Visa Inc. (NYSE:V) Q1 2023 Earnings Call Transcript

Visa Inc. (NYSE:V) Q1 2023 Earnings Call Transcript January 26, 2023

Visa Inc. beats earnings expectations. Reported EPS is $2.18, expectations were $2.01.

Operator: Welcome to Visa’s Fiscal First Quarter 2023 Earnings Conference Call. 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: Thanks, Jordin. Good afternoon, everyone, and welcome to Visa’s fiscal first quarter 2023 earnings call. Joining us today are Al Kelly, Visa’s Chairman and Chief Executive Officer; Vasant Prabhu, Visa’s Vice Chair and Chief Financial Officer; and Ryan McInerney, who will become the Chief Executive Officer of Visa next week. 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 the result of many factors.

Additional information concerning those factors is available in our most recent reports on Form 10-K, which you can find on the SEC’s website and the Investor Relations section of our website. For non-GAAP financial information disclosed in this call, the related GAAP measures and reconciliation are available in today’s earnings release. And with that, let me turn the call over to Al.

Al Kelly: Jennifer, thank you, and good afternoon, everybody, and thank you for joining us. Visa’s performance in the first quarter of 2023 reflects stable domestic volumes and transactions and a continued recovery of cross-border travel. Total Q1 payments volume was up 7% year-over-year or 135% versus three years ago, flat with Q4. Excluding Russia and China, payments volume was up 12% or 146% of 2019. U.S. Q1 payments volume was up 9% year-over-year or 144% of 2019, down 1 point from Q4. International volume, excluding Russia and China, was up 15% or 147% of 2019, up 1 point from Q4. Q1 cross-border volumes, excluding intra-Europe, grew 31% year-over-year and 132% versus three years ago, up 5 points from Q4. Excluding Russia, cross-border year-over-year growth was higher by 4 points.

Travel-related cross-border volumes rose 6 points from 112% of 2019 in Q4 to 118% in Q1, driven by Asia Pacific, helped by China lifting restrictions, continued modest improvements inbound into the United States and CEMEA benefiting from the FIFA World Cup. Processed transactions were up 10% year-over-year or 139% versus 2019, and we processed 571 million transactions a day during the quarter. Although first quarter net revenues grew — altogether, I should say, first quarter net revenues grew 12% year-over-year and non-GAAP EPS was $2.18, up 21%. In each of our growth levers, consumer payments, new flows and value-added services, we saw strong revenue growth. In our consumer payments business, we made significant progress this quarter through large deals with traditional issuers and co-brands.

And with the pandemic largely behind us, we saw many businesses focused on payments through Visa’s new flows capabilities. In addition, we continue to develop and expand our global value-added services globally. Now let me explore each of these growth areas. In consumer payments, credentials grew 8% overall, 11% excluding Russia, with strong double-digit growth in the United States, India and Brazil. Tap-to-pay penetration of face-to-face transactions globally was 72%, excluding Russia and the United States. In the United States, we surpassed a notable 30%, with San Jose, San Francisco and New York City all above 50%. U.S. drugstores went above 40% for the first time in the United States, and nearly 65% of Costco’s face-to-face credit transactions were made with a tap.

In the United States, we had several important renewals. First, we renewed our partnership with Bank of America in the United States, maintaining our current debit and credit business, including their cash rewards, travel rewards, premium rewards and newly launched Premium Rewards Elite consumer credit cards. We’re excited to continue to invest together in the growth of our joint business and to innovate with Bank of America to deliver enhanced capabilities and improved experiences for their customers. Second, we renewed with Commerce Bank, a top 25 Visa U.S. issuer across their consumer and commercial portfolios. Finally, we also renewed our agreement with Capital One. In Australia, we renewed our agreement with the country’s largest independent payment solutions provider, Costco, with over 4 million cardholders for debit and prepaid and also signed a new agreement for credit issuance.

Also in the region, we extended our exclusive relationship with Kiwibank, the largest New Zealand-owned bank. In Latin America, we renewed with ICBC Argentina, one of the largest issuers in the country, and with Banco do Brasil, one of the largest Visa issuers in the region. In addition, we entered into a new agreement with one of the largest banks in Panama, Banco Nacional de Panamá. Also in Latin America, we reached a new strategic deal with fintech platform, Tigo Money and parent company, Millicom, a leading provider of telecommunication services in the region. Visa and Millicom expect to offer Tigo Money’s more than 5 million wallet users the ability to digitize their cash in an easy and secure way, making purchases wherever Visa is accepted with the Visa-Tigo Money Access Card.

Another strategic fintech deal was with Niyo in India, a fast-growing cross-border focused neobank with 5 million customers. We’ve extended our relationship from debit into credit to grow cross-border spending with affluent as well as corporate customers. We’re also happy to share that we renewed and extended our global partnership with HSBC. Our agreement covers consumer and commercial and it will foster growth and digital acceleration. This deal also cuts across all of Visa’s five regions. As you know, Visa is the leader in travel co-brand globally, and I’m happy to report that we recently reached agreements with three important travel relationships. First, Qatar Airways’ Privilege Club, which today has a split portfolio across networks around the world, has signed a new 10-year exclusive partnership with Visa to enhance and expand its portfolio of co-branded payment initiatives with key financial partners across key markets worldwide.

This expanded partnership creates a new world of opportunities for our Visa customers and Privilege Club members to collect and spend Avios, the rewards currency of Privilege Club. Second, with Southwest Airlines in the United States, Visa will continue to be the exclusive payment network for their co-brand credit card issued by JPMorgan Chase. It represents one of the largest co-brand partnerships in the world. Third, with Star Alliance and HSBC in Australia, this is the world’s first credit card created with an airline alliance and is issued exclusively on Visa Credit. At the time of the launch, it brought together seven Star Alliance carriers in a single credit card platform. Also, we recently advanced our co-brand partnership with Flipkart, one of India’s leading digital commerce entities with a registered customer base of 450 million.

So whether it’s with traditional issuers or co-brand partners, we are continuing to position Visa well for the future. On to new flows, where this past quarter, new flows continued to grow with revenue up more than 20% in constant dollars led by strong growth in B2B payments volume and Visa Direct transactions. First, on the Visa Direct side, Visa Direct had 1.9 billion transactions in Q1, up 39% year-over-year, excluding Russia. We continue to grow globally. Non-U.S. Visa Direct transactions as a percentage of total transactions expanded nearly 20 points, excluding Russia, from Q1 ’21 to Q1 ’23. Building on the success of our remittance program with Standard Chartered Bank in Hong Kong, we recently launched Malaysia as an additional origination market spanning across six currency payers with more currencies to come.

We also continue to bring existing use cases to new markets. First, in Australia, Visa Direct is now enabling driver payouts with DoorDash. Second, we launched our inaugural P2P program in South Africa with FNB, one of the country’s largest banks to enable their 10 million active customers to move money within their mobile app using Visa Direct rails. Third, we launched our wallet cash payout program in Bangladesh with bKash. With this launch, the nearly 65 million bKash users can make wallet to money, bank transfers, 24/7 in near real time using Visa Direct. We are enabling several use cases, including seller payouts in the United States on Poshmark, a social media marketplace where more than 80 million registered users, and card top-offs with fintech, GoHenry.

As a follow-on to the issuance deal we announced last quarter with them, GoHenry is enabling its members to top up their child’s prepaid Visa card with Visa Direct first in the UK, with plans to expand this service across Europe in the future. In addition to Visa Direct, we had noteworthy developments in the B2B space this past quarter, where commercial payments volume grew 15% in constant dollars. In traditional issuance, we signed an agreement with Raiffeisen Bank for a new commercial credit partnership in addition to renewing customer — consumer credit across their 3 million clients in Austria. And in the United States, we renewed with UBS for consumer credit and debit as well as several business credit portfolios and Visa Spend Clarity for business.

Another issuing partnership was with Stone, one of the largest acquirers in Brazil focused on small businesses. Stone has recently become a Visa debit and credit issuer of cards that could be embedded digitally in its wallet. On the virtual card front, for accounts receivable and payable, we completed several agreements. First, Divvy, an expense management platform owned by BILL, has renewed its agreement to offer Visa virtual cards for small and midsized businesses in the United States as part of its expense and vendor payment solutions. Second, Viewpost converts U.S.-based B2B check payments to Visa virtual cards. And together, we are expanding card opportunities for issuers and corporates by offering a solution that can be deployed easily to every commercial business that still produces checks.

Third, we’ve reached an agreement with Plate IQ, a leading end-to-end accounts payable automation provider in the United States with direct integrations to accounting systems. Plate IQ will be offering a Visa virtual card solution to commercial partners across multiple industries including restaurants and hospitality, retail and accounting and bookkeeping, among others. Fourth, in our Asia Pacific region, SUNRATE, a global payment and treasury management platform has launched Visa virtual cards as part of its solution for more than 1,000 B2B clients, including global online travel agencies and small business customers. Fleet issuance continues to grow as well. This quarter, we issued — we signed with Zemo a European fleet and mobility solutions provider to issue Visa Open Loop fleet and fuel commercial cards as they expand from three European markets to 10.

In the United States, Highnote, a cloud-native card issuance and embedded finance platform, expanded its relationship with Visa with a five-year card issuance agreement across credit, debit, virtual solutions and fleet. In addition, Highnote became certified as a Visa Fleet card processor, which provides businesses with more specific product category level controls and more detailed and faster data for real-time decisions on new fleet and fuel card programs. B2B is an active space for fintechs and Visa continues to partner with new players to drive innovation for businesses. A recent example is Konfio, a fintech in Mexico that has already issued approximately 50,000 Visa small business cards and recently expanded its agreement to issue Visa Business Infinite cards.

In addition, they are positioned to grow acceptance in the market with their newly established acquiring business, Sr. Pago. Now moving to value-added services, which had about $1.7 billion in revenue this first quarter, up more than 20% in constant dollars. Remember that our focus for value-added services is threefold: one, to deepen client penetration of existing products; two, to build and launch new solutions; and three, to expand geographically. CyberSource is a great example on all three areas of focus. First, on deepening client penetration of existing products. CyberSource’s Decision Manager offering provides broad capabilities to existing CyberSource clients and has experienced strong growth throughout the pandemic, more than doubling transactions in the last three years.

In Q1, transactions utilizing Decision Manager grew in the low teens year-over-year, demonstrating the continued demand for this solution even as we enter a post-pandemic environment. Another area of growth we have mentioned is with acquirers who utilize CyberSource’s capabilities to offer them to their merchant clients. In Q1, we signed agreements with several acquirers for gateway services, including Elavon in North America. In Saudi Arabia, Saudi British Bank has announced its strategic partnership with our CyberSource Payment Gateway and Risk Platform to enhance the overall capabilities of SABB’s payment gateway with the aim of fostering the bank’s growth in an evolving and dynamic e-commerce space. On extended geographically, we’ve continued our efforts to strengthen our global presence.

Our non-U.S. CyberSource transactions have nearly quadrupled since the first quarter of 2019, and they now comprise the majority of our transactions, led in particular by the Asia Pacific region. CyberSource has also created new offerings. While historically, CyberSource has been an e-commerce capability, over the past few years, we have accelerated the product development of our card-present and omnichannel offerings, including with the acquisition of Payworks back in 2019. In the past quarter, we saw nearly 50% of year-over-year increase in card-present authorized CyberSource transactions. Other value-added services highlights this quarter include our innovative dispute capability through Verifi, which saw nearly 40% growth in cases processed this quarter as we expanded globally with more than 1/3 of our cases from outside North America.

This rapid dispute resolution solution automatically resolves disputes between merchants and issuers through the acquirer of rails, reduce the average time to resolve a dispute from 24 days to typically seconds. And Tink, our open banking platform continue to deepen and develop relationships across Europe. Tink recently signed a master agreement with BNP Paribas to be their main open banking and money movement services provider for millions of customers across Europe. Tink is already live with several businesses in the group. 3 million customers use Tink’s money management, data enrichment and transactions products at BNP Paribas Fortis in Belgium and BNL in Italy. Tink has also renewed and expanded its commitment with ABN AMRO to integrate Tink’s Money Manager and data enrichment products into the bank’s app for more than 3 million customers.

In conclusion, in the first quarter, Visa delivered very strong results and continue to effectively execute our growth strategy. Vasant will go into detail on our thoughts for the rest of the year, but I’d like to make a few other brief closing comments. We will continue to manage our business for the medium to long term, and we’ll invest in initiatives that are compelling and will provide future growth, all while being very mindful of the current environment. I continue to see a bright future for Visa as we look ahead to the rest of this year and beyond, and I believe we have the right strategy to continue to deliver great results. As we announced in November, effective February 1, 2023, I’ll be stepping down as CEO and assuming the full-time role as Executive Chairman.

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I’m exceedingly grateful to the Board and leadership of Visa, in addition to all of our passionate 26,500 employee colleagues who helped make this job so rewarding. I’m proud of all that we have accomplished together since I started in 2016. Ryan McInerney will become Visa’s CEO, and I cannot think of a finer leader to continue to position Visa at the center of money movement in increasingly innovative ways. I worked side-by-side with Ryan for almost 6.5 years. He knows our business, our clients and he is deeply respected by our employees. He and his team will do a great job, and I expect this transition to be totally seamless. With that in mind, and as Jennifer alluded to, I’ve asked Ryan to join the Q&A portion of our call today. But before that, let me hand it over to Vasant to provide financial highlights for the quarter and our thoughts on the second quarter and beyond.

Vasant Prabhu: Thank you, Al. Good afternoon, everyone. Our fiscal first quarter results reflect sustained growth in domestic spending and continued recovery in cross-border travel. Net revenues were up 12%, GAAP EPS up 8%, non-GAAP EPS was up 21%. The strong dollar dragged down reported net revenue growth by almost 3 points and non-GAAP EPS growth by approximately 3.5 points. Discontinuation of operations in Russia reduced net revenue growth by about 4.5 points. Adjusted for Russia, net revenues were up almost 20% in constant dollars. Net revenue growth exceeded our expectations as value-added services and new flows growth were very strong, currency volatility stayed high and client incentives were lower than anticipated. A few key highlights.

In constant dollars, global payments volume was up 7% year-over-year and 35% above 2019. Excluding China and adjusted for Russia, global payments volume was up 12% year-over-year and 46% higher than 2019. U.S. payments volume was up 9% year-over-year and 44% over 2019. In constant dollars, international payments volume, excluding China and Russia, was up 15% year-over-year and 47% above 2019. U.S. holiday spending growth was in the high single digits on a year-over-year basis and up more than 41% versus 2019. E-commerce maintained its share of retail spending versus last year, up over 5 points since 2019. Spending continues to smooth out over the holiday season with Black Friday and Cyber Monday still significant shopping days but less important post pandemic.

Holiday spending around the globe was generally consistent with U.S. trends. The cross-border travel recovery continues. However, as expected, the pace of recovery has moderated as most borders are now open, including Japan in October and now China in January. As a reminder, we saw a very sharp cross-border travel recovery in October and November of 2021, which we are lapping. Indexed to 2019, cross-border travel volume, excluding transactions within Europe, rose 6 points in the first quarter versus a 20-point gain in the third quarter of fiscal year ’22 and 10 points in the fourth quarter of fiscal year ’22. New plans — new flows and value-added services revenue sustained robust growth in excess of 20% in constant dollars. In the first quarter of fiscal year ’23, we bought back approximately $3.1 billion in stock at an average price of $198.74.

Contributions to the litigation escrow account, which have the same effect as a stock buyback, added another $350 million. We also distributed $945 million in dividends. Now on to the details. In the U.S., credit grew 10% year-over-year and 35% over 2019, lapping the credit recovery from last year, and as compared sequentially to last quarter, impacted by retail spending and fuel prices. U.S. debit grew 8%, up sequentially over last quarter. In level to 2019, debit grew 55% withstanding significantly above the pre-COVID trend line even as credit has recovered. U.S. card present spend grew 8% year-over-year, impacted by fuel prices and retail spend as compared sequentially to last quarter. U.S. card present spend was 26% above 2019. U.S. card not-present volume, excluding travel, grew 9% year-over-year and was 65% higher than 2019.

E-commerce spend remains well above the pre-COVID trend line even as card-present spending has recovered. On the international front in constant dollars, Latin America was up 25% year-over-year and 107% higher than 2019. Our CEMEA region, excluding Russia, grew 25% year-over-year and was 108% higher than 2019 as we saw, all through FY ’22, growth in both regions was fueled by client wins, cash digitization and acceptance expansion. Europe was up 10% year-over-year and 34% higher than 2019, impacted by a portfolio conversion that is now nearly complete in the UK. Ex UK, Europe volumes grew 28% year-over-year and was 71% above 2019, reflecting share gains in multiple markets. Ex portfolio conversions, volume trends in the UK remained stable. Asia Pacific, excluding China, continued to recover, up 16% year-over-year and 34% above 2019.

Global processed transactions were up 10% year-over-year and 39% over 2019 levels. Constant dollar cross-border volume, excluding transactions within Europe but including Russia in prior periods, were up 31% year-over-year and 32% over 2019. Excluding Russia, year-over-year growth was higher by about 4 points. Cross-border card-not-present volume growth, excluding travel and excluding intra-Europe, grew 3% year-over-year and was 55% above 2019. Adjusted for cryptocurrency purchases and Russia, cross-border e-commerce spending grew in the low double digits. Cross-border card-not-present, excluding travel, represented over 40% of total cross-border volume in the first quarter. Cross-border travel spend, excluding intra-Europe, grew 63% year-over-year and is now 18% above 2019.

The cross-border travel, excluding Europe, indexed to 2019 went from in September to in December. Travel in and out of Asia recovered sharply in the quarter by more than 12 points from the mid-70s indexed to 2019 to 85 for outbound and more than 90 for inbound helped by Japan. Japan alone improved by about 50 points since opening its borders in October. With China lifting restrictions on January 8, we expect more recovery to come. Europe inbound and outbound remained strong, with the travel indexed to 2019 in the 120s for outbound and 130s for inbound, both up slightly from the fourth quarter. Travel outbound from the U.S. to all geographies continues to be strong in the low 140s indexed to 2019, up 6 points from the fourth quarter. Travel inbound to the U.S. approached 2019 levels and improved 4 points in the quarter, likely due to the weakening dollar.

Travel into Latin America and the Caribbean remained very strong and stable, indexing around 150 to 2019 levels. Travel in and out of CEMEA indexed in the 130s and mid-120s, respectively, relative to 2019, with outbound up more than 10 points in the quarter and inbound by more than 15, helped by the FIFA World Cup. Finally, some color on Mainland China post the removal of COVID zero policies. The 40-day Spring Festival season is underway in Mainland China, the world’s largest travel event. Domestic travel is rising sharply. From a revenue standpoint, this will not contribute much. In terms of outbound mainland Chinese travel, this will pick up steam as more flight capacity is available, ticket prices moderate, new passports and visas are obtained and restrictions are lifted in some corridors.

The initial destinations for mainland Chinese visitors look to be Hong Kong and Southeast Asia, in particular, Thailand, Singapore and Malaysia. Inbound travel to Mainland China has not increased much and may not until the COVID situation settles down. Moving now to a quick review of first quarter financial results. Service revenues grew 10% versus the 10% growth in fourth quarter constant dollar payments volume. Exchange rate drag was offset by growth from business mix, pricing and card benefits. Data processing revenues grew 6% versus the 10% process transactions growth. The primary reason is that our data processing revenues are impacted by Russia. However, our transactions growth is not. Adjusted for Russia, data processing revenues were up 10%.

International transaction revenues were up 29% versus the 31% increase in constant dollar cross-border volumes, excluding intra-Europe. Revenue growth was helped by high currency volatility, although lower than the fourth quarter and pricing actions, which were offset by exchange rate shifts. Other revenues grew 31%, led by marketing and consulting services, pricing actions and acquisitions. Client incentives were 26% of gross revenues, below expectations due to some adjustments based on client performance and other items. For the year, we expect to renew about 20% of our payments volume with a good amount already completed in the first quarter. Revenue growth was robust across our three growth engines. Consumer payments growth was led by the recovery in cross-border volumes, high currency volatility and continued strong domestic volumes and transactions.

New flows revenue growth was over 20% in constant dollars. Commercial card volumes grew 15% year-over-year and are up 45% versus 2019. Excluding Russia, Visa Direct transactions grew 39%. Value-added services revenue was also up over 20% in constant dollars, driven by higher volume, increased client penetration and select pricing actions. Currencycloud and Tink added about 0.5 point to revenue growth. GAAP operating expenses grew 25%. Non-GAAP operating expenses grew 15%. Non-GAAP operating expense growth was higher than expected, primarily due to a smaller exchange rate benefit. The primary drivers of expense growth were personnel costs from hiring activity in the second half of last year and into the first quarter, as well as G&A expenses driven by lower exchange rate benefits, higher travel and expenses from new acquisitions.

Marketing increased 18%, primarily driven by the FIFA World Cup spend and client marketing. We recorded losses from our equity investments of $106 million. Excluding investment losses, non-GAAP non-operating expense was $7 million, benefiting from higher interest income due to rising rates and some other items. Our tax rate was lower than expected due to the resolution of a tax initiative coming in at 16% GAAP and 16.5% non-GAAP. GAAP EPS was $1.99, non-GAAP EPS was $2.18, up 21% over last year, inclusive of an approximately 3.5-point drag from the stronger dollar. Through the first three weeks of February, business trends have remained strong and stable. On a year-over-year basis, U.S. payments volume was up 14% with debit up 13% and credit up 14%.

Lapping of Omicron-related weakness from last year has contributed to strong January month-to-date growth. The Omicron-related uptick will fade as we get into February. These trends are generally consistent with performance in major markets around the world. Processed transactions grew 14% year-over-year. Constant dollar cross-border volume, excluding transactions within Europe, grew 36% year-over-year and was 42% over 2019 and 32% over 2020. Card-not-present non-travel growth was 75% above 2019 and 52% above 2020. Travel-related cross-border volumes were 25% above 2019 and 20% above 2020. We are now past the pandemic recovery stage on domestic volumes and transactions. As such, starting next quarter, we will no longer provide comparisons to 2019 for payments volumes and processed transactions.

Since the cross-border recovery is still ongoing, we will continue to provide comparisons to 2019 for cross-border volumes through this calendar year. Moving now to our outlook for the second quarter. For the second quarter, we are assuming that trends in domestic payments volume and processed transactions are sustained with some benefit from lapping Omicron in January last year. As a reminder, discontinuation of operations in Russia will impact reported payments volume growth rates in the second quarter. Russia will not impact reported processed transaction growth. Cross-border e-commerce trends have been stable, too, especially when you adjust for Russia and crypto-related volatility. We’re resuming cross-border e-commerce growth rates sustained through the second quarter, ex Russia and crypto.

The cross-border travel recovery continued generally in line with our expectations in the first quarter. We are assuming recent trends to sustain into the second quarter. We expect most of the Mainland China travel recovery in the second half and beyond for reasons I outlined earlier. We expect outbound travel from Mainland China to recover first. The pace of inbound travel recovery will depend on the COVID situation. Discontinuation of operations in Russia will reduce second quarter net revenue growth by almost 5 points since we recorded nearly two quarters’ worth of service fees in the second quarter of fiscal year ’22. Based on where the dollar is today and the forward curve, exchange rates will reduce reported net revenue growth in the second quarter by about 2 points.

When you put all this together, our planning assumptions get us to mid-teens constant dollar net revenue growth in the second quarter on a run rate basis i.e., adjusted for Russia. With an almost 5-point Russia impact and a 2-point exchange rate headwind, reported nominal dollar Q2 net revenue growth would be in the high single digits. Client incentives were below our 26.5% to 27.5% range of gross revenues in the first quarter. Second quarter client incentives are expected to run higher at the upper end of the range, finishing the first half in the middle of the range. As we indicated in October, operating expenses growth rates will moderate through the year as we reduce the rate of increase as well as lap higher levels from last year. In the second quarter, non-GAAP operating expense growth in nominal dollars is expected to be 2 points to 3 points lower than the first quarter expense growth.

Our third quarter non-GAAP operating expense growth rate is expected to decline an additional 2 points to 3 points, with a further 2 point to 3 point reduction in the fourth quarter. Non-GAAP results exclude certain acquisition-related items and the litigation provision from the third quarter last year. We currently expect non-GAAP non-operating expense to be in the $40 million to $50 million range in the second quarter, driven largely by higher interest income from our cash balances. Our tax rate is expected to be at the upper end of the 19% to 19.5% range for the rest of the year. With a non-GAAP 16.5% rate in the first quarter, the full year non-GAAP tax rate is now expected to range between 18.5% to 19%. As we said last quarter, should there be a recession or a geopolitical shock that impacts our business, slowing revenue growth below our planning assumptions in the second half, we will, of course, adjust our spending plans by reprioritizing investments, scaling back or delaying programs and pulling back as appropriate in personnel expenses, marketing spend, travel and other controllable categories.

In a business like ours, this always requires a careful balance between short- and long-term considerations. We have contingency plans in place and will activate them should we need to. Our business has been resilient so far this year. Our first quarter performance has demonstrated strong consumer payments growth from cash digitization and client wins. New flows and value-added services momentum remains very strong. There is still much uncertainty from an economic standpoint in the months ahead. We will remain vigilant and ready to act. As we look past fiscal year ’23, we remain as optimistic as we’ve ever been about the long-term growth potential of our business. Before I finish, this is a sad day for me personally. It’s Al’s last week as CEO.

Al has been the best CEO I’ve worked for and I’ve worked for many in my career. Al is a wonderful human being, an exceptional leader with extraordinary business judgment. It has been an eventful six years. Despite a three-year global pandemic, revenues have almost doubled, non-GAAP EPS is up over 2.5x and our stock price has tripled during Al’s tenure. I will miss you as CEO, Al, along with 26,500 or so others at Visa. With that, I’ll turn this back to Jennifer.

Jennifer Como: Thanks, Vasant. And with that, we’re ready to take questions, Jordin.

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Q&A Session

Operator: Our first question comes from Sanjay Sakhrani with KBW.

Sanjay Sakhrani : Thanks, and congratulations to Al and Ryan as well. Vasant, as we think about your baseline plan forecast, how are you factoring in the economy? I mean, are we assuming resilient consumer, stable economy or are you assuming some mild downturn?

Vasant Prabhu : Well, we went through what we call our planning assumptions last — on the last call for the full year, and we told you we had assumed no recession. As you can see, business trends have been remarkably stable. The spend levels just around the world, they’ve indexed in the mid-140s for almost four quarters right now, and there’s no evidence of a change in trend. That’s reflected in our second quarter outlook. At this point, we’re not changing any expectations for the second half. I mean, clearly, the dollar has weakened a bit so that will change the exchange rate impact in the second half, but we’re not changing any of our views in the second half. I mean, they are planning assumptions. And if there is a slowdown, then we will react accordingly.

Operator: Our next question comes from Darrin Peller with Wolfe Research.

Darrin Peller : So it’s nice to see that — it seems like from the trends you’re seeing in Q1 and what you’re guiding for Q2 is an element of conservatism based on the trends so far relative to what we could see in the second half, which I think is what The Street probably wanted. But when we just think about the underlying trends for a moment, I mean, some of the strength we’re seeing, like debit being up still high single digits constant currency in the U.S. on really tough comps, combined with other services. Maybe you could just touch on what’s the driving forces of both of those metrics because they were a little better than we thought. And I don’t know if it’s Visa Direct in the debit side helping or it’s other factors on share, and then if you could comment on other revenue strength.

Vasant Prabhu : Yes. On debit, it’s what we told you earlier. In general, if you look at the — looking at 2019 has kept us honest, so to speak. It’s a good view of what’s going on. And there’s — in total spend, it’s remarkable stability. What’s happening is as good spending slowed down a bit, services spending really took up all the slack. And so consumers have just shifted their spending but they’re spending the same amount, and that’s why debit has stayed resilient. Debit has been the biggest beneficiary of the move to digitization that happened globally and including in the U.S., more e-commerce, more tap-to-pay, more people using digital credentials just about on any payment occasion. So some people were worried that when things settle down, that debit might start to see some slowdown.

But as you’ve seen, debit has stayed resilient even as credit has recovered, which has kept our overall payment volumes very stable. Those would be the big trends and the other question?

Jennifer Como : Other revenue.