Visa Inc. (V)

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Visa, Inc. (V)

F2Q09 Earnings Call

April 29, 2009 5:00 pm ET

Executives

Jack Carsky – Head Global Investor Relations

Joseph W. Saunders - Chairman of the Board & Chief Executive Officer

Byron H. Pollitt, Jr. - Chief Financial Officer

Analysts

Jason Kupferberg – UBS Securities

Julio Quinteros, Jr. - Goldman Sachs & Co.

James Kissane - Banc of America Securities

Craig Maurer – Calyon Securities

Tien-Tsin Huang – J.P. Morgan

Donald Fendetti – Citigroup

Christopher Brendler - Stifel Nicolaus & Company, Inc.

John Williams – Macquarie

Sanjay Sakhrani - Keefe, Bruyette and Woods

Bob Napoli - Piper Jaffray

Dan Perlin – RBC Capital Markets

Presentation

Operator

Welcome to Visa Inc.’s fiscal second quarter 2009 earnings conference call. All participants are in a listen only mode until the question-and-answer session. Today’s conference is being recorded. If you have any objections you may disconnect at this time. I would now like to turn the conference over to your host, Mr. Jack Carsky, Head of Global Investor Relations. Mr. Carsky, you may begin.

Jack Carsky

Good afternoon and welcome to Visa Inc.’s fiscal second quarter 2009 earnings conference call. With us today are Joe Saunders, Visa’s Chairman and Chief Executive Officer and Byron Pollitt, Visa’s Chief Financial Officer. This call is currently being web cast live over the Internet. It can be accessed on the Investor Relations section of our website at www.InvestorVisa.com. A replay of the web cast will also be archived on our site for 30 days. A PowerPoint deck containing highlights of today’s commentary was posted to our website prior to this call.

Let me also remind you that this presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. By their nature forward-looking statements are not guarantees of future performance and as a result of a variety of factors actual results could differ materially from such statements. Additional information concerning these factors is available in the company’s filings with the SEC which can be accessed through their website and the Investor Relations section of the Visa website.

For historical non-GAAP or pro forma related financial information disclosed in this call the related GAAP measures and other information required by Regulation G of the SEC are available in the financial and statistical summary accompanying our fiscal second quarter earnings press release. This release can also be accessed through the Investor Relations section of our website.

With that, I’ll turn over the call to Joe.

Joseph Saunders

Thanks Jack. Thanks to all of you for joining us this afternoon. To begin with I am very pleased to report that our fiscal second quarter results were consistent with the guidance and expectations we provided in our last quarter’s earnings call. Despite the challenging global economy, Visa delivered strong operational and financial performance benefiting from its diverse product set, our intense focus on expense management and the underlying worldwide secular shift from cash and checks to electronic forms of payment which continues unabated.

Our operating net revenues in the second quarter were over $1.6 billion, an increase over 13% over the year-ago period and right in line with our guidance this quarter. Our adjusted operating margin of 55% which benefited from our ongoing efficiency drive was solid as well and exceeded our stated full-year guidance of the mid to high 40% range.

Finally, adjusted second quarter net income of $553 million was 38% greater than the year-ago period. Looking forward from a macro standpoint the world economy continues to slow and while Visa is resilient it is not immune. Aggregate payment volume growth in our international regions in the December quarter were a positive mid double digit rate and preliminary volume trends through March suggest only a modest decline since then.

This of course will be reflected in our fiscal third quarter service revenues.

There continues to be regional bright spots around the globe where the trends are holding up even more substantially. In the U.S. specifically, payment growth declined to approximately a 1% negative rate to the December quarter and we saw little change through the March quarter. We are encouraged that in aggregate over the five month period through April we have seen some stabilization in U.S. payment volumes.

Of course the more than 30% rate of decline in the year-over-year price of gasoline has resulted in difficult year-over-year comparables which will continue for the next few months before finally abating as we move into fiscal 2010. Importantly, all of the results we have achieved today are in spite of foreign currency headwinds which we also expect to abate by the beginning of fiscal 2010.

The underlying resilience of our business was evident from the contribution of debit credits in the U.S. which Visa pioneered in the mid 1990’s. Debit in the U.S. posted growth in each month of the March quarter as well as through the month of April. The continued strength of debt is attributable in part to that product’s strong correlation with non-discretionary spending categories which are holding up relatively well in the face of a tough economy.

In fact, in the quarter ended in December for the first time in Visa’s history the U.S. debit payment volumes eclipsed that of credit, an important milestone in the history of our business and a testament to the diversity of our product. Process transaction growth was resilient as well, posting gains of 6% through the end of March with even better performance through this point in the month of April.

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