Welcome to Visa's fiscal fourth quarter 2017 earnings conference call. All participants are in a listen-only mode until the question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. May I now turn the conference over to your host, Mr. Jack Carsky, Head of Investor Relations? Mr. Carsky, you may now begin.

Thanks, Kevin. Good morning, everyone, and welcome to Visa Inc.'s fiscal fourth quarter 2017 and full-year earnings conference call. Joining us today are Al Kelly, Visa's Chief Executive Officer, Vasant Prabhu, Visa's Chief Financial Officer, and Joon Huh of our IR team. This call is currently being webcast over the Internet and is accessible on the Investor Relations section of our website at www.investor.visa.com. A replay of the webcast will be archived on our site for 90 days. A PowerPoint deck containing the financial and statistical highlights of today's call have been posted to our IR website. Let me also remind you that this presentation may include forward-looking statements. These statements are not guarantees of future performance, and our actual results could materially differ as the result of a variety of factors. Additional information concerning those factors is available on our most recent reports on Forms 10-K and 10-Q, which you can find on the SEC's website and the Investor Relations section of Visa's website. For historical non-GAAP or other pro forma related financial information disclosed in this call, the related GAAP measures and other information required by Reg G of the SEC are available in the financial and statistical summary accompanying today's press release. And with that and for the final time for me, I will now turn the call over to Al.

Jack, thank you very much, and good morning to everybody. We're actually conducting this call from our New York City office, which gives us an opportunity to do a morning call, but I do appreciate everybody joining us early in the day and obviously very early in the day if you're on the West Coast. I'm pleased to say that we had another very solid quarter of business performance, resulting in a strong finish to our fiscal 2017. We saw our broad-based business momentum carry into the fourth quarter as we'd outperformed our expectations. Similar to prior quarters, we saw a healthy cross-border growth globally despite lapping what was a strong double-digit quarter last year. We saw a good domestic growth in multiple countries, including India, Russia and Australia. In the United States, our domestic business proved to be resilient despite concerns about slowing retail sales data over the past quarter. And although payments volume slowed in the U.S. due to expected lapping of notable partnerships, we did see healthy payments volume growth across all the regions with total growth in constant dollars of 10%. Processed transactions sustained a solid growth rate of 13% globally. And we had a high level of contract and renewal activity in the quarter, driving client incentives to 21.7% of gross revenue, the highest percentage for the year. All of this led to a strong fourth quarter financial results as we delivered net revenue growth of 14% and adjusted EPS growth of 15%. After I'm finished with my remarks, Vasant will go into greater financial detail on some of the comparisons and provide more background on the numbers. Now let me take a few minutes to cover business highlights as we had a particularly active quarter in terms of partnerships and announcements. We completed two…

Thank you, Al, and good morning to all. We had a strong finish to fiscal year 2017. On a GAAP basis, fiscal fourth quarter net revenues and EPS were both up 14%. As a reminder, this is the first quarter where we have Visa Europe included in our reported numbers in the prior year. We closed fiscal 2017 with full-year net revenues of $18.4 billion, up 22%. Net income on a GAAP basis was $6.7 billion, and EPS was $2.80. On an adjusted basis, net income for the full year was $8.3 billion, up 21%. And EPS was $3.48, up 22%. All in all, a strong growth year, which exceeded our expectations, especially in Europe, which contributed with mid-single-digit EPS accretion. Europe net revenues were ahead of our acquisition model projection, and operating expenses were below projection, with a lower effective tax rate post the legal entity reorganization we completed earlier this year. A few other points to note. Payment volumes on a constant-dollar basis, excluding Europe co-badge volume, continued to grow at double-digit rates globally. In the U.S., the step-down in growth rate reflects the lapping of Costco and USAA conversions in 2016. As a reminder, Costco started accepting Visa credit card in-store on June 20, 2016, and the first co-brand cards were issued. USAA credit conversion was completed in September 2016, USAA debit conversion completed by October 2016. Strong cross-border constant dollar growth was sustained in the double digits. However, the weakening of the dollar, particularly relative to the euro and the pound, is starting to have an impact on the mix of cross-border business. Most notably, outbound commerce from the U.S. is slowing down as is inbound commerce into Europe, especially to the U.K. There is some improvement in outbound commerce from Europe, but no meaningful pickup…

And with that, we're ready to take questions, Kevin.

Thank you, speakers. Our first question comes from Sanjay Sakhrani from KBW. Your line is now open. Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: Thank you, good morning. I appreciate all the color on 2018, Vasant. I was just wondering if you could talk about what your expectations are for Visa Europe's accretion in 2018. And when we think about sort of where the surprises could be, it sounded like in 2017, it was on the expenses. Should we assume like in 2018, it could be more on the pricing side? Thanks.

Yes. As I mentioned, it was sort of mid-single digits accretion in 2017 and cumulatively getting to the high single digits, so you could say once again, it adds probably in a low single digits accretion in 2018, so generally in that ballpark. So as you know, that's ahead of where we expected to be at this stage. No, I would say as Al said to that, 2017 performance was driven as much by revenue as expenses. So the revenue picture has been strong in Europe for two reasons. The local economies, they have been strong, and cross-border was particularly strong in Europe in 2017 because of the weak pound and the euro, a lot of cross border into the U.K. especially. And as we look at 2018, the economic situation in Europe at least as we look at it still looks very strong at a local level and the cross-border business is holding up. So it's going to be, again, I think revenue being a major driver of it. I don't know, Al, if you have something else.

No, I think that's fair. I think as I said, we're bullish on Europe, and I think it's a combination of what we're getting done on the revenue side and the expense side.

And of course, we got the legal entity reorganization done, which meant that the effective tax rate on our European earnings is lower than what we might have expected immediately post the transaction.

Next question, please.

Our next question comes from Bryan Keane from Deutsche Bank. Your line is now open.

Hi, guys. Just wanted to follow up on that. The high single-digit EPS accretion by 2018, that will be two years earlier than the original plan. I think it was for high single digits by fiscal year 2020. Just thinking about going forward into 2019 and 2020, is there some upside now to the original guidance on EPS accretion in Europe now that we're ahead of plan and there is probably more to do in the out-years? Thanks.

Bryan, I think we're, at this point, laser beam focused on 2018 and trying to take this in one step at a time. I think we feel very good about where we ended 2017. We feel very good about where we think we're going to head in 2018. And hopefully, there's a trend there. But right now, we're focused on 2018 and getting to that next step in terms of the value that Europe is delivering to the entire Visa enterprise.

Next question, Kevin.

Our next question comes from Dan Perlin from RBC Capital Markets. Your line is now open.

Thanks, good morning. So I had a question on the high 60s margin guidance for 2018. I appreciate all the expense color you guys gave. Historically, that's been a mid-60s number. And the question really is the business model at a kind of pivot point, whereby you really just can't kind of outrun the incremental margin anymore with really the pace of investment or is this just kind of a one-off, where we're going to be running in the high 60s? Thanks.

I think as we've always said, we don't have margins as an objective. We focus on driving volumes. Clearly, the focus is on converting cash, driving volumes, driving revenues. As long as revenues are growing in the high single digits and with the appropriate level of investment given the nature of our cost structure, expenses are growing in the mid-single digits, you're going to get margin improvement. And margins are not an objective. It's an outcome. And Al?

I think the only other dynamic I'd remind you of, Dan, is that we're seeing based on the actions we're taking fairly good margin expansion in Europe, which is now a part of the overall mix of the margin number for all of Visa. But other than that, I would agree totally with Vasant's comment, which is we're going to invest at the level that makes sense and we feel good about and margins as an outcome, not a goal.

Next question, please.

Our next question comes from Don Fandetti from Wells Fargo. Your line is now open.

Hi, good morning. Al, sort of a longer-term question. If you look around the world at what's going on with Alipay and real-time payments, at some point, do you get worried that there could be some leakage to the secular opportunity or do you feel like that is something that's premature in terms of worrying about?

Don, I think a good characteristic of any CEO is to be a bit paranoid. And while we just talked about very, very strong results in FY 2017, I can tell you that we are really laser-focused on the future and the fact that there are disruptive forces in the marketplace. I think that as it relates to real-time payments, I think we feel like we've got a very good tool in our toolbox in terms of Visa Direct. And as I said in my remarks, we saw volume on Visa Direct rise 75% year over year. The likes of Alipay and WeChat have done a phenomenal job in China and have started to migrate to other geographies. And you can rest assured that it is something that we pay a tremendous amount of attention to, and we're going to do everything we can to make sure that we remain a key player at the focal point of the payments ecosystem.

Next question, please.

Our next question comes from Jason Kupferberg from Bank of America Merrill Lynch. Your line is now open.

Good morning. I just wanted to ask on cross-border. Can you walk us through the reconciling items in Q4 between volume growth and revenue growth? At least in our model, the big revenue upside was on cross-border. And then just any thoughts or comments around the intra-quarter cross-border volume slowdown through October 21? I know it's only a few weeks of data, but any callouts there? Thanks.

I'm not exactly sure what you're referring to as far as the volume and revenue growth aspects of the fourth quarter. There was nothing unusual in the fourth quarter. It was a pretty steady growth quarter. There should not be anything unusual there unless I'm not fully understanding your question. As far as it relates to the first three weeks of October, we've said over and over again in the past that three weeks don't make a trend. Having said that, why is the number 7.4%? There's a little bit of shift in what are these intra-Europe cross-border volumes that accounts for probably 1.5 points or so of the difference from last quarter. Intra-Europe, sometimes acquirers and merchants can shift where they acquire the volume, and that can cause something that was considered an intra-Europe transaction to a domestic transaction. It doesn't have much of a revenue impact, but we do see that within the EU. The other factors are really driven more by a strengthening dollar causing some slowdowns, as I said in my comments, on outbound commerce from the U.S. and some limited impact from what's happening in the Caribbean and Mexico. But again, there's a lot going on in cross-border with these currency shifts, and we'll just have to wait and see. We feel pretty good about it.

The only thing I'd add is again, a small impact, but it's the lapping of some of the U.S. conversions.

Next question, Kevin.

Our next question comes from Lisa Ellis from Bernstein. Your line is now open. Lisa Ellis - Sanford C. Bernstein & Co. LLC: Hi. Good morning, guys. Al, just a question about Europe. You gave pretty bullish commentary on the outlook for Europe, and in particular highlighting the disparity across countries there with card penetration or digital payment penetration. But that is the region also where there is prevalence in some countries of these bank transfer-based networks that have gotten a lot of traction. Can you walk through your view on how debit goes head to head versus these networks? What's the difference in functionality? What's the difference in the value proposition to the merchant, to the issuer, et cetera?

Lisa, thank you for the question. I think I mentioned I'm heading to London right after this call, and this is actually something that's on our agenda to discuss. The issue you raise is real. I think in the case of Europe, as a reminder, the bulk of our business or a large percentage of our business is in the UK. And as we actually look to penetrate further into the continent, we're going to have to make sure that we have strong offerings in credit as well as debit. And we, by the way, tend to be even further behind in credit in some markets than we are in the case of debit. And we're going to have to make sure that our value propositions are differentiated in certain ways to make sure that we are indeed a player. But there's no question that these country-based networks are something we're going to have to contend with.

Next question, please.

Our next question comes from Darrin Peller from Barclays. Your line is now open.

Thanks, guys. A two-part question, but first, I understand you have more tough compares in 2018, including higher incentives as a catch-up, but fourth quarter did sow some of that increase in incentives already obviously, and yet you were able to do 14% growth. So just are the other factors like pricing enough for the difference down to high single digits in guide? And then just a longer-term part of the question is, I guess incentives are guided up again. If we took out the idea of a catch-up, again, bigger picture, should investors expect a more normalized growth in incentives after 2018 just based on pricing environment seeming to be somewhat stable in the overall market? So just bigger picture comments on incentives growth after the catch-up.

In the case of the first question, the guidance we're giving is our best assessment of where we see the business going at this point in time for 2018 with all of the various information that we have at our hands. In terms of the client incentives question, Vasant?

On the first part of your question, which is your revenue growth was 14% despite incentives being 21.7%, I just want to make sure you heard what I said about the fact that in the fourth quarter of 2017, while we were lapping Europe in 2016, the rebates were still in place in the fourth quarter of 2016. So it's not apples-to-apples yet for Europe on the revenue front because the rebates stop being paid in the first quarter of fiscal 2017. So you really only have to get out of the first quarter of 2017 where you're comparing Europe one year to the other in a real apples-to-apples way. That's number one. Number two, we went through some of the Costco/USAA comparatives. So there are a couple of factors that make the fourth quarter that we just had have things in it that are not going to be like what you've seen in the first quarter and beyond next year. As it relates to incentives, yes, some of it is the shift. But as you know, we just went through in Europe a large number of what we call contract conversions from rebates to incentives. All those now flow through the incentive line next year, so clearly that's a factor. And then we had, as you heard, several large renewals this year. That flows through. And we don't really want to comment on what happens in 2019 and beyond. But as Al said, we've given you the best picture we can of what to expect in 2018.

Next question, please.

Our next question comes from Jim Schneider from Goldman Sachs. Your line is now open. James Schneider - Goldman Sachs & Co. LLC: Good morning. Thanks for taking my question. I was wondering if you could maybe touch on the data processing line. That line has consistently done better than we expected. And I think on the last call, Vasant, you referred to the fact that you had picked up some specific wins. Can you maybe just kind of frame that line and the expectations for 2018 and beyond in terms of where you might be thinking of market share, in what regions and if Europe is specifically a possibility for further share gains there?

Yeah. I wouldn't emphasize share gains per se. Yes, we had a gain in Europe, which did help the growth rate in that line. But data processing has been a very healthy business. It's a great business. As I think Al mentioned, we would like to increase processing around the world. It has been growing in that 13% range all year while clearly having Costco and USAA come in the U.S. helped that, too. As we look ahead, we said we'd see a little bit of a step-down because of these lapping effects but still healthy double-digit growth. Beyond that, there really wasn't anything remarkable there. It's just a good, strong, fast growth business.

Next question please.

Thank you. Our next question comes from James Faucette. Your line is now open. One moment please. James E. Faucette - Morgan Stanley & Co. LLC: ...with regulators in Europe has been...

I'm sorry. You just came in with the first part of the question. Can you start again? James E. Faucette - Morgan Stanley & Co. LLC: Sure. Hey. This is James Faucette, Morgan Stanley. Al, it's a question for you. You mentioned in your prepared comments that your engagement with regulators perhaps is most active in Europe, and I'm wondering if you can just give a little bit of color as to what you view as the objectives of the regulators in Europe and the pieces that Visa can have that can help address the things that regulators are looking at. And I guess, as part of that, just give an update as to what you're seeing with your partners as – with PSD2, et cetera. Thanks.

So I think there's a number of objectives that the regulators have. They're looking for – to protect the privacy of consumers. They're looking to make sure that transactions are as secure as they possibly can be. They're looking to create and foster more innovation and allowing FinTechs to get into the stream a bit more, and that's facilitating the idea of opening up access to bank accounts around Europe as defined in PSD2. So I think that what the regulators are trying to accomplish is relatively clear. I think where it all lands and what the various use cases that might develop is probably less clear. We focus on a couple of things. One is making sure that we are having good open dialog with the regulators so that they understand our point of views and have clarity around what exists that's good in the payments ecosystem and how the payments ecosystem is evolving. Secondly, we're working closely with our clients, particularly issuers and acquirers, around Europe to understand what are some of the implications and frankly, what are potentially some of the opportunities, making sure that we help them as they try to meet the authentication hurdles that the regulators want people to achieve as well as understanding the implications of PSD2 and open access to accounts and what that might mean. And I think we have found ourselves having excellent dialog with clients throughout Europe, and it's something that we'll be continuing to focus on. I actually will meet with regulators tomorrow when I'm in London.

And with that, we'd like to thank you all for joining us today. If anybody has follow-up questions, please feel free to call myself or Joon. Thanks, again. Have a great day.

And that concludes today's conference. Thank you all for your participation. You may disconnect at this time.