Visa Conference Call Highlights

Visa Inc V reported its fourth quarter earnings on Wednesday. Shares of the company are up 10 percent.

Below are some key highlights from its conference call.

Financial Progress:

• We reported adjusted diluted earnings per share of $2.18.
• As expected and previewed on our call last quarter, revenue growth for the fiscal fourth quarter rebounded, growing 10% year-over-year on a constant dollar basis or 9% nominally.
• For the full fiscal year, revenue growth was 10% on a constant dollar basis and 8% nominally.
• Revenue growth for the quarter was 4%, compared to 9% nominal growth in the cross border payment volume.
• Client incentives for the fiscal fourth quarter came in at 19.2%, putting us right on target with our full year guidance of around 17%.
• In Q4, we committed $1.2 billion to reduce the number of Class A equivalent shares by 5.7 million, at an average price of $213.
• This was accomplished through open market purchases and as noted earlier, a deposit of $450 million in the company's litigation escrow account.
• Further, our board approved in October a new $5 billion share repurchase authorization that, in combination with the $682 million remaining from the prior authorization, gives us $5.7 billion to deploy in the coming quarters.
• We also recently announced a 20% increase in our quarterly dividend from $0.40 to $0.48 per share.
• This level of increase is consistent with our previously stated objective of a 20% payout of the previous fiscal year's net income.
• Global payment volume growth for the September quarter in constant dollars was 11%, slightly down from the June quarter.
• U.S. credit improved to 15% growth. U.S. debit was 7% in Q4.
• Global, cross border volume delivered a 10% constant dollar growth rate in the September quarter, up nicely from 7% in the June quarter.
• Transactions processed over Visa's network totaled $16.9 billion in the fiscal fourth quarter, a 9% increase over the prior year.
• The U.S. grew 8%, while international delivered 14% growth.
• Through October 21st, processed transaction growth improved to an 11% growth rate, up 2 percentage points.
• The U.S. grew 9%, while international grew 15%.
• Net operating revenue in the quarter was $3.2 billion, a 9% increase year-over-year, driven primarily by growth in service and data processing globally.
• Transactions processed over Visa's network totaled $16.9 billion in the fiscal fourth quarter, a 9% increase over the prior year. The U.S. grew 8%, while international delivered 14% growth.
• Turning to the income statement, net operating revenue in the quarter was $3.2 billion, a 9% increase year-over-year
• Adjusted operating margin was 62% for the fourth quarter, and 64% for the full fiscal year.
• Capital expenditures were $227 million in the quarter, and $553 million for the full fiscal year.
• The weighted average number of fully diluted shares outstanding for the quarter totaled 623 million, and 631 million for the full fiscal year.
• Today only 3.6 million terminals at 55,000 locations accept chip cards, 19.8 million Visa cards are in circulation, up from 56% - up 56% from 12.7 million.
• We're excited about Apple Pay.

Segments:

• Service revenue was $1.5 billion, up 8% over the prior year and was driven by moderating global payment volume growth.
• Data processing revenue was $1.3 billion, up 14% over the prior year's quarter, based on solid growth rates in Visa processed transactions both in the U.S. and internationally.
• The delta between the quarter's 9% processed transaction growth and the 14% revenue growth was largely due to higher year-over-year growth in U.S. debit fees implemented in 2012.
• International transaction revenue was up 4% to $938 million.
• Initially the licensing fee was $142.5 million U.S. annually. The annual rate for fiscal year 2015 will be around $148 million.

Guidance:

• While we expect U.S. and international payment volume growth to remain healthy, we have not yet seen acceleration in global economic growth.
• Cross border volumes are rebounding as we reported 10% growth in the quarter.
• We are contemplating constant dollar revenue growth of low double digits with 2 percentage points of negative foreign currency impact.
• Absent any catalyst, we see our constant currency growth today at the very low end of the double digit range.
• Turning to client incentives, as a percentage of gross revenues, we expect it to be in the range of 17.5% to 18.5%.
• Operating margin in the mid-60s.
• Full year tax rate in the low 30s.