Payments giant Visa reported fiscal third quarter results that showed continued momentum on the international stage, with cross-border transactions up 10 percent year on year. That number was a slight deceleration from 11 percent in previous quarters, owing to the strength of the dollar.
The headline numbers showed that the company beat expectations on the top line – and on the bottom line, too. With a nod toward the fine print of credit and debit spending, and consumers’ propensity to open their wallets (and keep them open), management stated that macroeconomic trends continue apace. Those top and bottom line digits: Adjusted net income came in at $1.20, which handily outpaced the $1.09 that had been seen by the Street. As for the top line, consensus had been for $5.1 billion, while the reported tally was $5.2 billion.
The adjusted earnings number excluded the impact of $600 million in reserves taken for ongoing litigation tied to swipe fees. That deposit had been presaged in June, when the addition to the litigation escrow account brought the total amount to $1.5 billion. A tentative agreement is in place, said management during a conference call with analysts to discuss the results. Additionally, client incentives came in at $1.4 billion, which management stated on the call was lower than had been expected, despite growth of 20 percent year on year.
With an eye on international activity, the company stated that integration efforts tied to Visa Europe (through the 2016 deal) are nearly complete, with an added $60 million in forecasted expenses on the way during the remainder of the fiscal year.
CEO Alfred Kelly stated on the call that contactless payments continue to gain traction, with, for example, such transactions amounting to 93 percent of face to face transaction volume in Australia. Taken as a whole, according to Kelly, contactless payments were up 2 percent from the previous quarter, and there were 18 countries where that rate had been ratcheted up to more than 5 percent.
Among several pockets of international regions of growth, India saw growth of more than 20 percent year on year, according to management commentary. Elsewhere, CFO Vasant Prabhu stated that inbound activity in certain corridors was up double digits, such as in Mexico and the Caribbean, spurred by tourism, for instance.
Total payments volume was roughly $2 trillion, which was a 15 percent increase in nominal terms, up 11 percent in constant dollar terms. The 11 percent may have initially disappointed investors, as consensus was for a 12 percent gain, and the stock traded down slightly to about $140.50. Drilling down a bit, and in supplemental materials provided alongside earnings, the company stated that both credit and debit transactions were up 11 percent year on year, measured in constant dollars, to a respective $1.1 trillion and $919 billion.
Kelly told analysts that the company sees opportunity in Europe, where cash still remains a chief payment method at more than 60 percent of consumer transactions in countries such as Spain and Poland. He also turned some attention to a June incident where European transactions could not be completed. He told analysts the issue had not been an outage or related to integration with Visa and Visa Europe, and said that 95 percent of transactions were completed successfully.
B2B payments, said Kelly, now represent 11 percent of Visa’s payments volume, and “significant growth opportunities” lie within the $20 trillion market. And during the Q and A with analysts, Prabhu noted that Visa Direct is gaining adoption through bill pay and faster payments to merchants.