AccessMyLibrary provides FREE access to millions of articles from top publications available through your library.
Original Source: FD (FAIR DISCLOSURE) WIRE
. Jack Carsky, Visa Inc., Head, Global IR . Joe Saunders, Visa Inc., Chairman, CEO . Byron Pollitt, Visa Inc., CFO . Tien-tsin Huang, JPMorgan, Analyst . Liz Grausam, Goldman Sachs, Analyst . Adam Frisch, UBS, Analyst . Craig Maurer, Calyon Securities, Analyst . Dan Perlin, Wachovia Securities, Analyst . Sanjay Sakhrani, KBW, Analyst . Patrick Burton, Citigroup, Analyst . Chris Brendler, Stifel Nicolaus, Analyst . Tim Willi, Avondale Partners, Analyst
. Chris Mammone, Deutsche Bank, Analyst . Greg Smith, Merrill Lynch, Analyst . Howard Shapiro, Fox Pitt Keton, Analyst
V reported 2Q08 gross revenues of $1.8b, adjusted net income of $401m, and adjusted net income per diluted Class A common share of $0.52.
A. Key Data From Call 1. 2Q08 gross revenues = $1.8b. 2. 2Q08 adjusted net income = $401m. 3. 2Q08 adjusted net income per diluted Class A common share = $0.52. 4. 2Q08 CapEx = $166m. 5. Cash, cash equivalents, available for sale investments and restricted cash at 2Q08-end = $8b.
S1. 2Q08 Business Review (J.S.) 1. 2Q08 Results: 1. V is off to a great start. 2. Despite a challenging economic environment, delivered strong financial results and recorded strong product growth in inaugural qtr. as a public co. 3. Net income on adjusted basis, $401m or $0.52 per diluted Class A common share on an adjusted basis of 779m shares outstanding. 1. This represents a 44% increase over adjusted pro forma net income of $278m in 2Q07. 2. There is no appropriate diluted EPS comparison for 2007 as in the prior year under the association model Co. was a non-stock corporation. 3. On a sequential qtr. basis, these results were ahead of internal budget projections made at the outset of FY08 due to stronger payments volume and transaction growth. 4. Though Co. continues to see some softness in traditional US credit card growth as it has all year, as it anticipated, it is largely but not entirely being offset by debit and rewards card growth in US and robust growth internationally. 1. At this time, sees no discernable trend of softer US economy meaningfully affecting payment volumes. 2. In this regard, during 2Q08, experienced strong growth worldwide and across diverse products: 1. Credit. 2. Debit. 3. Commercial. 5. Payments volume, primary driver of revenue, increased 19% to $681b in 1Q07 ending 12/31/07. 6. Total volume, includes cash volume, increased 21% to $1.1t. 7. Cash volume primarily represents debit and credit cards used
at ATMs rather than a point of sale. 8. Although Co. does not view cash volume per se as a profit driver of business, it is a metric it focuses on as it offers enormous opportunity to further migrate cardholders away from cash transaction, point of sale, credit and debit transaction. 1. Reports all of the above metrics on a one-qtr. lag basis. 2. On a current qtr. basis, for 3Q08, expects a similar rate of payment volume growth. 3. Long-term, expects that secular shift towards [plastic] and away from cash and check augmented by further product enhancements and new product development will continue to further drive growth.
9. YoverY, [card growth was 60%] with more than 1.6b cards carrying Visa brand. 1. Credit grew 12% to 796m cards while debit rose 21% to 820m. 10. Net operating revenues were strong at $1.5b, up 22% over 2Q07 on a pro forma basis. 1. Saw solid growth across all categories. 11. Price adjustments made last year ahead of transition to a public co., which were in full effect by 3Q07, had an impact on 2Q08 results YoverY.
1. Partially for this reason, net operating revenues will be modestly lower than volume growth rates in the next two quarters.
2. Current expectation for revenue growth over the next qtr. is at the higher end of the range of long-term annual revenue guidance of 11-15% and is ahead of what Co. had planned coming into 2008.
12. Recognizes that the economic backdrop is increasingly
challenging for many businesses in US and could still impact
4Q08. 1. Globally, should continue to benefit from overall secular shifts in payment space and increases in amount of non-discretionary purchases on credit and debit products and cross-border transactions.
2. Legal Matter: 1. As disclosed in prospectus in conjunction with IPO, took an additional FAS 5 reserve of $285m of covered litigation in 2Q08. 1. Made first payment to American Express at 2Q08-end. 2. At $3b escrow and mechanism, Co. established to address the outstanding covered litigation cases, protects public
shareholders from liabilities associated with these cases and ensures that the related expense is fully reimbursable.
S2. 2Q08 Financial Review (B.P.) 1. 2Q08 Highlights: 1. Approach will be to provide a medium-term outlook covering a three-year period for the following key metrics: 1. Annual net revenue growth of 11-15%. 2. Annual adjusted operating margin in low 40% range.
3. Annual adjusted diluted Class A common EPS growth of 20% or
more. 4. Annual free cash flow in excess of $1b annually. 1. Defines free cash flow as cash from operations, plus cash reimbursements from litigation escrow less CapEx. 2. These metrics will be supplemented by updates and additional insights where and when appropriate.
2. Payment volume growth was strong vs. 2Q07. 1. Posted double-digit increases in each of regions. 3. While international regions are fastest growing, US continues to represent the greatest portion of revenue and offers significant opportunity as Co. continues to build out credit and debit and expand into new payment categories.
4. Continued strong growth and revenue performance out of Asia
Pacific, Latin America, and Central EMEA will be driven by
growth in new cards, usage and acceptance. 5. Process transactions are those that Co. defines as being processed on Visa network, totaled 8.8b in 2Q08, up 15% over 2Q07. 1. Does generate higher revenue from transactions Co. processes. 2. Offers value-added products and services to clients as a result of information Co. is able to capture at point of sale. 3. One key focus area in near-term is building out these processing capabilities …