recognize that when we encounter an issue, we figure out how to work it and how to deal with it. And rest assured, we all at United are going to work our issues that we've encountered in the first quarter solve them. And you should count on us to continue to strive towards delivering for everybody we serve and to make sure that the growth of this company returns to the kind of ranges that you would expect of us. With that, I'd like to thank everybody for your time today and we appreciate it.
Operator: And ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect and have a great day. |
7,432 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Operator: Welcome to Visa's Fiscal Fourth Quarter and Full Year 2024 Earnings Conference Call. All participants are in a listen-only mode until the question-and-answer session. Today's conference is being recorded. [Operator Instructions] I would now like to turn the conference over to your host, Ms. Jennifer Como, Senior Vice President and Global Head of Investor Relations. Ms. Como, you may begin.
Jennifer Como: Thank you. Good afternoon, everyone, and welcome to Visa's fiscal fourth quarter and full year 2024 earnings call. Joining us today are Ryan McInerney, Visa's Chief Executive Officer; and Chris Suh, Visa's Chief Financial Officer. This call is being webcast on the Investor Relations section of our website at investor.visa.com. A replay will be archived on our site for 30 days. A slide deck containing financial and statistical highlights have 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 the result of many factors. 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. Our comments today regarding our financial results will reflect revenue on a GAAP basis and all other results on a non-GAAP nominal basis unless otherwise noted. 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. |
7,433 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Ryan McInerney : Good afternoon, everyone. Thank you for joining us. Our fourth quarter results were very strong with $9.6 billion in net revenue, up 12% year-over-year and EPS up 16%. Our key business drivers were relatively stable compared to Q3. In constant dollars, overall payments volume grew 8% year-over-year, U.S. payments volume grew 5% and international payments volume grew 10%. Cross-border volume, excluding intra-Europe, rose 13%, and processed transactions grew 10% year-over-year. As I reflect on this quarter and the full fiscal year, I am incredibly proud of the more than 31,000 Visa employees who have been focused on delivering our strategy and enabling our clients with compelling solutions, which resulted in the company's strong performance. We have continued to grow our consumer payments business through an intense focus on product design and innovation. In new flows, our targeted strategy for non-consumer payments is paying off. And in value-added services, we have deepened our relationships with our clients through multiple different solutions and continue to expand our services to non-Visa transactions. We have done all this while further increasing our suite of solutions. Now let's dive into some of the highlights for the fourth quarter and the year. In consumer payments, we continued to increase credentials and acceptance. We have over 4.6 billion credentials, up 7% year-over-year and 11.5 billion tokens with more than 30% of our total transactions tokenized. Global merchant locations crossed 150 million. The Olympics and Paralympics certainly helped, with more than 7 million Paris 2024 branded cards issued and more than 130,000 merchant locations added in Europe. And I am particularly excited about new acceptance use cases. For example, we renewed an agreement with Canelo, a leading provider of self-service commerce across sectors such as food and beverage automated retail with over 1 million active devices globally and more than 1 billion transactions annually. And in the Netherlands, we |
7,434 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | retail with over 1 million active devices globally and more than 1 billion transactions annually. And in the Netherlands, we reached an agreement with the country's largest grocer, Albert Heijn to expand in-store acceptance to all Visa products. We also recently renewed our agreement with AppFolio in the U.S. for rental payments acceptance. AppFolio is one of the largest software providers in the property management space and services 8 million-plus units across more than 20,000 clients. Throughout the year, we have continued to innovate in order to expand Visa's capabilities to non-card payments. This quarter, we announced Visa A2A, bringing the power of Visa's brand, infrastructure, and rules as well as consumer protections to enable simpler, safer and more secure account-to-account payments. We are excited to be collaborating with several banks, including NatWest and Nationwide Building Society and several leading fintechs, including Modulr to deliver an industry-driven solution to unlock the full potential of account-to-account transactions in the UK. And Visa A2A is open, open to any eligible bank, open banking provider, and verified biller. Initially, this is targeted at bill payments and we plan to launch in 2025 in the UK. We are very excited to bring this to market. In prior quarters, I've mentioned our account-to-account fraud risk scoring solution, Visa Protect for A2A payments. It was recently announced as Juniper Research's Platinum Winner for Fraud and Security Innovation of the Year Award, and we will be piloting on 10 new RTP networks in 2025. We're also seeing very strong interest in our new Flexible Credential, which enables multiple payment options from one Visa credential. We have hundreds of issuers in the pipeline and several launches planned for 2025 in the U.S., Asia Pacific, Europe, and CEMEA. Last quarter, I mentioned the expansion of tapping use cases on a mobile device. Tap to add card is now enabled by issuers in more than 15 countries across our 5 regions. We know that transit is a |
7,435 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | device. Tap to add card is now enabled by issuers in more than 15 countries across our 5 regions. We know that transit is a key activator for tapping and global tap-to-ride transactions exceeded 2 billion for the first time in fiscal year 2024, up 25% year-over-year. We added more than 110 new transit systems throughout the year in cities such as Boston, Athens, Beijing, Las Vegas, and Lima to total over 870 globally. And more than 40% of these new systems also use our value-added services acceptance solutions. Tap to Pay penetration globally, excluding the U.S., was at 82%, up 6 points from 2023. And in the U.S., it was at 54%, up 13 points from last year with 29 out of the top 30 U.S. merchants accepting Tap to Pay. Now pivoting to some deal highlights. We had some significant renewals this quarter around the globe: first, with one of our largest clients in Latin America, Grupo Promerica in credit, debit, and commercial across 8 countries; second, with our largest Asia Pacific client, SMCC across consumer and commercial credit; third, with our largest CEMEA client, Al Rajhi across consumer, commercial, and value-added services, including CyberSource and Visa Risk Manager, our network-agnostic risk product; and across both Asia Pacific and CEMEA, with Standard Chartered Bank, a credit renewal across key markets in Asia, a debit renewal with key markets in Africa as well as a new expansion in the Middle East for credit. In addition, they will continue to use our value-added services. In North America, we had three very important renewals: in Canada, we renewed our relationship with the country's top issuer, RBC across consumer credit and debit, small business credit, and commercial credit; in the U.S., we recently extended our long-standing partnership with US Bank to grow our relationship across their consumer and commercial portfolios. And we have renewed with USAA across both their consumer debit and credit portfolios. Finally, in Europe, building upon our strong relationship in Italy and across 11 other |
7,436 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | consumer debit and credit portfolios. Finally, in Europe, building upon our strong relationship in Italy and across 11 other markets, we are pleased to have renewed the strategic agreement with Intesa Sanpaolo, expanding our collaboration in Italy with the largest bank in the country for innovative solutions amongst businesses and consumers. In addition, together, we will enable new value-added services for their Visa customers. Across all of our regions and all of our fintech partners from early stage to mature, we signed over 650 commercial partnerships, up 30% from last year. As you can see, we have continued to grow our businesses through active engagement with our clients and a relentless focus on new product innovations. Now moving to new flows, where our targeted strategy for capturing newer areas of growth is paying off. This quarter, new flows revenue grew 22% year-over-year in constant dollars. Visa Direct transactions grew 38% for the quarter to 2.8 billion, and commercial volumes grew 5% year-over-year. We finished the year with almost 10 billion Visa Direct transactions and $1.7 trillion in commercial payments volume. Commercial credentials grew at 18% year-over-year, significantly faster than the 7% growth for total credentials that I mentioned earlier. We are very focused on growing B2B in new verticals such as travel. We are pleased to announce that we signed a virtual card issuing deal with JPMorgan Chase in Europe. This is a significant opportunity for Visa to further build on our strong issuing relationship in North America as well as further grow in the B2B travel vertical. Additionally, in Europe, we will be partnering with Adyen so that they can offer online travel agencies, or OTAs, Visa virtual cards as part of their B2B travel solution. Another area of focus is the cross-border B2B space, where we offer significant value for complex payments through both card and Visa B2B Connect. For Visa B2B Connect, we increased the number of banks that have signed on by almost 40% year-over-year, and |
7,437 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Visa B2B Connect. For Visa B2B Connect, we increased the number of banks that have signed on by almost 40% year-over-year, and the number of transacting banks is up nearly 60%. In Korea, we reached two agreements with Hana Card. The first is a commercial and consumer credit and debit issuance partnership, with enhanced multicurrency capabilities targeted towards the cross-border needs of its customers. The second is an agreement with Hana Card and the Government Trade Agency, KOTRA, so that small business exporters can receive cross-border B2B payments via card. In Canada, we are very pleased to have won the multicurrency credit issuance with fintech Loop, a cross-border banking platform for Canadian-based SMBs. In addition, our cross-border capabilities through Currencycloud will provide FX solutions across accounts, digital wallets and international payments. In Australia, we reached a multicurrency commercial debit agreement with OFX, a leading global money transfer company that offers foreign exchange services, international payment, and spend management controls. Now moving to Visa Direct, where we have continued to grow through new and expanded relationships. In Europe, we expanded our existing cross-border P2P partnership with Revolut to now allow real-time card transfers for their business customers via the Visa Direct platform in over 78 countries supporting over 50 currencies. In the U.S., we are excited about an expanded partnership with DailyPay, whose users are currently accessing earnings on demand via Visa Direct to now seamlessly send those earnings as international remittances to friends and family around the world. In Brazil, we reached a new agreement with Travelex Banco de Cambio, one of the largest foreign exchange banks in the country and the first to specialize in FX operations regulated by the Central Bank. The client will use Visa Direct for import and export payments and for remittances to a broad range of destinations. So across our new flows, we have seen our specific strategies |
7,438 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | payments and for remittances to a broad range of destinations. So across our new flows, we have seen our specific strategies succeeding in the marketplace. And now on to value-added services, where revenue was up 22% in the fourth quarter and full year in constant dollars. Let's look at the progress we have made across our value-added services. In our issuing solutions, our core banking and issuer processing platform, Pismo has a good pipeline and its solutions are resonating with clients with nearly 12 billion API calls a month. Recently, Pismo renewed its agreement with Itau in Brazil. And in 2025, we plan to expand Pismo's offerings to clients in more than 5 countries across four regions. In Risk and Identity Solutions, we recently announced our intent to acquire Featurespace, a developer of real-time artificial intelligence payments protection technology. It will enable Visa to provide enhanced fraud prevention tools to our clients and protect consumers in real-time across various payment methods. And Worldline, already a Visa partner and leading European acquirer, will soon be launching an optimized fraud management solution, utilizing Decision Manager to provide businesses with AI-based e-commerce fraud detection capabilities. In acceptance, food delivery platform, Foodpanda, has been a long-standing CyberSource client in Asia across several markets. They will also soon be using our AI-powered data token solution, which we announced earlier this year, enabling customers to control how their data is used to experience tailored shopping experiences. In Advisory Services, Visa Consulting and Analytics delivered more than 3,000 consulting engagements during the year, and we estimate that we helped clients realize over $5 billion of incremental revenue as a result. So our value-added services have continued to show strong momentum across both Visa and non-Visa transactions and nonpayment value-added services. Before I close, I wanted to make a few comments on the recent lawsuit by the Department of Justice. We |
7,439 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | value-added services. Before I close, I wanted to make a few comments on the recent lawsuit by the Department of Justice. We believe the lawsuit is meritless and shows a clear lack of understanding of the payments ecosystem in the United States. We will defend ourselves vigorously and are confident in our ability to demonstrate that Visa competes for every transaction in a thriving debit space that continues to grow and see new entrants. In closing, I am proud of our team and all that we have accomplished. We delivered on our financial expectations while also investing in Visa's future through important product innovation. Back at 2020 at our Investor Day, we set a goal for new flows and value-added services revenue to represent more than 30% of net revenue by the end of 2024. I am pleased to say that we have exceeded that goal. And we will be hosting another Investor Day on February 20, 2025, here in San Francisco when we can talk more about our strategy to continue growing value-added services, new flows, and consumer payments. I see tremendous opportunity ahead and feel confident in our plans to get us there. Now over to Chris. |
7,440 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Chris Suh : Thanks, Ryan. Good afternoon, everyone. We closed the year with another strong quarter. In Q4, we saw relatively stable growth across payments volume, cross-border volume, and processed transactions when compared to Q3. In constant dollars, global payments volume was up 8% year-over-year and cross-border volume, excluding intra-Europe, was up 13% year-over-year. Processed transactions grew 10% year-over-year. Fiscal fourth quarter net revenue was up 12%, above our expectations, primarily due to lower-than-expected incentives, stronger-than-expected other revenue and FX being less of a drag than expected. Net revenue was also up 12% in constant dollars. EPS was up 16% year-over-year and 17% in constant dollars, higher than expected from the strong net revenue performance and a lower-than-expected tax rate. Let's go into the details. In the U.S., total payments volume grew 5% year-over-year, in line with Q3. Credit and debit also each grew 5%. Card-present volume grew 2% and card-not-present volume grew 6%. Consumer spend across all segments from low to high spend has remained relatively stable to Q3. Our data does not indicate any meaningful behavior change across consumer segments from last quarter. Moving to international markets. Total payments volume was up 10% in constant dollars, stable to Q3. In most major regions, payments volume year-over-year growth rates in constant dollars were strong for the quarter, with Latin America up 24%, CEMEA up 19%, and Europe up 12%. Asia Pacific payments volume saw a marginal improvement from Q3 in constant dollars for the quarter but was still less than 1% year-over-year growth, primarily due to the macroeconomic environment, most notably in Mainland China. Asia Pacific payments volume growth, excluding Mainland China, was relatively consistent to Q3. Now to cross-border volume, which I will speak to today in constant dollars and excluding intra-Europe transactions. Total cross-border volume was up 13% in Q4, below Q3, in line with our expectations. Q4 |
7,441 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | excluding intra-Europe transactions. Total cross-border volume was up 13% in Q4, below Q3, in line with our expectations. Q4 cross-border e-commerce measured as card-not-present volume, excluding travel and crypto purchases, grew 15%, which was faster than cross-border travel volume growth at 12%, in line with our expectations. Indexed to 2019, cross-border travel was relatively consistent with Q3. As we look at the travel corridors, the primary driver of the lower year-over-year cross-border travel volume growth was Asia Pacific inbound and outbound, which continued to be impacted by the same primary factors we've been mentioning all year: macroeconomic conditions, currency weakness, and flight bookings being below pre-COVID levels. We also saw a step-down in CEMEA outbound travel volume growth compared to Q3 due to Ramadan timing. Normalized for this, the CEMEA growth was stable. Now let's review our fourth quarter financial results. I'll start with the revenue components. Service revenue grew 8% year-over-year versus the 7% growth in Q3 constant dollar payments volume due to mix and improving utilization of card benefits. Data processing revenue grew 8% versus 10% processed transaction growth primarily due to fees and penalties being lower than the prior year. International transaction revenue was up 9% versus the 13% increase in constant dollar cross-border volume, excluding intra-Europe, impacted by lapping higher currency volatility from last year, even with the average quarterly volatility being slightly higher in Q4 versus Q3. Other revenue grew 30%, primarily driven by strong marketing services revenue growth related to the Olympics, consulting and, to a lesser extent, pricing. Client incentives grew 6%. As expected, Q4 was the annual low point for year-over-year growth due to lapping significant renewals from the prior year. In addition, it was further lowered from some onetime adjustments due to client performance. While Ryan mentioned a significant amount of renewal activity in his remarks, the |
7,442 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | adjustments due to client performance. While Ryan mentioned a significant amount of renewal activity in his remarks, the majority of that impact will begin in Q1 of '25. Now on to our three growth engines. Consumer payments revenue growth was driven by relatively stable payments volume, cross-border volume, and processed transaction growth. New flows revenue grew 22% year-over-year in constant dollars, helped by a onetime rebate adjustment due to deal timing. Visa Direct transactions grew 38% year-over-year helped by growth in Latin America for interoperability among P2P apps. Commercial volume rose 5% year-over-year in constant dollars, below Q3, primarily due to days mix. Value-added services revenue grew 22% in constant dollars to $2.4 billion, led by strong growth in marketing services and consulting and issuing solutions. Operating expenses grew 11%, led by increases in marketing and personnel expenses. FX was a minimal drag instead of the 0.5 point benefit we had expected. Our acquisition of Pismo represented an approximately 0.5 point drag as well. Non-operating income was $69 million. Our tax rate was 16.5% due to an update in our tax position across jurisdictions. EPS was $2.71, up 16% over last year, with an approximately 1 point drag from exchange rates and an approximately 0.5 point drag from Pismo. In Q4, we bought back approximately $5.8 billion in stock and distributed over $1 billion in dividends to our stockholders. We also funded the litigation escrow account by $1.5 billion, which has the same effect as a stock buyback. At the end of September, we had $13.1 billion remaining in our buyback authorization. As we closed out fiscal 2024 and readied for fiscal 2025, I reflected on our full year performance relative to what we had expected at the start of the year. With the strong Q4, full year net revenue grew 10%, in line with our expectations, and EPS grew 15%, above our expectations, a testament to Visa's diversified business model. Volatility started strong in Q1 but then declined and remained |
7,443 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | expectations, a testament to Visa's diversified business model. Volatility started strong in Q1 but then declined and remained at lower-than-expected levels throughout most of the year. For incentives, we anticipated year-over-year growth will be lower than fiscal 2023 due primarily to smaller impacts from renewals in fiscal 2024. The growth rate ended up being even lower than we expected due to client performance adjustments and deal timing. On the business driver front, processed transactions grew 10% as expected. Payments volume grew 8% in constant dollars, below expectations due to a combination of weakness in Asia Pacific, as we have discussed, and in the U.S. from ticket size not improving as expected and, to a lesser extent, from the Reg II impact. Total cross-border volume growth, excluding intra-Europe, was 15% in constant dollars, generally in line with our original expectations, though the growth in cross-border travel volume was lower, primarily due to Asia Pacific travel and card-not-present excluding travel volume growth, performed better than we expected. As we've seen this year, volumes and transactions can swing quarter-to-quarter. As these drivers fluctuate, we work carefully to manage our business to deliver on our expectations. So as we thought about our budget and guidance philosophy going into fiscal 2025, it's largely the same approach and represents our best view based on today. So let's get into the guidance details and a quick note. When I reference 2024 and 2025, I'm referring to our fiscal years. As we regularly say, we are not economic forecasters so we're assuming the macroeconomic environment stays generally where it is today. As such, we expect payments volume and processed transaction growth to remain strong and generally in line with full year 2024 levels. For cross-border volumes, we expect the Q4 '24 trend to generally continue with card-not-present excluding travel volume growing slightly more than travel volume. Now let's cover our underlying assumptions for net revenue |
7,444 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | excluding travel volume growing slightly more than travel volume. Now let's cover our underlying assumptions for net revenue growth. First, volatility. We're expecting that the full year currency volatility levels are roughly in line with the Q4 '24 average, which implies that volatility will no longer be a drag starting with Q2 '25. Next, pricing. We will continue to price to value in 2025 with the pricing impact being generally the same as 2024. However, the cadence is expected to be different as we expect the vast majority of the incremental pricing impact will take effect in April versus being more balanced between October and April as it was in 2024. On incentives, first, there were a significant amount of renewals in Ryan's remarks that will be impacting Q1 '25 incentives. In total, we expect more than 20% of our payments volume to be impacted by renewals in 2025 compared to less than 15% that was impacted in 2024. Second, remember that in the first and second quarters of 2024, we called out client performance and deal timing as helping incentives. And in Q4, we had additional onetime performance adjustments. Adding this up, 2025 year-over-year incentives growth is expected to be significantly higher than 2024. We expect to close on Prosa and Featurespace in 2025, and when we do, we will update our estimates for the acquisition impacts. We pulled these assumptions together on an adjusted basis, defined as non-GAAP results in constant dollars and excluding acquisition impacts. You can review these disclosures in our earnings presentations for more detail. In 2025, we expect full year adjusted net revenue growth to be in the high single to low double digits, with incentives being the key driver of the difference between '24 and 2025. As always, revenue performance is sensitive to several factors so to the extent that there are deal delays or significant deal performance adjustments and or macro volatility and driver performance that is better than expected, adjusted net revenue growth would be on the higher |
7,445 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | and or macro volatility and driver performance that is better than expected, adjusted net revenue growth would be on the higher end of the range. In terms of quarterly variability, we expect the second half revenue performance to be better than the first due to some of the dynamics I have spoken about, volatility, pricing and, to a lesser extent, incentives. Now moving to expenses. We currently expect to grow adjusted operating expense in the high single digit to low double digits as we continue to fund new flows and value-added services projects, our sales efforts and growth initiatives in specific countries. Non-operating income is expected to be between $150 million and $200 million as a result of lower interest rates. Our tax rate is expected to be between 18% and 18.5%. On capital return, the Board has declared an increase to our quarterly dividend by 13%, and we intend to return excess free cash flow to shareholders through buybacks. All this results in adjusted EPS growth to be in the high end of low double digits. Now moving to Q1. For the first three weeks of October through the 21st, with volume growth in constant dollars, U.S. payments volume was up 6%, with debit up 7% and credit up 6% year-over-year. Cross-border volume, excluding intra-Europe, grew 13% year-over-year. Processed transactions grew 11% year-over-year. Now to financial expectations. We expect Q1 adjusted net revenue growth in the high single digits. Three things to note when we look at the step-down in adjusted net revenue growth from the fourth quarter in 2024 to the first quarter in 2025. First, incentives. There are a number of factors impacting incentives, especially in Q1 and H1 so let me go through each part. As I mentioned earlier, Q4 incentives growth was even lower than expected, with the combined impact of the lapping of significant renewals in 2023 and the onetime adjustments due to client performance. As I also mentioned, in 2025, we expect a significantly higher amount of our payments volume to be impacted by renewals, |
7,446 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | As I also mentioned, in 2025, we expect a significantly higher amount of our payments volume to be impacted by renewals, approximately 20% compared to under 15% in 2024. This is a combination of the large amount of renewals in Q4 '24 that will go into effect plus the amount of renewals we expect in 2025. In addition, the timing of the deal terms in 2025 is such that we expect about 60% of the 2025 renewal volume to go into effect in Q1. Putting those all together, we expect a significant step-up in the dollar amount of incentives from Q4 of '24 to Q1 of '25. Second, the timing of pricing actions. As I mentioned, whereas in 2024, the pricing impact was similar quarter-to-quarter, this year, we expect less pricing impact in the first half than the back half with Q1 having the smallest impact. Third, other revenue. As we do not have a major event in Q1 like the Olympics or FIFA, we anticipate lower growth in consulting and marketing services-related revenue compared to Q4. We expect adjusted operating expense growth to be in the high single digit to low double digits. On a year-over-year basis, remember that the first quarter of 2024 had a lower operating expense growth rate, both from lapping FIFA-related expenses in 2023 and from the allocation of Olympic-related marketing spend to other quarters. Non-operating income is expected to be between $35 million and $45 million, and our tax rate is expected to be around 18.5%. This puts our first quarter adjusted EPS growth in the low double digits. As always, if the environment changes and there are events that impact our business, we will remain flexible and thoughtful on balancing short- and long-term considerations. As we are several weeks into fiscal 2025, Visa's underlying business continues to be healthy and the growth opportunities are significant. We look forward to discussing this and our long-term growth algorithm at the upcoming Investor Day. And now, Jennifer, I'll hand it back to you. |
7,447 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Jennifer Como: Thanks, Chris. And with that, we're ready to take questions.
Operator: [Operator Instructions] Our first question comes from Harshita Rawat from Bernstein. Please go ahead.
Harshita Rawat : Good afternoon. Thank you for taking my question. A lot going on in the U.S. regulatory front with regards to the DoJ lawsuit, Reg II, MDL, CCA. Can you share your overall thoughts on the regulatory and litigation environment in the U.S.? And Chris, just as a follow-up, can you help us maybe size your revenue exposure to U.S. debit, both including as well as excluding Visa DPS? Thank you.
Ryan McInerney : Yeah, thanks for the question. As you note, a lot going on not just in the U.S. but all over the world. I think regulators appropriately are looking at the payments ecosystem and want to ensure that there's fair competition, that there's multiple options, both for consumers and merchants. And that's a process of engagement that we have in the U.S. to your question, but also with regulators, elected officials all around the world. And we feel very good about our ability to manage through that complexity. We feel very good about the ability to continue to run and grow our business. And we feel very good about the ability to continue to innovate and to continue to serve our clients. In terms of revenue exposure, that's not something that we disclose as it relates to U.S. debit or other parts of the business like that. But in terms of our ability to compete, we feel really, really good about it.
Jennifer Como: Next question?
Operator: Next, we'll go to the line of Ramsey El-Assal from Barclays. Please go ahead. |
7,448 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Jennifer Como: Next question?
Operator: Next, we'll go to the line of Ramsey El-Assal from Barclays. Please go ahead.
Ramsey El-Assal : Hi. Can you give us your updated thoughts on the competitive environment, especially as it pertains to or specifically as it pertains to pay by bank? We're seeing Walmart move forward with a new product and chatter around some other offerings. We've seen these products in the past, but I'm just wondering if there's anything that sort of changed on the ground to make these a little more interesting for consumers. I know you guys are involved as well serving that part of the market now, so curious to get your comments.
Ryan McInerney : Yeah, there's a lot going on with account-to-account payments in the U.S. and around the world as you know it as well. Pay by bank is not a new capability. It's not a new capability in the United States. It's not a new capability for Walmart. Actually, I think as of today, you can load three different bank accounts into your Walmart.com wallet to pay for things. And as you alluded to, they've also put some news out that they're going to have a new partnership that I think is going to further enhance that. We expect that account-to-account payments will continue to proliferate here and around the world. We think there's a lot that we can add in terms of value to account-to-account payments. I mentioned some of those things in my prepared remarks. But as I've talked about several times on this call, it's a very, very competitive environment in which we operate. But we feel very, very good about our products, our innovation, our ability to provide value to end users in terms of buyers and also sellers, and therefore, our ability to continue to grow the business.
Jennifer Como: Next question?
Operator: Next, we'll go to the line of Sanjay Sakhrani from KBW. Please go ahead. |
7,449 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Jennifer Como: Next question?
Operator: Next, we'll go to the line of Sanjay Sakhrani from KBW. Please go ahead.
Sanjay Sakhrani : Thank you. I had a question on commercial volumes. I know they decelerated in days mix. I'm just wondering what kind of growth rate we should expect on a go-forward basis. I mean -- and are there some macro impacts? Maybe just talk about that specifically.
Chris Suh : Hi, Sanjay, this is Chris. Yeah, as you noted, we did see a days mix impact in Q4 with commercial volumes. But if I just back way up, we're excited about the opportunity in new flows. We're optimistic about the big opportunity ahead. And over time, we do anticipate that we'll see continued growth of commercial volumes ahead of consumer volumes over time.
Jennifer Como: Next question?
Operator: Next, we'll go to the line of Paul Golding from Macquarie. Please go ahead.
Paul Golding : Thanks so much. With the Featurespace acquisition in process, I just wanted to ask how you see AI playing into the business model. Do you see it more as driving VAS or incremental business model, uplift revenue or cost improvement? Or is it more of a competitive differentiator that will just keep you ahead of your competition? Thanks. |
7,450 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Ryan McInerney : Yeah, thank you. In short, I see it as both but let me unpack a couple of things that you said. First, in terms of Featurespace, we're very excited about the opportunity to close on the Featurespace acquisition. As I travel around the world, financial crime, fraud is at the top of mind of clients, partners, regulators all around the world. And Featurespace is a world leader in providing AI-driven solutions to combat that fraud, to reduce that fraud, to enable our clients and partners to continue to serve their customers in a safe way. So we're very excited about that. As it relates more broadly to especially Generative AI at Visa, I see it really in two different buckets. The first is we are adopting it aggressively across our company to drive productivity. And we've seen some great results from everywhere to our engineering teams, to our accounting teams, to our sales teams, our client service teams. And we're still in the early stages of, I think, the very significant impact this will have on the productivity of our business. I also see it as a real differentiator to the products and services that we're putting in market. You've heard me talk about some of the new risk capabilities, risk management capabilities, for example, that we've deployed in the account-to-account space, which are all enabled with generative AI. You mentioned Featurespace. We've had some really good success in other parts of both our value-added services business and the broader consumer payments business as well. And we've got a product pipeline that is very heavily tilted towards some, we think, very exciting Generative AI capabilities that hopefully you'll hear more from us on soon. One of those I mentioned in my prepared remarks, which was the data token that we're starting to pilot with Foodpanda, which is 1 example of that.
Paul Golding : Thank you.
Jennifer Como: Next question.
Operator: Next, we'll go to the line of Tien-Tsin Huang from JPMorgan. Please go ahead. |
7,451 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Jennifer Como: Next question.
Operator: Next, we'll go to the line of Tien-Tsin Huang from JPMorgan. Please go ahead.
Tien-Tsin Huang : Thank you. Just wanted to ask how growth in '25 might look different than '24 across consumer payments, new flows, and value-added services. |
7,452 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Chris Suh : Hi, Tien-Tsin. This is Chris. So we don't guide by consumer payments, new flows, and value-added services. But let me just give you a little bit more color on how we think about the guide that we did give. At the highest level, we took the same approach to guidance as we did a year ago, which is really to provide guidance based on our best estimate of what we expect to happen throughout the year. And so if we take all our assumptions and those assumptions play out as we've articulated, we'd expect total revenue growth, adjusted net revenue growth to be in the middle of the range that we provided. And obviously, if those assumptions, those variables turn out to be better, that could push us to the high end of revenue growth, and vice versa if those assumptions turn out to be slightly worse. The key variables that I would call out are, there's three-- there's probably four here to talk about. So one is incentives. Our plan is based on our best estimate of renewals and deal activity. But as we saw in FY '24, those results can vary quarter-to-quarter with client performance and timing of deals, and lower growth could push revenue growth towards the upper end of the range. Two would be cross-border volumes. Higher or lower growth in cross-border volumes would also contribute toward higher or lower within that revenue range. Third would be volatility. We've assumed FY '25 full year on average to the levels that we saw in Q4, and any significant swing could impact revenue in '25. And of course, across all of it is the assumption on the macro economy. As we've always said, we're not forecasters of the economy. But in the event the U.S. -- in the U.S. or globally, if PC grows faster than currently forecasted, then we should also see stronger growth as well. And so all of these factors can play a role. We feel good about the plan that we shared here for the full year at the start of the year. And we'll obviously continue to update you as the year unfolds.
Jennifer Como: Next question? |
7,453 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Jennifer Como: Next question?
Operator: Next, we'll go to the line of Rayna Kumar from Oppenheimer. Please go ahead.
Rayna Kumar : Good afternoon. Thanks for taking my question. Last week, the CFPB issued a final open banking rule for the U.S. Can you talk about what opportunities this could present for Visa from Tink's perspective and what potential headwinds that could create? Thank you.
Ryan McInerney : My understanding is that the new rules that they, I guess, finalized are largely consistent with the CFPB's initial proposal. And we are strong advocates for consumers having more control and more access to the financial data but ensuring that it's in a safe and secure way. We're still evaluating all the details of the potential impacts from the more detailed regulations across the industry. But it goes without saying, our own capabilities will comply with the CFPB's rules as well as our clients' very high bar for security and privacy. Widening the aperture a little bit to the opportunities that it creates, I think in an environment that open banking is even more available in the United States, like it is in places like Europe, what we found is that the Visa brand can be a meaningful differentiator. The Visa brand can give confidence to end users and data providers, and that if we can bring our capabilities to market like we've done in Europe with Visa A2A, we can give more confidence to the whole ecosystem and help resolve a lot of the complexities that exist in open banking. So we remain excited about the opportunities to add value, especially in the U.S., where we're still in the pretty nascent stages of all this.
Jennifer Como: Next question?
Operator: Next, we'll go to the line of Andrew Schmidt from Citi. Please go ahead. |
7,454 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Jennifer Como: Next question?
Operator: Next, we'll go to the line of Andrew Schmidt from Citi. Please go ahead.
Andrew Schmidt : Hi, Ryan. Hi, Chris. Thanks for taking my questions this afternoon. I wanted to ask about value-add services growth. It's really good to see the consistency there. Maybe you could just talk about the predictability, and then maybe comment a little bit more on the planning process of how you sort of feed the engine and continue to drive that growth. I know there's an organic and inorganic components penetration aspects to this but if you could help unpack that. I know it's a lot of things in there but if you could help unpack that, it'd be great. Thanks so much. |
7,455 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Ryan McInerney : We, too, are very excited about the consistent growth we've been able to deliver year after year with the value-added services businesses. And we deliver that through planning, sales planning, client planning, product road mapping, all the things that you would expect we do business by business, in the issuer solutions business, the acquirer solutions business, risk and advisory business, and so on and so forth. When you think about the opportunity, here's how I would encourage you to think about it, which is the same way we kind of plan to go to market. We deliver value-added services for Visa transactions. And these are offerings that are built to enable Visa to be the best way to pay and be paid market by market around the world. And we're continuing to invest to add new functionality to improve the payment success and the security on the network. So these are products and services like Visa Account Updater, the risk products that we talk a lot about like Visa Secure, the dispute tools that we deliver like Visa Resolve Online, the benefits that we offer. So that's kind of 1 component of the opportunity. The second part of the opportunity is services for non-Visa transactions. This is an area you've heard me and us talking a lot more about in recent quarters. This includes acceptance services like CyberSource, Authorize.net, Verifi, risk tools like Decision Manager, processing solutions like DPS, like Pismo, and again, these are all capabilities that we're bringing to market for our clients that add value for all different types of payment transactions. And then the third set of opportunities that we're going after are services beyond payments. This is a much broader category. It includes things like our consulting and analytics teams, our marketing services teams, open banking services such as Tink, we were talking about earlier in terms of their data aggregation solutions. We're now offering core banking platform services as part of the Pismo acquisition as well. So that hopefully gives you |
7,456 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | We're now offering core banking platform services as part of the Pismo acquisition as well. So that hopefully gives you a sense of how we look at the opportunities, we look at the competitive sets, we build and deliver products, we build and deliver our sales motions and go-to-market and ultimately deliver the consistent growth that you referenced. |
7,457 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Jennifer Como: Next question?
Operator: Next, we'll go to the line of Dave Koning from Baird. Please go ahead.
Dave Koning : Hey, guys. Thank you. On the cross-border line, revenue growth was stable at 9% this quarter, same as last quarter, but reported volumes accelerated 1%. And I would think FX volatility was less bad so that probably helped a little bit, and mix seemed about the same. So I was wondering, is there anything else, any other little headwinds emerging there? What -- maybe what created the gap?
Chris Suh : Yeah, sure. So a couple of things. So as you pointed out, international revenue grew slower than total cross-border volumes. It really did have to do with the volatility. So Q4 volatility did improve from Q3 a bit but it was lower than the volatility that we saw last year. And secondly, the associated volume, the cross-border volume, 13% in Q4, as expected, but also lower than the volume growth that we saw in Q4 a year ago. And so when you combine those things that had impacted the differential that you see between volumes and revenue.
Jennifer Como: Next question?
Operator: Next, we'll go to the line of Tim Chiodo from UBS. Please go ahead.
Tim Chiodo : Great. Thank you for taking the question. So I wanted to dig into two specific aspects of value-added services, so first being DPS and the second being CyberSource. I believe those two combined make up a reasonably large portion of the transaction-based value-added services. I think the last disclosure on DPS was about $2.5 trillion in volume, and CyberSource is in the roughly $1 trillion. I was hoping you could give sort of relative growth rates relative to the rest of value-added services and maybe some updated stats if possible. Thanks. |
7,458 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Ryan McInerney : Yeah, thanks for the question. We're super proud about the progress that we're making in DPS and CyberSource, DPS being primarily in the U.S. and CyberSource being a really at-scale global platform now. But we don't provide transaction volume growth or break out other metrics at that level of reporting. So I appreciate the interest. Sorry not to be able to provide any more detail.
Jennifer Como: Next question?
Operator: Next, we'll go to the line of Bryan Keane from Deutsche Bank. Please go ahead.
Bryan Keane : Hi, guys. Good afternoon. I wanted to ask about the pickup you've seen in October for volume growth, especially in debit. Looks like it's perked up a little bit to 7%. Anything you're seeing there in new wins or is that potentially a better economic environment driving that? And then just quickly, secondly, on the price to value, just the change in timing, what was the reason for the change? Why is the timing different this year? |
7,459 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Chris Suh : Sure. Okay, I'll start with your question about October and then I think Ryan will handle your second part of your question. So in terms of October, so as we've consistently said, three weeks don't make a trend. It was true in July when we started a little bit slower and then Q4 ended up being stable. And we think it's true now as we see a strong start to October. Now that said, here's a couple of things that we see in terms of relative strength between the month of October and how we ended Q4. Two things that I'd point to: one is days mix. So the growth in the month of September was lower due to days mix. Last year, September had an extra Friday and Saturday, which are two of the highest spend days of the week. And this September, that was replaced with a Sunday and Monday, which are two of the lower spend days. And so that had an impact on September growth. And then secondly, in the U.S., in addition to that days mix point, we are starting to lap the modest impact of Reg II that we started to talk about a year ago in Q1. And so those combined things are contributing to what we see as the start of October. But as we said, it's three weeks. Let's see how the quarter plays out.
Ryan McInerney : Bryan, yeah, as you noted and we've said many times, we price to value. So when we price to value, we have to ship products. We have to ship services. We have to deliver solutions that are adding value and increasing value to our clients. And our product pipeline in 2025 is a bit more backloaded, especially as we bring some new and exciting products and services to the market, and so that really drives the difference in pricing cadence in 2025.
Jennifer Como: Next question?
Operator: Next, we'll go to the line of Jason Kupferberg from Bank of America. Please go ahead. |
7,460 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Jennifer Como: Next question?
Operator: Next, we'll go to the line of Jason Kupferberg from Bank of America. Please go ahead.
Jason Kupferberg : Thanks, guys. Just looking at the U.S. card-present volume growth, I think we've been in the 2% range here for the past two or three quarters. So wondering if you're expecting that to accelerate in fiscal '25. And Chris, can you just quantify what that favorable adjustment to Q4 new flows revenues were? Thank you.
Chris Suh : Got it. Jason, you cut out a little bit at the end. What was the second part of your question, Jason?
Jason Kupferberg : That onetime helper to new flows revenue in Q4, if you could quantify that?
Chris Suh : Okay, got it. I'll start with the second one since you just asked it. Yeah, we feel great about the momentum of new flows. Q3 was 18%, now to 22% in Q4. As I said on the call though, Q4 was helped by this onetime rebate adjustment due to deal timing. So we had expected a client to earn a rebate, which was contingent on them achieving a milestone, and they didn't achieve it. So as such, we recorded a onetime adjustment to that rebate, which landed in Q4. And I think your first question was around card-present and just sort of volumes as we look forward into FY '25. And maybe that's why I'll go out, just broaden it a little bit and say, per our call, our overall assumptions on underlying drivers is that in '25, they remain relatively stable to the trends that we see, both for the full year on payment volume and payment transactions relative to '24 and then on cross-border to the trends that we see in Q4. And so they will remain relatively strong and healthy. And like I said, we'll continue to update you throughout the course of the year.
Jennifer Como: Next question?
Operator: Next, we'll go to the line of Craig Maurer from FT Partners. Please go ahead. |
7,461 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Jennifer Como: Next question?
Operator: Next, we'll go to the line of Craig Maurer from FT Partners. Please go ahead.
Craig Maurer : Hi, thanks everybody for taking my questions. I wanted to ask first, haven't asked in a long time about your thoughts on operating leverage, and you're growing expenses at a similar rate to revenue in the forecast for fiscal year '25. And going forward long term, is there a commitment to grow revenue faster than expenses or are we looking at limited operating leverage in the future? And secondly, considering the fiscal year '25 guide, what are your assumptions around APAC embedded in the guide? Do you need acceleration in China to achieve that or is it basically assuming the same steady no growth situation there? Thanks.
Ryan McInerney : I'll take the first question and you can take the second question, Chris. On your first question, as I said on this call and earlier calls, we have an enormous set of opportunities that we're pursuing. And the way we're running the business day in and day out, quarter in and quarter out, year in and year out is we're going through the assessment of those opportunities, we're figuring out the product pipeline that we can deploy. We're looking at inorganic and organic opportunities. And we're putting together a plan that we think maximizes the long-term growth that we can deliver. That's the way we approach it. That's the way we think about it. And you see the results that we've delivered, and you heard what Chris's comments were in the guide for this year. So that's kind of where we are with that. |
7,462 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Chris Suh : I'll address your comments on AP specifically. So again, at a global basis, we expect overall trends to be relatively similar to where we're ending FY '24. And the situation in AP, so much of that has been driven by the macroeconomic conditions in China. And as we've consistently said, we don't forecast the economy. And so again, in the context of relatively stable drivers, we'll see how AP performs but again, it will really be dependent on the health of the overall economy.
Jennifer Como: Next question.
Operator: Next, we'll go to the line of Trevor Williams from Jefferies. Please go ahead.
Trevor Williams : Great, thanks a lot. Yeah, I wanted to follow up on value-added services. I think the general framework you've given is roughly two thirds of VAS revenue is transaction-linked in some form. Of that portion that's tied to transactions or volume, how much of that today needs to be running over VisaNet for you to be earning those vast revenue streams? Ryan, it sounds like most of it today is still running over your network but maybe the off-network piece should be increasing as a percentage of the mix over time. But anything more specific there would be helpful. Thanks. |
7,463 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Ryan McInerney : Yeah. I mean, the largest component of our VAS revenue today is that first bucket of services I mentioned for Visa transactions, and obviously, we've been doing that the longest time. And just to comment on that, what that really does is it drives additional yield on top of our Visa transactions. So we're adding more value to the transaction. We're adding more value to the clients and ultimately driving additional yield on top of the Visa payments volume growth that we see. But as I said, we also see -- we've made meaningful progress building out our platforms to service non-Visa transactions. CyberSource I mentioned, Verifi I mentioned, Pismo I mentioned, Decision Manager I mentioned. These are all becoming meaningful platforms for us with meaningful opportunity. And you can just imagine the TAM that we're able to go after when we're not just delivering services for Visa transactions but we're able to work with clients to deliver services on top of a much broader array of payment transactions is just significant. So we remain very excited about both.
Jennifer Como: Last question, please.
Operator: Our final question goes to the line of Darrin Peller from Wolfe Research. Please go ahead.
Darrin Peller : Hey, thanks, guys. Look, just coming off of the, I think it was 12% growth in incentives and rebates in '24, and now you're saying obviously higher in '25. It's obviously great to see the activities [indiscernible] growth. Maybe just help us understand a little more around, you mentioned a lot of renewals but what about just net new business and market share gains. How does that build in? And I guess related to that, looks like this year is a big year of that constant revenue growth rate. So does that have an impact on how you think about this year's growth versus long term? We think it could be actually even better this year being a little bit of an outlying year in terms of growth in incentives and rebates, if we're thinking about that correctly. Thanks, guys. |
7,464 | V | 4 | 2,024 | 2024-10-29 17:00:00 | Visa Inc. | 38,043,467 | Ryan McInerney : Yeah, Darrin, I mean, I don't think we're going to get into like the outer years but I'd say a couple of things. One is we're winning, like we're winning region by region and market by market around the world. You look at the size and sophistication of some of those names that I mentioned in my prepared remarks and I've mentioned for the last couple of quarters. We are winning and we feel really good about that market by market around the world. Second thing is, as we've also talked about in the past, we can't necessarily predict the time of when these renewals are going to happen, when a competitive situation is going to happen to our client. We have to be ready at any given time to give our best and hopefully, ultimately win. And as you were alluding to, there's been kind of a string of those recently and more of them this quarter that we're excited about. So we'll continue to deploy a great product. We'll continue to -- we've got a great team that I acknowledged during the prepared remarks that's serving these clients, which is ultimately a big reason they choose to both continue to do business with us and expand the business that they're doing with us, expand the consumer business, expand in the commercial business, expand into new flows, and we feel really good about it.
Jennifer Como: And with that, we'd like to thank you for joining us today. If you have additional questions, please feel free to call or e-mail our Investor Relations team. Thanks again, and have a great day.
Operator: Thank you, all, for participating in Visa's fiscal fourth quarter and full year 2024 earnings conference call. That concludes today's conference. You may disconnect at this time, and please enjoy the rest of your day. |
7,465 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Operator: Welcome to Visa's Fiscal Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. [Operator Instructions] I would now like to turn the conference over to your host, Ms. Jennifer Como, Senior Vice President and Global Head of Investor Relations. Ms. Como, you may begin.
Jennifer Como: Thank you. Good afternoon, everyone, and welcome to Visa's fiscal third quarter 2024 earnings call. Joining us today are Ryan McInerney, Visa's Chief Executive Officer; and Chris Suh, Visa's Chief Financial Officer. This call is being webcast on the Investor Relations section of our website at investor.visa.com. A replay will be archived on our site for 30 days. A 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. 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. Our comments today regarding our financial results will reflect revenue on a GAAP basis and all other results on a non-GAAP nominal basis unless otherwise noted. 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. |
7,466 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Ryan McInerney: Good afternoon, everyone. Thank you for joining us. We delivered strong third quarter results with $8.9 billion in net revenue, up 10% year-over-year, and EPS up 12%. Our key business drivers were relatively stable as compared to Q2, adjusted for leap year. In constant dollars, overall payments volume grew 7% year-over-year, U.S. payments volume grew 5%, and international payments volume grew 10%. Cross-border volume excluding intra-Europe, rose 14%, and processed transactions grew 10% year-over-year. We recently received the results from our annual Global Client Engagement Survey where Visa achieved a Global Net Promoter Score, or NPS, of 76, up three points from last year. We saw NPS increases across all of our client types, merchants, issuers, fintechs, and processors and across our regions, the results remain strong, with a notable 6-point NPS improvement in North America. I want to thank all of our 30,000 employees who helped deliver these fantastic results. And as I review some highlights from the quarter, you'll see how this focus on serving our clients by meeting their needs, innovating, and helping them grow is fueling our success across consumer payments, new flows, and value-added services. Let's start with consumer payments, where we see more than $20 trillion of opportunity to capture cash, check, ACH, domestic schemes and other forms of electronic payment. In our client engagement survey, our clients ranked our strategic partnership and our brand as two of the most important factors to our successful relationships. I'll share some examples of how each of these played out this quarter. In strategic partnerships, we are constantly seeking ways to add more value and grow together with our clients. We are pleased to have been named the Preferred Network Partner by Lloyds Banking Group, renewing our debit relationship and significantly expanding our relationship in credit, winning 10 million additional credit credentials across the Group's consumer and commercial business. Also in the |
7,467 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | in credit, winning 10 million additional credit credentials across the Group's consumer and commercial business. Also in the U.K., NatWest has launched a new Visa Travel Reward credit card, following the signing of our partnership last year. They will also be utilizing many value-added services, including transaction controls and card benefits. On the European continent, we worked with Raiffeisen Bank International AG, a leading bank in several markets. And recently, in the Czech Republic and Romania, we renewed our commercial business and expanded our consumer debit and credit business totaling over two million potential new credentials. In Korea, we deepened our partnership with leading issuer KB Kookmin Card. Already a user of Visa Direct cross-border money movement and a Visa consumer and commercial issuer, they will grow their consumer credit and debit portfolios with Visa and use value-added services, including consulting and marketing services. In Peru, we extended our partnership with leading issuer, Banco de Credito de Peru, across consumer and commercial portfolios with plans to launch additional new flows offerings and value-added services. In the U.S., we extended our agreement with Wells Fargo. This will allow us to continue to support Wells Fargo's strategy to reinvent their credit business and provide additional growth by leveraging key Visa assets like consulting and Visa sponsorships such as FIFA and the Olympic and Paralympic Games. On the brand front, with the Olympic Games opening ceremony later this week, it is exciting to see the engagement with the Visa brand and activation across the world in marketing campaigns, cardholder experiences and Olympic and Paralympic-branded Visa issuance, which I am happy to report in Europe is at nearly six million cards compared to the five million number I quoted just last quarter. We have also added nearly 100,000 new merchant locations in France in advance of the event. Our brand also plays an important role in winning co-brand partnerships. In India, |
7,468 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | locations in France in advance of the event. Our brand also plays an important role in winning co-brand partnerships. In India, growing credit issuance and reaching affluent and cross-border consumers remain areas of focus. We are excited about the launch of a co-brand card with Adani One and ICICI Bank as India's first co-branded credit card with rich airport-linked benefits for their target base of 400 million customers through the Adani One platform. We also signed an agreement to launch a new co-brand card with Tata Digital, along with an Indian banking partner, building on the success of our existing credit co-brand relationship. This new co-brand offering consists of a multicurrency prepaid foreign exchange card that will target travelers from India, also benefiting from the rewards of the Tata Digital Super App, Tata Neu. Across seven countries in Latin America, we will work with Unicomer, a major retailer and financial services provider with numerous brands to deliver a co-brand credit card in addition to using CyberSource. And in CEMEA, we reached a de novo co-brand arrangement with BinDawood, a leading grocer in the Kingdom of Saudi Arabia with 88 outlets and over five million loyalty program members. On the travel side, we extended our relationship with Malaysia Airlines from a prepaid co-brand card targeting millennials and Gen Z customers to also launch a new co-brand credit card for the travel-minded affluent. And in the U.S., Turkish Airlines have chosen Visa to be their exclusive network partner for their new Miles and Smiles co-brand credit card. Our consumer payment strategy is focused on growing credentials as we are doing across all the partnerships I just mentioned and increasing acceptance locations. And wallets are a great example of where this comes together, where Visa can be a funding source, an embedded credential, and an accepted form of payment by wallet merchants. This increases the value proposition for wallet providers and their users. Two wallet highlights this quarter are in |
7,469 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | merchants. This increases the value proposition for wallet providers and their users. Two wallet highlights this quarter are in Peru and Vietnam. Yape is a Peruvian super app with more than 15 million users who already have a Visa credential that enables them to send money across P2P apps via Visa Direct. And just recently, they launched Tap to Phone functionality for their more than two million merchants to accept Visa. And in Vietnam, a country with approximately 50 million wallet users, the three leading digital wallets, MoMo, VNPAY, and ZaloPay are now enabling their users to utilize Visa cards as a funding source for transactions at over 500,000 QR acceptance points managed by these wallets. One additional area that we are very focused on is delivering simple, easy, and secure checkout experiences. Let me share a few recent examples. First, we are integrating Click to Pay and the Visa Payment Passkey Service, enabling a customer to authenticate themselves using biometrics. Already, we have hundreds of issuers enabled for passkeys in Europe and a number of issuers who represent more than 50% of our e-commerce payments volume in Europe piloting the solution. Second, we crossed 10 billion tokens this quarter, a significant milestone. And in 2023 alone, Visa tokens helped generate more than an estimated $40 billion in incremental e-commerce revenue for businesses globally and saved more than $600 million in fraud. Third is the ability to tap for more use cases on a mobile device. With tapping as one of the best in-person commerce experiences, we want to provide Visa users with more ways to tap, including Tap to Pay, tap to authenticate an identity, tap to add a card, or tap to send money to family or friends. And finally, this quarter, Tap to Pay grew four percentage points from last year to 80% of face-to-face transactions globally, excluding the U.S. In the U.S., we surpassed 50% and have 30 U.S. cities above 60% penetration. Now moving on to new flows. This quarter, new flows revenue grew 18% year-over-year |
7,470 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | have 30 U.S. cities above 60% penetration. Now moving on to new flows. This quarter, new flows revenue grew 18% year-over-year in constant dollars with Visa Direct overall transactions growing 41% for the quarter to 2.6 billion and commercial volumes up 7% year-over-year in constant dollars. Let me provide some updates, starting with B2B, where we have focused on penetrating new verticals and delivering innovative products and solutions. In healthcare, we will work with AXA and Paysure to launch a commercial virtual card solution to simplify the claims processes for their customers worldwide. We have also expanded our virtual card acceptance with a key business services provider, Cintas, who offers uniform, safety, and fire protection services to over one million customers. Together with our partner, Billtrust, we will help Cintas streamline their payments, automate processes, and manage costs on Billtrust's Business Payments Network or BPN. We also just recently extended our long-standing BPN collaboration with Billtrust that connects suppliers and buyers to facilitate straight-through processing of virtual card payments with rich data that optimizes acceptance costs. Our products and solutions in B2B remain very important in winning and growing our business. One such solution is the enhanced B2B data that we can provide. In Brazil, together with Solero, a leading business financial management solution, we will provide issuers with enhanced visibility into small business spend by aggregating data across cards, bank accounts, boletos and more, enabling them to better manage their client relationships and offer compelling products. Another solution is Spend Clarity, which provides expense program management, including card issuance, controls, and reporting. Wells Fargo has white-labeled our solution called Wells One Expense Manager, which has now onboarded 6,000 corporate clients representing over one million users, providing access to their spend data. Now moving on to Visa Direct. We continued to grow our |
7,471 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | over one million users, providing access to their spend data. Now moving on to Visa Direct. We continued to grow our transactions through expanded and new relationships. Over the past year, total Visa Direct cross-border P2P transactions have nearly doubled, with Europe and CEMEA being the largest regions. In CEMEA, we are very excited to have renewed our Visa Direct relationship with fintech Monobank in addition to renewing their consumer and commercial credit, debit, and prepaid portfolios. In Asia Pacific, we are partnering with China Zhongsheng Bank on cross-border capabilities, including Visa Direct and Currencycloud, allowing the bank to support cross-border payments for their merchant clients. Canadian fintech Nuvei has extended its agreement with us for Visa Direct across all cross-border use cases in more than 30 countries for their merchant clients and recently became the first Visa Direct enabler in Colombia. We also executed our first global agreement with WorldRemit and Sendwave, enabling their customers to eventually send Visa Direct cross-border remittances from 50 countries to recipients in 130 countries. Quickly, a leading South Asian marketplace, has enabled Visa Direct cross-border remittance solutions for U.S. customers to send money to relatives and friends in India and the rest of South Asia. And in earned wage access, we reached an agreement with Weaver, a U.K.-based embedded finance provider. In addition to card issuance, they will be utilizing Visa Direct to enable Weaver's business clients to offer employee expense reimbursement, reward and recognition, and earned wage access. Earned wage access provider PayActiv, who serves 4,000 businesses has renewed its agreement with us and will enable Visa+ for payouts. Similarly, we expanded our relationship with enabler, Astra. In addition to domestic disbursements, Astra will now offer cross-border remittances, implement Visa+ to reach domestic wallets in the U.S., and expand to additional use cases, including payroll, earned wage access and |
7,472 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Visa+ to reach domestic wallets in the U.S., and expand to additional use cases, including payroll, earned wage access and marketplaces. Visa+ is still in the early stages but is fully rolled out and live for PayPal and Venmo users and more providers continue to join the platform. Wrapping up new flows, we also renewed an agreement with FIS, an important issuer processing partner to enable a suite of value-added services and new flows capabilities for their clients, including Visa Direct. And now on to value-added services, where revenue was up 23% in the third quarter in constant dollars. Let me highlight some of the progress we have made in driving adoption and growth among our value-added services portfolio. First in issuing solutions. One area of strong revenue growth this quarter was in card benefits, where we enable our clients to offer unique value propositions tailored to their customer base in travel, entertainment, restaurants, insurance and more. Strong issuance in premium cards across most of our regions has fueled this growth in the third quarter. For example, in Latin America, travel benefits have grown with over 370,000 unique visits to our Visa Infinite Airport Lounge in Brazil, representing customers from a number of leading issuers. In addition, since its launch in 2022, our Visa Infinite Fast Pass in Brazil, which allows cardholders to get through airport security more quickly, has screened over one million travelers. These are among the top five card benefits in Brazil and deliver value to customers, issuers and Visa. We continue to add more benefits like the recently launched partnership with OpenTable to offer eligible Visa cardholders access to coveted restaurant reservations and experiences in the U.S., with plans to expand into Canada and Mexico. In Acceptance Solutions, third quarter growth was driven by increasing utilization across both token and e-commerce-related services. In e-commerce, one such example is with iFood, the largest food delivery platform in Brazil who is utilizing |
7,473 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | services. In e-commerce, one such example is with iFood, the largest food delivery platform in Brazil who is utilizing our Verifi solution to help prevent disputes before they become chargebacks. In addition, they will be using our authentication solutions. In Risk & Identity Solutions, we continued to see strong adoption by new and existing clients, driven in part by growth in card-not-present transactions. In North America, acquirer Worldpay will be expanding their use of our authentication solutions from CardinalCommerce, fostering collaboration and real-time enhanced data exchange between Worldpay merchants and issuers during card-not-present transactions, reducing fraud and allowing more transactions to be properly authenticated and authorized securely. We are also pleased that the pilot of our account-to-account risk scoring solution Visa Protect with Pay.UK has had great results, showing an average 40% uplift in fraud detection over the 3-month pilot period. In addition, we are now launching Visa Protect in Argentina with a core payments technology company, Celsa after successfully piloting the solution there as well. The last two value-added services are open banking and advisory services. We continue to sign new partners with Tink in Europe and the U.S. And as I mentioned earlier, we continue to see strong growth in client demand for our consulting and marketing services, particularly around marquee events such as the Olympic and Paralympic Games. Our value-added services portfolio solutions is strong and is driving meaningful growth for our clients and for Visa. Before I close, I wanted to speak to the fact that the settlement reached for the injunctive relief class was rejected by the court. We are, of course, disappointed with this decision. We believe that the prior settlement provided meaningful relief to all merchants and we will continue to work towards another settlement. To close, so far this fiscal year, we have seen strong revenue and EPS growth as a result of relatively stable volume and |
7,474 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | To close, so far this fiscal year, we have seen strong revenue and EPS growth as a result of relatively stable volume and transaction growth. I remain very excited about the opportunity that lies ahead of us. At Visa, we come to work in service of our clients and partners and are focused on building and deploying the best solutions possible across consumer payments, new flows, and value-added services. Now over to Chris. |
7,475 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Chris Suh: Thanks, Ryan. Good afternoon, everyone. In Q3, we had another strong quarter with relatively stable growth across payments volume, cross-border volume, and processed transactions when compared to Q2, adjusted for leap year. In constant dollars, global payments volume was up 7% year-over-year and cross-border volumes, excluding intra-Europe, was up 14% year-over-year. Processed transactions grew 10% year-over-year. Fiscal third quarter net revenue was up 10% in both GAAP and constant dollars, in line with our expectations. EPS was up 12% year-over-year and 13% in constant dollars. Now let's go into the details. In the U.S., payment volumes growth numbers were generally in line with Q2 adjusted for leap year, with total Q3 payments volume growing 5% year-over-year, with credit and debit also growing 5%. Card-present volume grew 2% and card-not-present volume grew 7%. In the U.S., while growth in the high spend consumer segment remained stable compared to prior quarters, we saw a slight moderation in the lower spend consumer segment. Moving to international markets. Total payments volume was up 10% in constant dollars, relatively stable with Q2 when adjusted for leap year. Payments volume growth rates were strong for the quarter in most major regions, with Latin America, CEMEA, and Europe ex U.K. each growing more than 16% in constant dollars. Asia Pacific payments volume slowed to less than 0.5 point of year-over-year growth in constant dollars for the quarter, driven primarily by the macroeconomic environment, most notably in Mainland China. Now to cross-border volume, which I will speak to today in constant dollars and excluding intra-Europe transactions. Total cross-border volume was up 14% in Q3, relatively stable to Q2 adjusted for leap year. Cross-border card-not-present volume growth, excluding travel and adjusted for cryptocurrency purchases, was in the mid-teens, helped by continued strength in retail. Cross-border travel volume growth was also up in the mid-teens or 157% indexed to 2019. This |
7,476 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | by continued strength in retail. Cross-border travel volume growth was also up in the mid-teens or 157% indexed to 2019. This quarter, we saw the inbound Asia Pacific Index improve nine points at a similar pace to Q2 to 151% of 2019. The improvement in Asia Pacific outbound travel, however, slowed from Q2 with the index increasing by less than one point to 125% of 2019. We continue to see the same primary drivers as last quarter with some additional pressure from macroeconomic conditions. Now let's review our third quarter financial results. I'll start with the revenue components. Service revenue grew 8% year-over-year versus the 8% growth in Q2 constant dollar payments volume, with revenue yield improving sequentially and versus last year due to improving utilization of card benefit. Data processing revenue grew 9% versus 10% processed transaction growth with the revenue yield generally in line sequentially and versus last year. International transaction revenue was up 9% versus the 14% increase in constant dollar cross-border volume, excluding intra-Europe, impacted by lapping higher currency volatility from last year. Volatility levels remain consistent on average to last quarter. Other revenue grew 31%, primarily driven by strong consulting and marketing services revenue related to the Olympics and, to a lesser extent, pricing. Client incentives grew 11%. Now on to our three growth engines. Consumer payments growth was driven by relatively stable payments volume, cross-border volume and processed transaction growth. New flows revenue grew 18% year-over-year in constant dollars. Visa Direct transactions grew 41% year-over-year, helped by growth in Latin America for interoperability among P2P apps. Commercial volumes rose 7% year-over-year in constant dollars. In Q3, value-added services revenue grew 23% in constant dollars to $2.2 billion, primarily driven by Issuing and Acceptance Solutions and Advisory Services. Operating expenses grew 14%, primarily due to increases in general and administrative personnel |
7,477 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | and Advisory Services. Operating expenses grew 14%, primarily due to increases in general and administrative personnel and marketing expenses, including spend related to the Olympics. FX was 0.5 point drag versus the 1.5 point benefit we expected. Pismo represented an approximately one point drag. Nonoperating income was $73 million. Our tax rate was 18.8% and EPS was $2.42, up 12% over last year, inclusive of an approximately 1.5 point drag from exchange rates and an approximately 0.5 point drag from Pismo. In Q3, we bought back approximately $4.8 billion in stock and distributed over $1 billion in dividends to our stockholders. At the end of June, we had $18.9 billion remaining in our buyback authorization. Now let's move to what we've seen so far in July through the 21st with volume growth in constant dollars. Cross-border is excluding intra-Europe. U.S. payments volume was up 4% with debit up 4% and credit up 3% year-over-year. The slight deceleration from Q3 does not appear to be from any one factor but likely a number of smaller factors such as weather, timing of promotional shopping events, and the technology outage, among others. Cross-border volume grew 13% year-over-year, below Q3 levels with travel-related volume growing slightly less, which continued to be impacted by Asia Pacific and card-not-present ex travel volume growing at similar levels to Q3. Processed transactions grew 9% year-over-year. Now on to our expectations. Remember that adjusted basis is defined as non-GAAP results in constant dollars and excludes acquisition impacts. You can review these disclosures in our earnings presentation for more detail. Let's start with the fourth quarter. We expect payments volume and processed transactions to grow at a similar rate to Q3. For total cross-border volume growth, we are expecting to end up slightly below Q3. Currency volatility continues to average around 4-year lows through July 21. And as such, we are making an adjustment to currency volatility expectations for Q4, now assuming volatility |
7,478 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | through July 21. And as such, we are making an adjustment to currency volatility expectations for Q4, now assuming volatility will stay in line with Q3 levels. Incentives are expected to be at their lowest growth rate all year. Pulling it all together, we expect adjusted net revenue growth in the low double digits, which equates to a slight improvement from the 10% adjusted revenue growth rate in the third quarter. We expect our Q4 adjusted operating expenses to grow in the high single digits. Nonoperating income is expected to be between $40 million and $50 million. The tax rate is expected to be between 19% and 19.5% in Q4, which puts Q4 adjusted EPS growth rate in the high end of low double digits. Moving to the full year. With three quarters now complete, our expectations for full year adjusted net revenue growth remains unchanged from what we shared at the start of the year. Whilst absorbing the impact of lower currency volatility and the macroeconomic challenges in Asia, which have affected volumes, we still expect to reach low double-digit adjusted net revenue growth for the full year. Full year adjusted operating expense growth will be in the high single digit to low double digits, reflecting the less favorable impact of FX. This keeps full year adjusted EPS growth in the low teens. In closing, we delivered strong results this quarter, with new flows and value added services revenue growing faster than consumer payments. We extended our existing relationships, one new clients and invested to develop innovative products and solutions, all positioning us for continued growth into the future. But now Jennifer, it's time for some Q&A. |
7,479 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Jennifer Como: Thanks Chris. And with that, we're ready to take questions.
Operator: [Operator Instructions] Our first question comes from Darrin Peller from Wolfe Research. Please go ahead.
Darrin Peller: Hi, thanks guys. Look, let me just start. The U.S. volume growth rate obviously is a bit softer. And if you could help us distill what you consider structural versus cyclical, I think that'd be a good place to start. But adding on to it really is, just the ability for you to grow double-digit revenue with only four, five, six, mid-single-digit U.S. volume growth is, coming from value added services. It's coming from cross border. Can you help us understand if that kind of trend, you believe the company has that capability to grow those rates on revenues, even in this context of U.S. volume trends? Thanks guys. |
7,480 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Chris Suh: Yes. Hi Darrin. So let me start with the U.S. Let me start with the first part of your question, and then we'll maybe get into zoom out and talk about maybe the longer question. So in the U.S. in Q3, we did see stable drivers relative to Q2, once you adjust for leap year. That's 5% payment volumes growth in the third quarter. In the 21 days since in July, that number did tick down to 4%. Maybe I'll just sort of give you the full arc of what we're seeing. So 4%, we'll just level set on those numbers, 4% in the 21 days versus 5% in Q3. And so for that, we did stare at a lot of the drivers, the factors that impacted those three weeks. And there was a lot going on and I referenced a few of them on the call and maybe I'll expand on those a bit. First, we had a major hurricane, Hurricane Beryl, and it impacted Texas and other parts of the U.S. nearby. The second, I referenced the timing of promotional e-commerce events. Maybe I can expand on that a little bit. The timing this year was later and then e-commerce customers are billed, when the goods are shipped. And so, some of that shipping periods fell out of that 21 period. So we had a little bit of difference in the 21 day period, to the comparable year ago. And third, obviously the major tech outage that happened at the end of last week, that also had some impact. So, when we look at that, no single factor drove that one point of change from Q3, to the first part of July. But all things considered, we actually feel pretty good about the three week results. Now the second part of your question really was around sort of the low double-digits in the context of cross-border, VAS and CMS. I'll sort of back into the question. We've had consistent strong performance in VAS, over $2 billion of revenue, over 20% growth for many quarters consecutively. And we're seeing strength across the business in issuing solutions and acceptance and advisory. That's a business that we feel great about the momentum in. With our new flows business, 18% growth, as Ryan talked |
7,481 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | advisory. That's a business that we feel great about the momentum in. With our new flows business, 18% growth, as Ryan talked about, in the quarter, that's the second quarter in a row, where we're seeing growth in the teens, great execution, stable volumes, and visa direct transactions growing at a high level. As you know, that business also, quarter-to-quarter, can vary a little bit in the growth rates, as we saw in the first half of the year. But all in all, feel really good about the continued strength in that business. And then cross-border, well, cross-border, maybe I'll just zoom out a little bit and talk about cross-border and what we've seen over the course of time. If you recall, pre-pandemic, cross-border grew, travel grew in the high single-digits to low double-digits. And e-commerce, which was about a third of the business, grew into the teens, sometimes into the mid-teens. Obviously, the pandemic happened, travel really contracted, e-commerce grew faster. And since then, now post-pandemic, what we're seeing now is that e-commerce is roughly 40% of the business. And the growth rate has normalized. It's stabilized back to pre-pandemic levels. And so let's say, teens growth on e-commerce on 40% of the cross-border business. Travel after the post-pandemic run-up has normalized. It's a little hard to tell exactly where it's going to stabilize at, but we've seen high growth. We've seen it continue to normalize. But what we do know structurally, is that with e-commerce being a bigger portion of the business, that's a tail into the total cross-border growth. And so, we are confident that that will continue to be healthy relative to the domestic spend. I'll pause there and certainly if there's anything else to add, Ryan, or others, please jump in. |
7,482 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Ryan McInerney: No, nothing to add from me, Chris. Thanks, Darrin.
Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of Andrew Jeffrey from William Blair. Please go ahead.
Andrew Jeffrey: Hi. Good afternoon. Appreciate you taking the question. Very impressive value-added services growth this quarter at 23%. And I think as you mentioned, Chris, it's approaching 25% of total revenue, so perhaps driving more than half your consolidated revenue growth. Can you talk a little bit about at what point we might expect value-added services to sort of bend up the growth curve of Visa consolidated? |
7,483 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Ryan McInerney: It's Ryan, Andrew. Thanks for the question. And yes, we're very excited about not only what we delivered, in terms of value-added services growth for the quarter. What we've been delivering consistently for several years now, since we shared with you all the strategy, and kind of became very purposeful about our go-to-market approach. I mean, you go back to I think it was 2021, we did about $5 billion in revenue, 2022, $6 billion. Last year was $7 billion. Like you said, we did $2.2 billion this quarter, up 23%. So I think what we've shown, is that we have delivered consistent growth quarter-after-quarter, and year-after-year in these businesses. And we're super optimistic about where we go from here. I mean, we think about the opportunities really in three different segments. The first is, we have a series of value-added services, some of which Chris outlined in his previous answer that, are very focused on enhancing value for Visa transactions. Risk products like Visa Secure, dispute tools like Visa Resolve Online, card benefits, like I mentioned in my prepared remarks. And we've - that has historically been the largest part of our value-added services business. And we've shown that we can drive great growth in that area. Increasingly, we're building out a set of services that add value for non-Visa transactions. We've done some things in this space before. Some of our platforms like CyberSource, Authorize.Net, Verifi. But then you've heard me talk in the last couple of quarters about expanding our risk capabilities. For example, to not just other card networks, but also to RFCP and account-to-account services. And I mentioned the great results we've had in both the U.K. and in Argentina on that front. And then the third area of opportunity for us, is expanding our value-added services beyond payments. Historically, we've had things like Visa Consulting and Analytics and our marketing services And some of the open banking services delivered by Tink, but we're continuing to build out a portfolio |
7,484 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | our marketing services And some of the open banking services delivered by Tink, but we're continuing to build out a portfolio of value-added services, for our clients and partners beyond payments things like the cyber protection capabilities that we've been bringing to market. So, we've demonstrated consistent growth. We believe we'll be able to continue to demonstrate consistent growth. We've got a product pipeline, and a go-to-market approach all over the world with a diverse set of clients, and we feel good about the opportunity. |
7,485 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of Bryan Keane from Deutsche Bank. Please go ahead.
Bryan Keane: Hi guys, good afternoon. Chris, just want to ask about incentives, being the lowest expectation will be for the fourth quarter. Can you just talk a little bit about how much of that is volume-driven, versus the amount of renewals you're seeing? And just trying to think about, as we head into next fiscal year, just what kind of growth or sustainable growth should we think about for incentives? Thanks.
Chris Suh: Thanks for the question. I'll even take us back a little bit about the expectations that, we had for incentives coming into the fiscal year. As we ended fiscal '23, that was a high year for us in terms of volume of renewals, a little higher than our typical sort of normal cadence. That did impact how we thought about the incentive volumes in FY '24. And even last year, we had sort of a different growth rate in the first half and the second half of the year. And so as we looked across this year, we had a slightly lower volume of renewals this year. Obviously, year-to-date incentives have played out slightly differently, largely due to client performance, deal timing, things like that. And overall, it's been better than, as it's been lower, I guess, than what we anticipated. When we go into Q4, sort of the same trend applies. We still expect Q4 to benefit from the lapping of the high incentives that, we saw in the second half of last year, which informs, again, the growth rate that we anticipate in Q4. We don't have a lot to share about FY 2025 at this point, but we'll share plenty in the next earnings call.
Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of Ken Suchoski from Autonomous Research. Please go ahead. |
7,486 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Operator: Next, we'll go to the line of Ken Suchoski from Autonomous Research. Please go ahead.
Ken Suchoski: Hi, good afternoon. Thanks for taking the question. I wanted to ask about VAS and I think the team has talked about, how some of the VAS revenue is correlated with transaction growth. But you also have parts of that business that are more recurring, or less recurring in nature. So can you just help us understand how, you think about the cyclicality of VAS, and how that business might perform in a lower volume growth environment? And I also think the team has talked about pricing, for value in VAS. So how much more room is left to go there? And how does that help with the resiliency of the business? Thank you. |
7,487 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Ryan McInerney: Yes Ken, it's Ryan. On the second part of your question, our ability to price for value is a function of the value that we bring to the market, and we feel great about the value that we're bringing to the market. And I think you see it in our results. Across the various different areas of issuing solutions, Acceptance Solutions, Risk & Identity Solutions, Advisory. I mean, we just continue to bring products and services that are ultimately, helping our clients grow their business, helping our clients reduce fraud, grow authorizations, those types of things. And we believe we'll continue to do that, and we believe we'll be able to continue to price for value. As I think I was saying earlier, there is - the biggest portion of our value-added services, are a function of Visa transactions. And so obviously, Visa transactions, as they go up or down, have an impact on that, but so does our ability to sell more services. On previous calls, I've talked about the fact that we still have the majority of our clients that have yet to have the type of penetration and depth that, we've been able to achieve with others. So, as we continue to penetrate our clients, all around the world in the various markets that we deliver, as I was saying earlier, to the earlier question, I'm very optimistic about our ability to continue to grow this business as we have.
Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of Tien-Tsin Huang from JPMorgan. Please go ahead.
Tien-Tsin Huang: Hi, thanks, good afternoon. Just curious if you're - if you've updated your U.S. outlook here in the second half, are you still expecting transaction sizes to accelerate in the U.S., especially in the fourth quarter? |
7,488 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Chris Suh: Hi, Tien-Tsin. Thanks for the question. Yes, we had forecasted ATS, as you know, growth to improve throughout the pace of this year from quarter-to-quarter, and we did see that. We saw ATS improve in the third quarter. Specifically in the U.S., ATS was slightly better in Q3 than in Q2. It got to basically flat year-over-year in Q3. We saw improvement in a number of categories, sequentially, restaurant, QSR fuel, telecom, utilities, insurance, to name a few. And we do anticipate in Q4 that we'll continue to see, slight improvement sequentially again. The one thing - the one watch out I'll call out is the fuel prices could impact that trajectory and so, we'll watch that closely. So yes, it is playing out as we anticipated. The pace is slightly varied from what we anticipated, but it is continuing to improve. And I think that's the important thing.
Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of Gus Gala from Monness, Crespi, Hardt. Please go ahead.
Gus Gala: Hi, guys. Thank you. Can we talk a little bit about the contactless payments penetration? Can you maybe highlight maybe what the gap is in penetration rates, across maybe some of your older cardholders or young cardholders? Just trying to get around to what a terminal level of penetration could look like? Thanks.
Ryan McInerney: You're asking - just so I heard, you're asking about Tap to Pay?
Gus Gala: Yes. |
7,489 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Ryan McInerney: You're asking - just so I heard, you're asking about Tap to Pay?
Gus Gala: Yes.
Ryan McInerney: I mean, yes, maybe just back up first in the big picture of things. The fact that outside of the United States, eight out of 10 of all the Visa face-to-face transactions around the entire planet are Tap to Pay now, I mean, that just tells you right there that it's all segments, all demographics, all use cases, all product types. I mean, we're at 80% overall around the world. We've got, I think, more than 55 countries that are now more than 90% contactless penetration. So increasingly, in most countries for most customers, for most products all around the world, that's just the default way that people are paying. And in the U.S., the curve is maturing exactly how we'd expect it based on what we've seen in 100-plus countries all around the world. As I said in my prepared remarks, now one out of every two transactions in the U.S. are taps. In a place like New York City, where many of you on the call spend time, we're above 75% now. So in New York City, where - which is one of the early adopters of transit, we're above, I think, 75%-plus of all face-to-face transactions. That's up from just 50% two years ago. So again, at that level of penetration in a market the size of New York City, it's across the board in terms of products and issuers, and segments and the like. So, I think as we continue to see this growth happen, buyers, sellers, they love tapping as a way to pay. And we're going to continue to see that growth accelerate in a place like the U.S.
Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of Will Nance from Goldman Sachs. Please go ahead. |
7,490 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of Will Nance from Goldman Sachs. Please go ahead.
Will Nance: Hi, guys. Thanks for taking the question. We've been getting a lot of questions around the litigation updates, and I totally understand the level of uncertainty is a lot higher now. But I guess the most common investor question that we're getting is, around the potential impacts to the overall ecosystem, if we see a much greater reduction in interchange rates from what was proposed. And I guess specifically how the production and interchange rates, could reverberate through renewal negotiations with issuers, and then longer term, how this may impact the trajectory of incentives and net yields. So just wondering if we could hear kind of your perspective, about the potential reduction, or a larger reduction in the overall size of sort of ecosystem revenue, and if that changes the direction of any of the key indicators that we're focused on over time? Thanks.
Ryan McInerney: Hi, Will. Thanks for the question. And you're asking about the MDL litigation. I guess I'll just back up. The first thing I would say is we strongly disagree with the judge's decision. We believe the settlement was fair. We believe the settlement provided meaningful relief to all merchants. The second thing, I would say is the decision failed to take into consideration a number of things, especially the complex multisided ecosystem that we operate in. The role that - the complicated role that many different players in the ecosystem delivered. So, but having said that, we're pursuing a revised settlement. It's too early to speculate on what that settlement is. So I just - I won't do that today. But I would ask everybody to keep in mind, a settlement can occur at any point before, during, or even after the trial. So just keep that in mind as the process plays out.
Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of Timothy Chiodo from UBS. Please go ahead. |
7,491 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of Timothy Chiodo from UBS. Please go ahead.
Timothy Chiodo: Hi. Thanks for taking the question. I want to hit on that at the same time tackles, both incentives and value-added services revenue. So it's the concept of value in-kind incentives. I was hoping you could talk a little bit about whether or not, these are becoming more prominent, meaning you're using them a little bit more in discussions with issuers. And then, if you could just briefly recap some of the mechanics around the revenue recognition, the contra revenue, the addition to deferred revenue. And then eventually, the value-added services revenue? Thanks a lot.
Ryan McInerney: Yes. I'll just give you the high level on this. The value in-kind is a great way for us to, as it says, to deliver value to our clients. And increasingly, our clients, as you see in our performance are preferring to buy our value-added services, versus just take incentives that might drop to the bottom line. So that is absolutely something that, our clients are asking for more of. It's something that is helping our clients grow their businesses. And I talked earlier about just the last several years about our product pipeline, how we've gone to market, how we built new products to solutions and services for our clients. And that's what's driving the demand. So that's kind of become a more important part of our client renewals and our client renewal discussions. And increasingly value-added services are becoming a way for us to differentiate ourselves with our clients, and grow our consumer payments business. Do you want to talk about the organics? |
7,492 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Chris Suh: Tim, to the second part of your question, maybe I'll just give you a high-level summary. I think you have sort of the pieces you called out. At a high level, when value in-kind is offered in lieu of a cash incentive, it can - it would be recognized as a contra revenue at the time that it's granted or earned, depending on the nature of the contract. And then on the other side, when the client is able to utilize that value in-kind for services from Visa, commonly in our value-added services business, that's then recognized as revenue and the associated costs are also recognized in our P&L.
Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of James Faucette from Morgan Stanley. Please go ahead.
James Faucette: Great. Thank you very much. I wanted to just ask a follow-up question on near-term trends. We've seen a little bit of further slowing in credit than in debit over the last couple of months, and in the past has been a little bit of an indication of consumer stress. And I'm just wondering how you're thinking about that. And it seems like you're looking for the rest of the September quarter that, there's a little bit of a re-acceleration, as we get past some of the issues that you identified in July. Just want to make sure that I'm understanding that correctly, and kind of how we should interpret a little bit of the divergence in credit and debit growth right now? Thanks.
Ryan McInerney: Let me just give a little context on it and then Chris, feel free to add or correct. Like Chris said, we're three weeks into the quarter. We had a hurricane. We had a tech outage across the country. We had a number of things happen. So, we're not kind of taking three weeks as a trend. We'll see kind of how things progress from here, in just terms kind of what happens for the rest of the quarter. I don't know if you want to talk about the credit-debit divergence. |
7,493 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Chris Suh: Yes. Well, I think I'll refer back to a little bit of a comment that we made, and we're seeing the July results. I also commented on the call that we are seeing a little bit of moderation in what I would call the lower spend band cohorts. And I think that's a little bit correlated, to some of the volume numbers that we're seeing in the quarter, related to credit versus debit. But all in all, when we look at it relative to, again, Q2 and Q3, we see it to be relatively stable once you factor in sort of the days mix with the leap year.
Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of Bryan Bergin from TD Cowen. Please go ahead.
Bryan Bergin: Hi, good afternoon. Thank you. Wanted to ask on new flows here. So you had a nice acceleration in growth really over the last two quarters on consistent comps. Can you add more color on the particular areas of strength that have picked up? I know Visa Direct was one of those. I'm just curious if you think you could sustain that level of expansion, or may that moderate a bit? |
7,494 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Chris Suh: Yes. Thanks for the question. 18% growth, as I mentioned, feel really good about the execution and the momentum in the business. It is an enormous opportunity that we have in front of us, across both our commercial business and money movement with Visa Direct. I think you're familiar with the numbers, 41% growth in the transactions and stable commercial volumes as well. I think what - this acceleration that you're referring to, we had a unique situation in Q1 where we had some onetime items that really kind of depressed the growth, reported growth in Q1. And if you look at the last couple of quarters, it's more reflective, I think, of the underlying health in the business. That said, as we saw in Q1, that growth rate can vary from quarter-to-quarter, based on deal timing and terms and one-time items like the one that impacted Q1. And so overall, I'd say at the macro level, good momentum. The underlying business is healthy, and we're continuing to see that level of growth. And the growth rate should be healthier, and should continue to grow faster than consumer payments, with some normal expected variability quarter-to-quarter. |
7,495 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Ryan McInerney: And just to build on Chris' points, I think we're in the very early stages of Visa Direct growth. We spent many, many years investing and building the platform, the infrastructure, the connectivity, domestic cross-border, working with issuers and acquirers and processors. And now we're able to be out there selling all around the world, finding new use cases, some of which I highlighted in my prepared remarks. You go back to 2019, we did 2 billion Visa Direct transactions. We did 2.6 billion transactions this quarter. So this is just another great example of, when we go and we systematically identify the need in the market, we spend the time, we build the infrastructure. We build 8.5 billion end points, the connectivity, the reliability, the security, the fraud capabilities. I just think we're in the very early stages of what we're going to see, in terms of the growth of this business and the number of use cases and partners, many of which I highlighted in my prepared remarks that, are going to want to build their use cases on this platform.
Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of Sanjay Sakhrani from KBW. Please go ahead.
Sanjay Sakhrani: Thank you. I guess most of my questions have been asked and answered. But just on that last point, Ryan, you were making, I'm just wondering, where are we in the evolution of yield there? Can those go higher as you continue to expand in some of those categories with Visa Direct? And then just in terms of Reg II, is the full impact of Reg II now in the run rate, or should we expect there be any uncertainties related to that? Thank you. |
7,496 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Ryan McInerney: Yes. I'll take both of them. On the first one, we're still in the early evolution of the use cases. I mean, we weren't even talking about earned wage access a couple of years ago, Sanjay. And so as we've got - I think we've got 65 or so use cases now on the platform, our teams are finding new use cases all the time. So I think we're continuing to see the evolution of all of that and the economics of all that will play out. What I would point you back to, is what I mentioned in my prepared remarks, the tremendous success we're having in cross-border. We've had great success in selling new use cases, and driving cross-border transaction growth in Visa Direct. As you know, the yields are higher in cross-border, given the value that we add. So again, feel good about all of that. Listen, I want to just emphasize in terms of Reg II, the e-commerce debit market is a very competitive market, and is going to be competitive for as far as we can see. So while Chris noted, I think noted that the impact has remained the same, we haven't seen any change in impact, and I don't - and we're not expecting any change in impact for the fourth quarter. It is a competitive business. We are out there with clients day in and day out, helping them understand the benefits of processing transactions on Visa. And there are a lot of them, which is why we feel good so far in the evolution of Reg II, about how we've been able to grow that business. We feel great about the capabilities that a Visa data transaction offers, many of which I've talked about on these calls in the past. So we're out there, we're competing, we're selling, we're delivering our products, and we feel good about our win rate.
Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of Jason Kupferberg from Bank of America. Please go ahead. |
7,497 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Operator: Next, we'll go to the line of Jason Kupferberg from Bank of America. Please go ahead.
Jason Kupferberg: Thanks guys. So just a clarification on revenue, and then a question on volumes for this fiscal year. So it sounds like for Q4, you're looking for revenue growth of, call it, 11% to 12%. I think that would put you at the low end of the low double-digit guide, you're maintaining for the year. So that's what I wanted to clarify. And then just a question on volumes. I think you said Q4 should be in line with Q3, which I think would bring the full year to around 7%, versus the high single-digit updated guide last quarter. So just as we start to tune our models for next year, what are some of the potential accelerants off that 7% level we should be considering? |
7,498 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Chris Suh: Hi, Jason, let's unpack that. You had a couple of things in there, and I just want to - I think this is important, so we'll just be super clear. For Q4, my guidance, our guidance for our Q4 adjusted net revenue would be low double-digits. And sort of the directional guidance I also gave is it would be slightly above the Q3 level that we reported, which was the 10% growth in the quarter. And so sort of take that - take those two points and I would triangulate around that. And that would still get you sort of to the math of the low end of low double-digits, as you called it, for the full year. The second point was on drivers from Q3 to Q4. I did say that payment volume, payment transactions, we anticipate Q4 to be consistent with Q3. The one exception to that is in cross-border, where I did say it'd be slightly below the Q3 levels. And that really is based on the travel circumstances and situation in Asia that we've talked about extensively, with outbound travel in Asia, in particular, being impacted and recovering slower than we anticipated at the beginning of the year. And so, those are the two variables in terms of the - to get the Q4 guidance consistent with the intent - that I communicated. And then as far as FY '25 goes, we're at the beginning end of planning, and as we always do, we'll share our expectations on '25 at the end of Q4.
Jennifer Como: Next question, please.
Operator: Next, we'll go to the line of Dan Perlin from RBC Capital Markets. Please go ahead. |
7,499 | V | 3 | 2,024 | 2024-07-23 17:00:00 | Visa Inc. | 38,043,467 | Operator: Next, we'll go to the line of Dan Perlin from RBC Capital Markets. Please go ahead.
Dan Perlin: Thanks. I guess more of a big picture question here, Ryan. So your AI and gen AI investment, you've talked about, I think at conferences, your desire to kind of build out your own large language model. So I'm wondering, one, where do those investments stand today? I guess, two, what would be your expectation for early use cases of those investments, and kind of the payback period? And then three, is there an opportunity to drive, like true incremental sales, or better outcomes for your merchant constituents as opposed to just the banks? Thanks.
Ryan McInerney: Yes. Hi, Dan, thanks for the question on AI. First of all, to frame it is, we are all in on gen AI at Visa as we've been all in on predictive AI, for more than a decade. We're applying it in two broad-based different ways. One is, sort of adopting across the company to drive productivity, and we're seeing real results there. We're seeing great results, great adoption, great productivity increases from technology, to accounting to sales all across the company. The second is applying generative AI to enhance the entire payment ecosystem. And to the latter part of your question, absolutely. I guess I'd give you one set of examples or some of the risk tools and capabilities that we've been deploying in the market. I mentioned the risk products that we're using on RTP and account-to-account payments. That is an opportunity to reduce fraud, both for merchants and for issuers. I think I mentioned on a previous call, we have our Visa Provisioning Intelligence Service, which is using artificial intelligence to help predict token provisioning fraud before it happens. That also is a benefit to both issuers and merchants. And the list goes on. So, we are very optimistic about the positive impact that generative AI can have, not just on our own productivity, but on our ability to help drive increased sales and lower fraud across the ecosystem. |
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