Visa Inc. 2017 Investor Day Visa: The Investment Proposition Vasant Prabhu Chief Financial Officer
Visa: The Investment Proposition The Global Growth Opportunity Visa s Core Assets Capturing the Growth Opportunity Managing the Challenges Visa s Track Record The Growth Model Capital Allocation Priorities
The Global Growth Opportunity $17 Trillion cash and check conversion opportunity Growth is approaching an inflection point, one of four over Visa s 60 year history Connected devices could drive a massive expansion in use cases and acceptance points Significant opportunity to accelerate payments volume and transaction growth
$17 Trillion Cash and Check Conversion Opportunity Cash and Check Opportunity USD, 2016 Europe $3.5T CEMEA $2.4T North America $3.2T LAC $1.8T Asia Pacific $6.1T Source: Visa analysis of data from Oxford Economics, The Nilson Report, Euromonitor, Haver Analytics, UK Card Association, the Central Bank of the Russian Federation, The Norges Bank, The Swiss National Bank, The Bank of Thailand, Reserve Bank of Australia, Federal Reserve, Statistics New Zealand, Saudi Arabian Monetary Agency and the Central Bank of Ireland
Growth is Approaching an Inflection Point, One of Four over Visa s 60 Year History Inflection Points Opening the Network The Platform as a Service ecommerce goes mainstream Visa is Everywhere You Want to Be 1960 s 1970 s 1990 s 2010 s 3 Opportunity Through New Inflection Points June 7, 2017 4 Opportunity Through New Inflection Points June 7, 2017 (1960) (1975) (1995) (2016) Cards <1 Million ~40 Million ~450 Million 3 Billion+ Payments Volume <$1 Billion ~$10 Billion ~$600 Billion $7 Trillion+
Connected Devices Could Drive a Massive Expansion in Use Cases and Acceptance Points Today 3B+ cards Tomorrow: 10x Increase ~30B ways to pay 44M merchant locations ~400M ways to be paid Source: Visa Operating Certificates CY2016. Merchant locations are provided by Visa s issuing and acquiring financial institutions; card counts include cards carrying the Visa, Visa Electron, V PAY and Interlink brands as well as PLUS proprietary cards.
Significant Opportunity to Accelerate Payments Volume and Transaction Growth 1 Conversion of Cash 2 Shift to Digital Commerce 3 Expanding to New Segments $17T in cash and check $2T sales, 5X growth rate vs physical 2X higher Visa share than physical $30T+ addressable spend P2P G2C B2C B2B Source: Visa analysis of data from Oxford Economics, The Nilson Report, Euromonitor, Haver Analytics, UK Card Association, the Central Bank of the Russian Federation, The Norges Bank, The Swiss National Bank, The Bank of Thailand, Reserve Bank of Australia, Federal Reserve, Statistics New Zealand, Saudi Arabian Monetary Agency, the Central Bank of Ireland, emarketer (2017), comscore (2016), McKinsey & Company (2017), EIU (2017)
Visa s Core Assets The resources of the four-party network reinforced by new strategic partners The scale, reliability and security of VisaNet The power of the Visa Brand Financial resources of Global Visa
The Resources of the Four-Party Network Reinforced by New Strategic Partners Issuance Acceptance 3B+ cards 13,000+ issuers 3,000+ acquirers 44M merchant locations Strategic Partners Governments Source: Operating certificates and Visa Networks CY201
The Scale, Reliability and Security of VisaNet Scale 100+ billion processed transactions 160 currencies processed 200+ countries Reliability Multiple data centers connected via multiple high bandwidth circuits Redundant connectivity, power, and cooling systems Data replication across centers for seamless failover Security Multiple layers of security Intelligence driven security Moving from reactive to proactive
The Power of the Visa Brand Acceptance Security Confidence Frictionless The best way to pay and be paid, for everyone, everywhere.
Financial Resources of Global Visa (2011-2016) High Growth Net Revenue Growth High Margin Operating Profit Margin High Cash Cumulative Operating Cash Flow 10% Mid-60 s $30B+ Note: For a reconciliation of our GAAP to Non-GAAP financial metrics, please refer to our annual reports on form 10K.
Capturing the Growth Opportunity Growth Pillars Drive Digital Deepen Partnerships Expand Access Develop Best Talent Foundational Pillars Transform Technology Champion Security Leverage World-Class Brand
Deepen Client Partnerships: Banks Marketing Digital & Innovation Fraud & Risk Core Products Consulting Acquiring Loyalty & Offers STIP
Deepen Client Partnerships: Merchants Marketing Digital & Innovation Fraud & Risk Acceptance & Operations Consulting Co-Brand Loyalty & Offers
VisaNet Drive Digital New Use Cases Digitizing Physical POS Tapping into New Payment Flows Accelerating ecommerce Creating Next Generation Experiences Partners Strategic APIs Product Packages Payments Enabled Core Offerings Risk Mgmnt. Value-Add Services Insights Ecosystem Foundation Visa Developer Platform
Drive Digital Digitizing the POS New Payment Flows Accelerating ecommerce Next Gen Commerce Pays and HCE Visa Direct Visa Checkout Internet of Things Scan & Pay Token Push & Controls Innovation Centers
Expand Access Expand Issuance + Expand Acceptance Core Products Credit Debit Pre-paid Commercial Expansion Products Virtual Cards Visa Direct B2B Connect Cheaper, faster, smarter POS solutions Smart POS Contactless mpos QR enable significant merchant expansion New merchant categories New segments Expanding markets
Transform Technology
Transform Technology
Champion Security Protect Data Safeguard payment data Encryption PCI Data Harness Data Stop fraud before it occurs Detection Disruption Exchange Authentication Devalue Data Render data useless EMV chip Tokenization Empower Consumers Engage cardholders in payment security Alerts Digital controls
Leverage World Class Brand
Attract Best Talent Global / Local 69 countries with Visa staff Experienced Leadership (VP+) 42% 16% >10 years <2 years Investing in Areas of Growth 65% growth in Technology & Innovation
Tailoring Our Approach by Market Market Characteristics Approach Terminals per 1,000 pop PCE Penetration GDP per Capita ($K) Developed >15 >20% >$25 Developing 5-20 10-25% $5-$25 Emerging <5 <10% <$5 Provide innovative, convenient ways to pay and be paid (contactless, IoT, PAYs) Partner with technology disruptors to create new payment experiences Expand into new segments and categories Provide innovative merchant solutions Offer full range of products: affluent credit, commercial, pre-paid, etc. Massively expand acceptance, targeting everyday spend merchant categories Grow preference for Visa cards versus alternatives Government partnerships to drive electronification Introduce and grow core products: debit, credit and prepaid Build acceptance in core categories emphasis on mobile/digital Government partnerships to drive electronification Note: PCE penetration includes both credit and debit cards Source: Visa Business and Economic Insights analysis of data from Oxford Economics, The Nilson Report, Euromonitor, Haver Analytics, UK Card Association, the Central Bank of the Russian Federation, The Norges Bank, The Swiss National Bank, The Bank of Thailand, Reserve Bank of Australia, Federal Reserve, Statistics New Zealand, and Saudi Arabian Monetary Agency; Primary: Euromonitor Passport Database, Secondary: Timetric, Lafferty and RBR-EFTPOS; World Bank World Development Indicators (CY2015)
Managing the Challenges National Payment Schemes Faster Payments Technology Disruptors Compete aggressively with new products & innovation Continue driving preference among issuers, merchants, and consumers Use scale advantages to fund local investments in brand, acceptance, and new features Expand real-time Visa Direct product capabilities around the world globally Partner with key global platforms to embed Visa Direct as preferred payment method Develop deep commercial partnerships that support and expand the four-party model Make Visa the commerce platform of choice for any and all developers Compete vigorously where needed World-Class Brand Global Acceptance Superior Products Digital and Innovation Scale Visa Advantages Proven Real Time Network (VisaNet) Push Payment Capabilities (Visa Direct) Established Operating Regulations Trusted Brand Established Connection (Banks/Merchants) Open Access to VisaNet and Visa Services via API (Visa Developer Platform)
Visa s Track Record Operating Performance Net Revenue ($B) CAGR 10% x Operating Leverage (% Margin) +7 ppts = Operating Income ($B) CAGR 13% 15.1 59.0 66.0 10.0 9.2 5.5 2011 2016 2011 2016 2011 2016 Tax Rate (%) Weighted Average Shares Outstanding (B) 1 EPS ($) -7 ppts -15% Total CAGR 18% 36.3 29.1 2.8 2.4 2.84 1.25 2011 2016 2011 2016 2011 2016 1) Includes issuance of preferred stock convertible into approximately 79M of class A common stock in June 2016. Figures shown for fiscal year ending September 30 on adjusted Non-GAAP basis and excludes one-time, non-recurring items. For a reconciliation of our GAAP to Non-GAAP financial metrics, please refer to our annual reports on form 10K
Visa s Track Record Shareholder Value Creation Dividends ($B) Stock Buybacks ($B) 1 0.4 $5.4B (2011-16) 1.2 1.0 0.9 0.6 1.4 3.2 $25.6B (2011-16) 5.4 4.6 2.4 2.9 7.1 2011 2016 2011 2016 Stock Price Performance (%) 2 231 Total Shareholder Return (%) 2 243 21 78 15 25 84 Visa S&P 500 22 17 81 34 105 1 Year 3 Years 5 Years 1 Year 3 Years 5 Years 1) Includes funding of U.S. litigation escrow account which dilute class B common stock through adjustment to the conversion rate (2011: $1.2B, 2012: $1.7B, 2014: $0.5B) 2) Calculated as of May 31, 2017 Figures shown for fiscal year ending September 30
The Growth Model Payments Volume & Transaction Growth Net Revenue Growth Operating Leverage Operating Income Growth Financial Levers EPS Growth
The Growth Model Net Revenue Growth PCE Growth PCE Penetration Market Growth Market Share Net Pricing Volume Growth Value Added Services Net Revenue Growth
The Growth Model Net Revenue Growth Contribution (2011-16 Constant Dollar) All Other (20%) PCE Growth (20%) PCE Penetration (60%) Figures shown for fiscal year ending September 30
The Growth Model Client Incentives Why Client Incentives? Why High Growth? Why Difficult to Forecast? The Bottom Line Drive Payments Volume and Transaction growth Incent win-win outcomes Secure multi-year contracts Growth of Payments Volume and Transactions Exclusivity Longer contract terms Issuer consolidation Timing of renewal Terms of renewal Actual volumes/mix vs. Forecast volumes/mix Client incentives are a means to an end driving volume & Net Revenue Payments Volume (2011-16 CAGR) 9% Ensure price competitiveness Expansion to U.S. Merchants and Acquirers Processed Transactions 10% Net Revenue 10% Nominal dollar basis fiscal year ending September 30
The Growth Model Operating Leverage Volume Growth Variable Cost Growth Fixed Cost Inflation Productivity Core Expense Growth Investments Operating Expense Growth
Volume Growth Scale Productivity Inflation Investment Expense Growth The Growth Model Operating Leverage Operating Expense 1 Drivers of Operating Leverage Components of Expense Growth Brand Related 20% Support Functions 2 15% Technology Related 35% Economies of scale (fixed vs. variable cost mix) Productivity and purchasing savings Offset by... 9-10% (Illustrative) 6% Product, Sales and Service Related 30% Wage and expense inflation P&L investments in new capabilities and growth programs 1. Fiscal year 2016. Excludes certain items that are either non-recurring or have no cash impact 2. Support Functions include Finance, Legal, Risk, HR, Strategy and Government Relations
The Growth Model EPS Growth Components of EPS Growth (2011-16 Constant Dollar) Financial Levers (30%) Stock Buybacks Tax Rates Operating Leverage Net Revenue Growth Operating Levers (70%) Figures shown for fiscal year ending September 30
Capital Allocation Priorities 1 Invest to Fund Growth Initiatives 2 Pay 20% to 25% of EPS in Dividends 3 Return Excess Cash Through Stock Buybacks 4 Manage Capital Structure to Sustain Debt Ratings
Capital Allocation Priorities 1 Invest to Fund Growth Initiatives Acquisitions Capital Investments (2011-16) $2.7B Invest to fund growth programs Acquire or invest in new technologies / capabilities Selective Acquisitions and Investments (2011-16) ~$24B P&L Cash Investments (2011-16) ~$3-3.5B Europe Minority Investments 2010 2011 2012 2013 2014 2015 2016 2017 Figures shown for fiscal year ending September 30
Capital Allocation Priorities 2 Dividends Payout Ratio (%) Dividends 20 (2011-16) 20% - 25% Payout Ratio 12 $5.4B 2011 2016 3 Stock Buybacks Buybacks 1 Weighted Average Shares Outstanding (B) 2 Deploy excess cash to buyback stock (2011-16) $25.6B 2.8 2.4 1) Includes funding of U.S. litigation escrow account which dilute class B common stock through adjustment to the conversion rate (2011: $1.2B, 2012: $1.7B, 2014: $0.5B) 2) Includes issuance of preferred stock convertible into approximately 79M of class A common stock in June 2016 2011 2016 Figures shown for fiscal year ending September 30
Capital Allocation Priorities 4 Manage Capital Structure to Sustain Debt Ratings Current Rating: S&P (A+/A-1) / Moody s (A1/P-1) Target Leverage: 1.2x 1.5x Gross Debt / EBITDA Gross Debt / EBITDA (x LTM) 1 Debt Maturity Schedule ($16B) Cash and Investments ($10.8B) 1.5 1.4 1.3 3.0 4.0 3.5 (At 3/31/17) 12/31/15 9/30/16 3/31/17 2.25 1.75 1.5 2017 2020 2022 2025 2035 2045 6.8 Required Backstop for Settlement 4.0 1) EBITDA is a Non-GAAP metric defined as Operating Income plus Depreciation and Amortization, pro forma for the acquisition of Visa Europe and excluding one-time, non-recurring items
Summary Sizeable global growth opportunity Visa has powerful assets to capture this opportunity Well defined strategy and tactics tailored by market Track record of revenue and EPS growth Disciplined capital allocation Well positioned to sustain superior shareholder value creation
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that relate to, among other things, our future operations, prospects, developments, strategies, business growth and financial outlook. Forward-looking statements generally are identified by words such as "believes," "estimates," "expects," "intends," "may," "projects," could," "should," "will," "continue" and other similar expressions. All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict. We describe risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, any of these forward-looking statements in our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended September 30, 2016 and our subsequent reports on Forms 10-Q and 8-K. Except as required by law, we do not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise. *** Note: All brand names and logos are the property of their respective owners, are used for identification purposes only, and do not imply product endorsement or affiliation with Visa. With the exception of slide titled Acceptance Penetration Drives PCE Penetration, PCE is defined as Purchase PCE (does not include non-financial transactions).