Welcome to the Visa fiscal fourth quarter and full-year 2018 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. I would now like to turn the conference over to your host, Mr. Mike Milotich, Senior Vice President of Investor Relations. Mr. Milotich, you may now begin.

Thank you, Katie. Good afternoon, everyone, and welcome to Visa's fiscal fourth quarter and full-year 2018 earnings call. Joining us today are Al Kelly, Visa's Chief Executive Officer, and Vasant Prabhu, Visa's Chief Financial Officer. This call is being webcast on the Investor Relations section of our website at www.investor.visa.com. A replay will be archived on our site for 30 days. A slide deck containing financial and statistical highlights has been posted on our IR website. Let me also remind you that this presentation includes forward-looking statements. These statements are not guarantees of future performance, and our actual results could differ materially as a result of many factors. Additional information concerning those factors is available in 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 our website. Historical non-GAAP financial information disclosed in this call to related GAAP measures and reconciliation are available in today's earnings release. And with that, let me turn the call over to Al.

Mike, thank you and good afternoon, everyone, and thanks for joining us today. Our performance remained strong in fiscal fourth quarter. Revenue growth was 12%, as all our key business drivers remained robust despite the stronger dollar. Payments volume growth on a constant dollar basis of 11% was right in line with last quarter, with strength in the U.S. offsetting a slowdown in dual-branded card volume in China. Excluding China, our payment volume growth would have modestly accelerated versus the last quarter. Cross-border on a constant dollar basis was 10%, same as the prior quarter. Processed transaction growth was consistent with last quarter at 12%. Expense growth, adjusted for a donation of available-for-sale investment securities to the Visa Foundation, was 12%, primarily driven by personnel-related investments. Adjusted EPS growth was 34%. We also returned approximately $2.1 billion of capital to shareholders in the quarter, consisting of $1.6 billion of share repurchases and $500 million through dividends. Looking back on this entire fiscal year of 2018, our global leading network connecting issuers and merchants got stronger on a number of dimensions. The number of cards, including virtual cards, increased by about 80 million to 3.3 billion. Total Visa volume surpassed a record $11 trillion, driven by 182 billion transactions, or an average of 500 million transactions every single day during fiscal 2018. Payments volume totaled over $8.2 trillion, increasing by almost $900 billion year over year. Our payments volume growth was strong across the globe, with double-digit growth in constant dollars in all regions except Europe, which grew at 9.2%. And with our payments volume growing twice as fast as global PCE, Visa's penetration of global purchased PCE increased by 0.5 point to over 16% this year. Transactions processed totaled $124 billion, up 12%, lifting our processing penetration by 1 point…

Thank you, Al, and good morning, everyone. Good afternoon, everyone. We had a strong finish to fiscal year 2018. On a GAAP basis, fiscal fourth quarter net revenues were up 12%, and EPS was up 37%. Adjusted to exclude a special item, EPS grew 34%, which includes a 10 percentage point benefit from the impact of U.S. tax reform. Exchange rate shifts versus the prior year were a drag on net revenue growth of almost 50 basis points and EPS growth of approximately 1 percentage point. Full-year net revenues of $20.6 billion were up 12%. Net income on a GAAP basis was $10.3 billion, and EPS was $4.42. On an adjusted basis, net income for the full year was $10.7 billion, up 29%, and EPS was $4.61, up 32%. The adjustments for each quarter are described in our earnings release. On a full-year basis, U.S. tax reform contributed 10 percentage points to net income and EPS growth. For the full year, exchange rate shifts added 1 percentage point to net revenue growth and 1.5 percentage points to EPS growth. A few other points to note, in the fourth quarter, we donated available-for-sale investment securities to the Visa Foundation. Our adjusted results exclude this special item, which is $195 million of non-cash G&A expense as well as the realized gain in non-operating income/expense and the tax benefit associated with the charitable contribution. Growth remained steady across business drivers, with little change relative to the third quarter. On a constant dollar basis, payments volume grew 11% and processed transactions grew 12%. Cross-border volume grew 10%. As a reminder, Q3 cross-border volume growth of 10% was reduced by 1 percentage point due to lapping a settlement delay in Europe last year. As the dollar strengthened, cross-border growth decelerated through the fourth quarter in…

Okay. We're willing to run 10 minutes long, so we have more time for questions. So with that, we're ready to get started with questions.

Thank you Our first question today comes from Craig Maurer with Autonomous Research. Your line is now open.

Hi, thanks for taking the time today, two questions. First, what gives you confidence that the U.S. dollar will start to retreat in the back half of the year next year to put that in the guidance? And secondly, can you talk about yields on Visa Direct and push payments, as we hear a lot of Fast growth in that area going on globally from all networks? Thank you.

Craig, it's Al. I'll take the second question and I'll let Vasant take the first. We initially guided to Visa Direct heavily in the P2P space, where frankly, there's not a lot of economics. Our yields there tend to be less than we would get on normal Visa transactions. But as we move into some of these new use cases, we aren't expected to get yields that are similar to what we get in the typical pull transactions that we do today. Let me ask Vasant to talk about what our view is on the retreating U.S. dollar in back end of the year.

I don't think our crystal ball is any better than anybody else's, and so we don't really try to predict those things. We just look at forward curves and make some assumptions based on that. But the thing that happens, if in fact the dollar begins to weaken, let's say, in the second half, it will help us in certain corridors and it will hurt us in other corridors, and there's a net effect of that. So even if it doesn't happen as might be projected by forward curves, there are normal balancing effects in the business. So it's not a one-way bet in a sense. So if the dollar weakens, clearly we benefit from a translation standpoint. We have given you our best guess of about 100 basis points of impact in net revenue. On the cross-border side, we would benefit with the inbound corridor to the U.S. But on the other hand, we will benefit in other parts of the world from the dollar weakening. So there's a lot of offsetting factors.

Next question?

Our next question comes from Tien-Tsin Huang with JPMorgan. Your line is now open.

Thanks a lot. You covered a lot of ground in the prepared remarks, it's useful. I wanted to ask on the revenue outlook. You're calling for low double-digit for fiscal 2019. At this time last year, you guided to high single-digit growth, I believe, and you landed at 12%. So I'm curious why you're more optimistic this year versus last year. Is your visibility perhaps a little bit better? Is there a different level of conservatism maybe that you're baking in? Just curious to compare where you stand this year on your outlook versus this time last year. Thanks.

Sure, Tien-Tsin. As we normally do, we give you our best sense of the upcoming year based on the facts we have available at this point in time. And if you looked at where we were at the end of last year, clearly the strength of the U.S. consumer in particular ended up being stronger than we expected. As you saw, our debit growth was mid-single digits for quite a few quarters leading up to the year. And then starting in the second fiscal quarter of 2018, we jumped into the double digits and have stayed there. So there were various elements of the business that clearly changed their growth trajectory after we gave you the outlook for the year. So you could say that things happened that were stronger than we expected. The global economy was stronger than we expected. In the second quarter and the third quarter in particular, the exchange rate tailwinds were stronger than we might have expected when we went into the year. So these things happen, and we update you as we learn them. As we look ahead, again, we're doing the same thing. We're giving you the best sense we have of the business as we enter the year. And therefore, we give you as much color as we did as to what our assumptions are. Obviously, we'll update you as the year progresses. I know some people try to read into what we say, things like oh, they're being conservative. They want to leave room to raise it in the future and all that. And as we've told you all along, we give you our best sense at any point in time. We are not trying to be overly conservative or otherwise, and this is our best sense as we stand today.

Next question?

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

Al, so it's pretty interesting to see double-digit revenue growth coming again this year for a company with a $300 billion market cap. As you look out over the intermediate term and you think about revenue growth, the model, do you still see the same secular contribution coming through as payments move away from cash? Because sometimes it's hard for us to see when we might at a tipping point given a lot of new technologies and payment initiatives coming in.

Don, as you might guess, I'm not going to give a long-term forecast on revenue. We just explained how we got to the number for just this year and the assumptions in that. That said, I'm quite confident in the business over a long period of time, and we've got lots of different vectors on which I think we can continue to grow this business, whether it's by penetrating new payment flows, penetrating new segments, penetrating new geographies, bringing more of the unbanked around the world into the mainstream financial system. I think some of these capabilities that we are developing in terms of things like Visa Direct, some of the technologies that I think are enabling a better user experience at the actual moment when a user uses a card, whether that's contactless or QR, and hopefully, in 2019, the big change in e-commerce as we move to secure remote commerce. So I think that there are just a good number of growth vectors for this business that give me a good deal of confidence in our ability to continue to grow our volumes. And as we grow our volumes, obviously revenues should come along. And so I remain confident about the future of Visa in terms of the volumes we can deliver.

And just adding to that, we've historically talked a lot about you might call our traditional payment flows, which is the B2C – B2B business – I'm sorry, the consumer-to-merchant business, C2B. And as you know, we believe there's a lot of opportunity there to continue to digitize cash and increase PC penetration. But increasingly, as Al said, it's these new payment flows as we call them that are enabled by things like Visa Direct, which would be P2P, and disbursements, which is a B2C, that we're getting increasingly excited about. And then of course, Visa Direct also enables many elements of B2B and G2C, government-to-consumer. And then B2B remains a huge opportunity. We are already close to $1 trillion in payment volume there, and we would like to see it grow much faster than let's call it our core consumer to – C2B business.

Next question?

Our next question comes from Harshita Rawat. Your line is now open.

Hi, good afternoon. Thank you for taking my question. I want to ask about emerging markets. There appears to be a lot happening underground in some of these markets that government involvement needs domestic schemes in certain instances, almost a new Fast ACH and API infrastructure. So my question for you is how should we think about your ability to quickly adapt in these very rapidly evolving markets? And is there anything you need to do on the pricing partnerships on the technology front?

Harshita, many of these emerging markets which are – where there's clearly lots of dynamics, as you talked about, Visa has been on the ground in these markets for in many cases multiple decades, and we've got experienced teams in those markets. And I think if I put China aside, where we actually still don't have a domestic license, but we look at some of the countries in Asia, some of the countries in South America, some of the countries in Africa, we I think have had a market leadership position, and we I think will continue to look to forge both good partnerships with people where it makes sense. The reality is the payments ecosystem is hugely about partnerships already. And I think as I look forward, there will be even more partnerships as some of the FinTechs really take hold and provide various value-added services. We are committed to VisaNet. We think it is the best network in the world in addition to being the biggest in the world. We continue to invest in it in big ways and will continue to invest in it. That said, we are very pragmatic people. And to the degree that there are other rails that Visa transactions might – or Visa credentials might be used on where we can do something in partnership, where perhaps there are various value-added services we might be able to still provide, even if a transaction isn't running on our rails, we'll be committed to do that. So I think that we are going down multiple paths where we're both trying to continue to strengthen the assets we have today, starting with our network, but also the investment in lots of capabilities we're doing. But we're also going to be smart about partnering where partnering makes sense. We're committed to try to be in the middle of as many payment flows as possible. And if we can control – if we can have the full control of that payment flow, great. If in some cases we're participating in it as a partial player, that's also fine as well. So I think that we are well-positioned. If you look at India as one case study, that's a market we've been in for 35 years. We've got a big team on the ground there. And we continue to be the market leader even though there's lots of activity going on there in terms of both government intervention, as you talk about, as well as new players that are emerging.

Next question.

Our next question comes from Darrin Peller with Wolfe Research. Your line is now open.

Hey, thanks, guys. Look, I know there are some pricing initiatives at the company, and you touched on the anniversary of some in 2019. But maybe you could just help us understand from a cadence standpoint what kind of benefit we could have through the year. And then, Al, just higher level, between Europe and other areas, do you see similar pricing opportunities in 2019 and 2020 that you saw in 2018? Especially on the back of Europe front-end integration being done now, do you have some room there? Thanks.

So, Darrin, I'd say two things. One is both Vasant and I have been clear about what we see in terms of pricing in Europe. The second thing I'd say is that we have had a longstanding policy of not getting involved, for many reasons, including competitive reasons, in forecasting specific pricing actions that we would take and where we would take them geographically and in terms of on the network. And I think we're going to revert back to not commenting on specific pricing plans on a going-forward basis. But obviously, that said, we recognize that it's an important lever.

And our plans for 2019 include pricing. There's carryover pricing from 2018 that flows into the first half of 2019. And as I said in the comments earlier, we have some pricing coming in, in 2019. And so order of magnitude, across the whole business, there's about similar kinds of pricing between the two years.

Next question.

Our next question comes from Lisa Ellis with MoffettNathanson. Your line is now open.

Lisa?

Sorry, good afternoon, guys. My question is about Visa Direct. I like to see the strong metrics there year on year. Can you give an idea of – so you highlighted use cases associated with P2P disbursements, some B2B use cases. Can you give a sense for is there a pathway and what does it look like to using Visa Direct for things like bill pay or even more traditional merchant transactions, particularly in geographies where there is incumbent Fast ACH networks, where that type of push payment is already heavily in use for those types of transactions? Is that a focus area, and can you give a sense for what that timeline or that pathway looks like?

So we already do, Lisa, have some bill pay use cases that are happening in different geographies around the world. And again, our view is that by reversing the typical way that our network works that we have lots of opportunity in lots of different use cases. And we've got a dedicated team that's spending a lot of time thinking about bill pay, P2P, disbursements, and faster payments to merchants. I think those are the four primary businesses that at the moment that we can see ourselves playing in in terms of Visa Direct. And specifically on bill pay, I know both in Singapore and in India we have use cases going on right now.

Next question.

Our next question comes from James Faucette with Morgan Stanley. Your line is now open. James E. Faucette - Morgan Stanley & Co. LLC: Great, thank you very much. I just wanted to ask a point of clarification first on – I think, Vasant, you mentioned that there's 20% of your total volume that's up for renewal in 2018. You touched on its impact on incentives, but as a dull roar (1:02:12), how does that compare to previous years? Or at least what has been in the last few years by comparison, just to contextualize it a little bit? And then, Al, I wanted to follow up on the questions related to – on new technologies and partnerships. When you look at some of the things that you've rolled out like the recent announcement of B2B Connect, et cetera, how close are you working with your partners to visualize and then push the boundaries on new initiatives? And I'm wondering how much is like being pulled from your partners as they look for opportunities. I'm just trying to get a sense as to how receptive the market may be to some of these new initiatives. Thanks.

I'll take the first one, and Al I think is going to answer the second one. In terms of the renewal tempo, FY 2017, fiscal year 2017 and 2018 was heavy in Europe. As Al was even saying, we opened up 100 contracts, more than 100 contracts and redid them, and you saw that in some of the client incentive movements. 2016, 2017, and 2018 in the rest of the world were somewhat lower than the 20% pace. So 20% inclusive of Europe is probably more of – a little higher than the last couple of years on a global basis, but 2015 was a bigger year from a renewal standpoint. So that gives you some flavor for it. Our average contracts run from three to seven years typically, so about five years is a decent estimate. The 20% is getting more to par for the course.

James, on the second question related to new technologies, first of all, I'd say that we try to be very client and consumer/business owner-centric in all we do. We don't just try to come up with capabilities and technologies for the sake of having them. We want and are only interested in creating capabilities and products that we think solve a particular problem or fill a particular need in the payment ecosystem. That said, there are cases where we are sometimes being pushed by our clients to move faster, and there are cases where we're pushing or pulling our clients along, asking them to come along more quickly. And by the way, for the same capability or the same product, we can have each of those cases at different clients. So we could have some clients who we have to pull along and some who are pushing for us to move faster. So constant communication and an open stream of dialogue is critical in these cases. And we try to sit with clients, particularly our biggest clients, and give them a sense of what's in our product pipeline, what are we thinking about over the next year or two, so that they have some transparency into what we're thinking. Because often we need them to come along, because often one of the things that is on the critical path of progress is them opening up their tech queues and making sure that they're doing whatever changes they need to make to accommodate some capability or product that we're putting into the marketplace.

Next question.

Our next question comes from Sanjay Sakhrani with KBW. Your line is open. Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: Thanks, a quick question on the China dual-card spending volumes. I was under the impression that the conversion to two cards had stopped. Is that not the case anymore because you guys mentioned that weakness? And then secondly, on these tokenization partnerships, I guess when we think about what the longer-term or even intermediate-term benefits are, are there specific pilots that you will launch around those partnerships or any economic benefits?

On the first question, Sanjay, there are definitely a good number of our Chinese bank partners. I don't know how many. We have 55, I think 56 China bank issuer partners, and a good number of them are still issuing dual-badged cards. So yes, that's still happening. On the tokenization partnerships, look, this is something we're very committed to. We have always taken a lead in trying to make sure the payment ecosystem is as secure as it possibly can be. And getting to a point where payment credentials are codified in a different way using tokens versus the actual card number we believe is critical for the infrastructure. My personal belief, by getting these large token requesters on board now and getting to the point where we have 60 very strong token requesters in 40 markets around the world is going to start triggering some key merchants to start moving to tokenizing their card-on-file pans from today. And I think like everything in life that this is one of those things that if we can build some momentum, which I think we can, that it will really start to take off. But clearly, like everything, again, you need some tipping point where the momentum really starts to take off and you move from pushing an initiative uphill to watching it roll downhill. And I think in the case of tokenization, we're probably still trying to push it uphill a little bit, but I feel like we're close to the top of the hill, and we'll start seeing it roll down the hill as key merchants get enabled by these token requesters that we've recently signed.

Okay, last question, Katie.

Our final question today comes from Moshe Orenbuch with Credit Suisse. Your line is open. Moshe Ari Orenbuch - Credit Suisse Securities (USA) LLC: Great, thanks. Most of my questions actually have been asked and answered. But, Al, maybe you could just elaborate a little bit on the last point. What are the types of transactions that you wouldn't see running over the network today because of not having the tokenization partnership, and how would you see that developing over the next year or two?

I think they're two unrelated things. Look, as big and as broad and as large as our network is, we are not connected to every single bank account around the world. And so I think that there could be cases, certainly as it relates to the movement in certain markets towards real-time payments, where we're doing something in partnership with another set of rails. I think as we do that, one of the things we will bring to the party, among many capabilities that we uniquely have on our network, will be tokens. But there will be other capabilities that we bring along as well, including the fact that we're global, including the fact that we have rules that handle things like disputes and chargebacks, including the fact that we've got a great array of risk and fraud tools that we can bring to the party. So that's how I think about it, Moshe.

We'd like to thank you for joining us today. If you have any additional questions, please feel free to call or e-mail our Investor Relations team. Thanks again and have a great day.

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