Welcome to Visa's Fiscal First 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. I would now like to turn the conference over to your host, Mr. Jack Carsky, Head of Global Investor Relations. Mr. Carsky, you may begin.

Thanks, May. Good afternoon, everyone, and welcome to Visa, Inc.'s fiscal first quarter 2017 earnings conference call. Joining us today are Al Kelly, Visa's Chief Executive Officer; and Vasant Prabhu, Visa's Chief Financial Officer. This call is currently being webcast over the Internet and is accessible on the Investor Relations section of our website at 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 as well. Let me also remind you that this presentation may include forward-looking statements. These statements aren't guarantees of future performance, and our actual results could materially differ as a result of a variety of factors. Additional information concerning those factors is available on our most recent reports on Forms 10-K and Q, which you can find on the SEC's website and the IR section of Visa's website. For historical non-GAAP 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, I'll turn the call over to Al.

Jack, thank you, and good afternoon or good evening to everyone. And thank you for joining us today. Let me start by saying how excited I am to be with all of you. I just completed my first quarter at Visa, and past my two-month mark as the Chief Executive Officer. I think, as many of you know, I've been a board member since early 2014, so I've been involved in the business and was a party in approving the company's strategy and priorities. I also understand the majority of the opportunities and challenges around the world. My objective from day one has been to make this CEO transition at Visa seamless for our clients, our partners, our employees, and our shareholders. I have no big plans to change our strategy in the short-term, but as a key player in a dynamic payments ecosystem, we certainly have to be prepared as necessary to adapt to our thinking as facts and circumstances change. Over the last couple of months, I've spent the majority of my time traveling to meet our valued clients, regulatory personnel and talented employees. During this time, I met with or talked to over 50 clients. I've also visited with regulators or government officials in nine countries and visited 12 of our global offices. I have to say it's been exhilarating and enjoyable. It has also reinforced my belief in our great global brand and the first-class group of clients that we have globally. Let me begin by sharing a few early observations since I joined the Visa team. Then I'll highlight the business momentum we saw in the quarter and close with some thoughts around our strategic pillars as we move forward. First, I would say, we have a fantastic leadership team. I thoroughly enjoyed spending time…

Thank you, Al. Fiscal 2017 is off to a strong start. First quarter revenue and EPS exceeded our expectations driven by accelerating fundamentals, which more than offset the drag from exchange rate shifts. On a GAAP basis, fiscal first quarter net revenues were up 25%, and EPS up 7%. Net income for the first quarter was $2.1 billion, and EPS $0.86 per diluted share. Adjusting for the $255 million non-cash gain in last year's first quarter from the write-off of the Visa Europe put liability, EPS was up 23%. Exchange rate shifts versus the prior year negatively impacted both net revenue and EPS growth by approximately 3 percentage points. There were four key drivers of our Q1 outperformance; first, constant dollar payment volume growth stepped up between 1 to 2 percentage points in most geographies; second, normalized for the impact of Visa Europe, the cross-border recovery accelerated by 2 percentage points globally from 10% to 12%, once again the acceleration was broad-based; third, normalized for the impact of Visa Europe, process transaction growth picked up by 1 point from 12% to 13%, driven significantly by India as well as the U.S.; fourth, timing of client incentives and delays in expenses added almost $0.03 to our Q1 results. Strong business fundamentals more than offset the negative impact of a strengthening U.S. dollar and a weakening euro. The balance between strong business fundamentals and unfavorable exchange rate shifts will drive our results as we look ahead to the rest of fiscal year 2017. A couple of other points to note before I get into the details of our Q1 results and our outlook for the year. We did not issue $2 billion in debt as we had planned. We did issue $567 million in commercial paper to fund our stock buyback and…

Thanks, Vasant. At this time, May, we're ready to take questions.

Thank you. First question is from Bob Napoli. Your line is now open. Robert Paul Napoli - William Blair & Co. LLC: Thank you very much. Al, congratulations on a very nice quarter. You really have accelerated momentum since you've become CEO. So congratulations on that.

Team effort, but thank you, Bob. Robert Paul Napoli - William Blair & Co. LLC: The question is on client incentives. Just the change in client incentives from last year to this year, what percentage of that is from the integration – from the Visa Europe acquisition versus other items like Costco or just general business conditions? And do you expect, as we look to fiscal 2018-2019, to see that percentage continue to increase?

Yeah, as we said on our call last quarter, we said that it was roughly half due to Europe, and some of it is how the accounting works when you remove rebates and replace them with client incentives. And the rest was driven by Costco, USAA, and also renewals that we expect this year. So nothing has changed much on those fronts. Robert Paul Napoli - William Blair & Co. LLC: As far as the longer-term outlook?

Sorry? Robert Paul Napoli - William Blair & Co. LLC: Just the trend into 2018. Sorry.

Well, I think it's too early to talk about that. We'll certainly get into all that as we get to later in the year and talk about next year. But as you know, we're tracking below our range in the first quarter, so you should assume that it'll catch up in future quarters this year. Robert Paul Napoli - William Blair & Co. LLC: Thank you very much.

Thanks, Bob.

Next question, please.

We have from KBW, Sanjay Sakhrani. Your line is now open. Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: Thanks. I was wondering if we could get more color on where you guys are with the pricing initiatives in Europe for the year.

We're moving ahead with plans we had. And some of it, as we've told you before, we don't plan to announce them per se in calls like these. Certainly, in the market in Europe, people are aware of what we have done. As we said in our comments, we are engaged with all our issuers and acquirers in Europe on all these issues. There are ongoing discussions. We're happy with how things are going. And as far as that's concerned, we're very much on track in terms of everything we wanted to do.

Next question, please.

We have from Jason Kupferberg from Jefferies. Your line is open.

Thanks, guys. So just in light of the longer consultation period in Europe and a little bit of the delay in the integration, is 2% to 3% EPS accretion from Visa Europe still the right number?

Yes, I think that's certainly what we're continuing to target, Jason.

Next question, please.

I'm sorry, we have George Mihalos. Your line is open, from Cowen. George Mihalos - Cowen & Co. LLC: Great. Thanks. Nice to see the encouraging trends pretty much across the globe. Just curious within the U.S. market, I know there's a number of deals that are still ramping up. But sort of on an apples-to-apples basis, are you seeing an acceleration on the part of your issuers in trying to push more credit products and maybe the volume you're seeing again on sort of a same store sales basis ex-Costco and USAA?

I would say that, given the continued amount of attention reward products are getting, we're certainly seeing that our issuers are very focused on the credit card segment for sure.

Yeah, in general, credit growth rates when you normalize for all things that are, as you said, adds to our business, the underlying growth trend is higher in credit than debit, and is roughly stable quarter-over-quarter.

Next question, please, May.

Next question is from Craig Maurer from Autonomous. Your line is now open.

Yes. Hi. Thanks. I was hoping with all the noise in the numbers, you could help us see through to some level of organic growth for the European franchise. Thanks.

We've tried to do our best to give you the business drivers. So if you go to our Operational Performance package, what you'll see is that European payment volumes grew 2 points faster than they did last quarter. So it was 7% growth last quarter, 9% this quarter, and that is Item 2 in the Operational Performance Data. So you can see that. And then in the commentary, we talked about cross-border being quite strong in Europe. We're seeing a huge amount of inbound commerce into the UK, certainly helped by the pound. Generally speaking, cross-border across Europe is quite strong, helped by the weakening euro. Europe is definitely a beneficiary of a lot of inbound commerce. And then in terms of transactions, I think you heard us say in our comments that transaction growth rates in Europe was stable. We're moving very well in terms of all the other actions we want to take in Europe as it relates to costs and so on. So all-in-all, as Al said earlier, we feel very good about both Europe's financial performance and also the accretion that we anticipated this year. We are on track to do as well as or better than we had assumed we would his year.

Thank you.

Thanks, Craig. Next question.

Next is from Darrin Peller from Barclays. Your line is now open.

Thanks, guys. Just a little bit of a follow up on that and then on the incentive side again. First, can you help us understand, I mean, is there a way that you can just kind of tell us what the pro forma revenue growth rate would have been had you owned Visa Europe this time last year? And then part of your guidance obviously seems predicated on, as you said Vasant, incentives being notably higher than the run rate in both fourth quarter and now the first quarter was the same as a percentage of growth. I guess just, I mean, you had USAA and Costco both in there. I know a lot of the European banks were done already. I guess, just why would it increase at that level? Thanks again, guys.

Darrin, I'll start with it, there were a couple of deals that we thought would close in the first quarter that have just drifted into the second quarter, and a couple of them are big deals outside of the United States. And so we have a pretty good insight to what the second quarter is going to look like based on the fact that these deals are either have closed or were at the very last level of red lining the deal. So we have pretty good insight. So I think the guidance that you heard from Vasant is good guidance. In terms of the first part of your question, we're not in a position to start getting into a lot of the detail on Visa Europe individually. I think we're very excited to have moved to kind of a one Visa concept that as quickly as we possibly can. We're going to be happy to be able to talk about it on a total global company basis.

Yeah. It doesn't make a whole lot of sense to sort of divide up the report, the financial reports into, this is Visa Europe's performance separately. We try to help you as much as we could in the business drivers to give you a feel for how Europe is performing and how the business is actually performing on an organic basis if you adjust for Europe. And then I think the other question you asked was, why would we expect incentives to be higher this year than the fourth quarter of last year. It's a variety of reasons, some of which we walked through on the call last time. Someway it has to do with how the accounting for the rebates worked post the acquisition of Visa Europe. It's Visa Europe coming into our numbers. It's Costco and USAA being in there for the full year. And it's some of these renewals that we were anticipating this year that Al mentioned. So what we told you is what we still expect, and that's why we indicated that what you saw in the first quarter was a result of some delays, but the overall full-year expectation for client incentives does not change.

Next question, May.

Next question is from Tien-Tsin Huang from JPMorgan.

Hi. Thank you. I'll ask on the debit routing modification that caught a lot of news when it was announced in December. With you I guess taking up guidance here doesn't seem to be a big issue from a P&L standpoint. Just curious if you can maybe comment on how impactful that modification or clarification has been or could be to your P&L. Thanks.

Per the request of the FTC, we made the clarification. But I think that for the most part we were acting in the appropriate fashion. But we see very little impact of any meaningful level on the business whatsoever.

Next question, May.

Next is from Dan Perlin, RBC Capital Markets. Your line is open.

Hey. So a quick question on India. You talked about significantly increasing transactions but not driving much revenue, and part of that was the function of the Indian Government asking you guys to kind of keep prices subdued for a little period of time. I'm wondering, as you think about the guidance that you just gave us, are you assuming more normalized pricing in that horizon, and if not, when would you expect that to somewhat normalize in your opinion? Thanks.

I think we're assuming some pricing in that model. I don't think we're – I would say, we're being fairly conservative in what we expect to be able to gain in terms of revenue. This is, I think for us very importantly, and strategically this is a build opportunity that the government really has put out there in front of us. And so in my mind, at this point I'm much more focused on capitalizing on this opportunity and investing heavily behind driving both awareness for consumers and incentive for merchants to get signed up. There's only a very fractional amount of the merchant community in India that is enabled today to be able to accept electronic or digitized payments, and we want to try to get that number up as much as we possibly can. So I think when you consider the economics of the investments we'll make in India, plus a fairly conservative pricing, it's certainly not going to be a market in this fiscal year that's going to drive a lot of profit for us. But I think, it's a great year for us to make sure that we do everything we can in one of the two largest population countries in the world to get as good a position as we can to help us over the next decade.

Thank you.

Thanks, Dan. Next question, please.

We have one from Ken Bruce from Bank of America Merrill Lynch.

Thanks. Good afternoon. My question also relates to Europe. I'm hoping you might be able or willing to compare and contrast the go-to-market strategy with the issuers, and what you're doing or what you plan to do in Europe differs from the U.S. You kind of pointed out that you've got a very incentive driven market here in the U.S. and you're able – and you've been very successful in terms of using the interchange framework here to drive a lot of issuer wins. Can you maybe just help us understand how you're attacking Europe differently?

So I think, Ken, Europe is almost a number of different segments in and of itself. I mean, the Europe for us right now is hugely dominated by the UK where we have most of the debit market taken up. Then there's four or five other markets across the EU where we have a reasonable amount of business. And then there's a number of big economies, certainly Germany being one example, where it's still a heavy cash society, where I think we've got a lot of opportunity in the medium to longer term to see more of commerce digitized or in some form of electronic form. Europe is also different than the United States in terms of processing, where there are in certain markets domestic processing schemes. And we've got a strategy to try to win more processing volume in Europe as well. So we're engaging, I would say, hopefully, what I believe to be a thoughtful segmented approach with different issuers and different acquirers on a country-by-country basis because each of these countries is different, and having spent most of my life as an issuer on the issuing side of the business, I know full well that the issuing business is really a local consumer business, and you've got to figure out the right strategy on a market-by-market basis. So we're not going to have kind of a pan-European strategy. It's really going to be a market-by-market strategy within Europe.

Next question, please.

Next question is from Lisa Ellis from Bernstein. Your line is open. Lisa D. Ellis - Sanford C. Bernstein & Co. LLC: Hi. Good afternoon. Al, I just wanted to ask you if you wouldn't mind commenting on two areas that you did not explicitly mentioned in the strategy that you laid out; one is Visa's expansion into adjacent markets like remittance or potentially into B2B, and what your plans are there; and then, secondly, when you mentioned partnerships, you did not call out the big tech firms like Apple, PayPal, Alipay, et cetera. And so I'm just curious if you have a comment there. Thanks.

On the latter, Lisa, I think I maybe shorthanded it, but I did say that we're working with all the pays, and so it's all of those pays. And we're in different stages of relationship with all of them. But obviously they're increasingly important people in the payments ecosystem as mobile devices become an important form factor in the digital world. So absolutely we're working with them. Look, I think there's a lot of vectors for growth for Visa, and the whole commercial space and disbursement of different kinds and business-to-business kinds of payments are very much on our radar screen. We have a group of people headed by a very senior person who's dedicated to this space now. We're not as strong a player as we'd like to be, but we are stacked up and spending a lot of time on this issue. And it's something that we do want to get a stronger position in the whole commercial and B2B space.

Next question, please.

Next is from Moshe Katri, Wedbush Securities. Your line is now open.

Hey. Thanks for taking my question. One, can we get an update on the PayPal agreement in terms of where we are? And then in that context, going back to Visa Europe, have we seen any change in issuer attrition while you're renewing your book there? Thanks a lot.

Well, in terms of the latter question first, I think either in mine or Vasant's remarks, we talked about the fact that a lot of our issuer volume in Visa Europe is under contract. So we actually bought Visa Europe at a time where we've got a pretty good book of business that's going to be with us for a while. I mean, that said, as I said in my remarks, I'm very, very much a client-focused person, and we're going to work hard with every single one of our clients in Europe as well as around the world. But we do have a lot of good long-term relationships locked up. In terms of PayPal, I'd say that everything is progressing as planned. Our issuer clients who are very important to us, obviously, are engaged with PayPal, and they're working to migrate customers off of ACH back onto their cards. PayPal has been executing marketing campaigns and changes in their user experience to make it much easier for Visa card holders to pay with their Visa card, and to make it their default payment option.

Thanks.

Next question, please.

Next question from Wasserstrom from Guggenheim Securities.

Thanks very much. My question, Vasant, is just on the use of CP and short-term debt rather than the debt issuance that you had planned. What motivated that decision, particularly given that the rate environment presumably would be pretty good still for term debt?

Well, the fact is that we have offshore cash. And let's say we issue $2 billion of long-term debt, and we're able to repatriate somewhere in the region of $8 billion of offshore cash either because there's a change in the rules that allows it to happen tax efficiently, or because we are able to, as part of our – some thoughts and ideas we have on the re-organization in Europe, we're able to repatriate cash. We will have more cash than we need to keep for settlement guarantees and all that. And that excess cash is available. So that's the reason to wait a bit and see whether we want to use our own cash rather than lock in more long-term debt. I mean, this is something we monitor on a regular basis, and if there's any changes on that front, we'll certainly let you now.

Thanks, Eric. Next question, please.

Next question from Bryan Keane from Deutsche Bank. Your line is now open.

Hi. I just want to ask in the U.S. debit market, you guys talked about some headwinds due to the PIN debit routing choices. Is that a shift from Interlink to other EFT networks, or are you guys seeing or think you're going to see a switch in the market towards more PIN versus Signature? And then just quickly, secondly on cross-border volume, what are you guys expecting exactly in the guidance, continue at these elevated levels or to fall back down?

So on the first question, what we talked about was really that our Signature Debit business actually stepped up in growth rate by 3 points this quarter, and that's driven a lot by USAA. So really all we were referring to was switch away from our PIN debit volume, which would be Interlink volume. Some of it is because the Interlink volume declined this quarter as it did last quarter, some of which we told you was because we were lapping a significant win from the fourth quarter of 2015, and then some of it was because volume moved to other PIN debit networks. So it was all around volumes away from our PIN debit network, or hard comparisons for our PIN debit volumes versus prior years. So that was the answer on that one. What was the other question?

Cross-border volumes.

Oh yes, cross-border volume, I think as I said in my comments, for the first 28 days of January, cross-border volume growth was certainly holding up. But the dollar has strengthened, so our go- forward assumptions assume that the cross-border growth rate is healthy but perhaps a little bit of a moderation in the rate of growth than what we saw in the first quarter. So we'll wait and see.

Next question, please.

From Jason Deleeuw, Piper Jaffray. Jason S. Deleeuw - Piper Jaffray & Co.: Thanks. I was hoping to get an update on Visa Checkout, what some of the current investments are right now on the consumer merchant side. And then what's the longer-term vision for Visa Checkout and how does that fit in with the partnerships with the other pays? Thank you.

Well, we think of Visa Checkout as a platform, and it's all part of us trying to make sure that we're a leader in terms of bringing potential solutions to the marketplace. We feel very good about the fact that we now are up to 18 million users signed up for Visa Checkout. It happens to also be a very active base of customers in terms of usage of Visa Checkout. We are facilitating more of our issuer clients to put their products side-by-side, embedded within Visa Checkout. And at this stage, the pays are out there obviously doing their thing as well, and we're going to continue to work with them. I think it's too early to tell how all of this is going to shake out. My personal view is that there are too many wallets out there. Consumers are not going to ultimately want to have 50 wallets, and we're not necessarily anxious to be in the wallet business per se, but we're anxious to take advantage of us being a trusted acceptance mark in the payments eco-space, and want to be able to make sure that we're taking a leading position in establishing Visa as a trusted mark, and as an important partner to our issuers in terms of them trying to establish as much volume as they can get in the digital space.

Next question, May.

Next from Jim Schneider, Goldman Sachs. James Schneider - Goldman Sachs & Co.: Good afternoon. Thanks for taking my question. I was wondering if you could maybe comment on the impact broadly that you expect from the Trump administration and other Congressional policies, both in terms of tax policy, regulatory impacts, or other impacts, and maybe talk about some of the largest positive or largest potentially negative things you can see in the future.

Jim, I think, it's too early to tell. I mean, we're barely two weeks into this presidency. And while the President has been active with executive orders, I think that as things start to settle down and we get into more specific policies and his cabinet is confirmed and in place and the legislature gets going, I think it remains to be seen what happens. I will tell you this, that we have a world-class group of government relations people who are already fully engaged as much as we can in the relevant conversations in Washington. But I think there's things that relate to trade, relate to taxes, all of which could play into our business. But I honestly just think it's too early to start to speculate. And we're certainly not building anything into our plans positively or negatively for that matter related to any policies that might come out. But I can assure you that we're watching it very closely.

Thanks, Jim. May, next question.

From James Faucette, Morgan Stanley. James E. Faucette - Morgan Stanley & Co. LLC: Thanks very much. Wanted to kind of follow up on that. You talked about having visited with a lot of customers as well as government officials, et cetera, around the world since you've taken on the CEO role. Can you talk and summarize a little bit what the particular regulators were asking from Visa, and kind of what their objectives are, and how Visa can help fulfill those? And I guess, kind of what's happened in India as it creates an interesting lens through which to view that. So maybe elaborate a little bit on some of those relations, et cetera. Thanks.

So I've talked to regulators in both very developed markets as well as regulators in developing and emerging markets, and I think the content and tenor of the conversations is a bit different depending upon who you talk to. I mean, there are governments around the world who very much are seeking a close partnership with us. Their desire is learning how they can be helped in moving to a much more of a cashless society, how they can get many more of the people in their countries actually engaged in the financial system, how there could be greater financial literacy. And so in those particular cases, I would say that we're trying to take a very active role, and in some cases a very proactive role, in helping shape how the government thinks about what steps they ought to take. Including, by the way, in some cases working with governments to have them be a role model by making sure that they are moving away from paper in favor of a digitized world. So for example, in Egypt, instead of vouchers being handed out, giving people prepaid cards so that they could in fact begin to start to have an experience with plastic. And what that does is it automatically starts setting up and incenting a whole merchant network to get built out as these people have to have a place to go, be able to spend their money that's on these prepaid cards, and merchants in this particular example who are involved in food and beverage, for instance, want to be able to get their fair share of that volume so they're very quickly incented to get to a point where they can accept plastic and be signed up as a merchant. In more developed countries, there are…

Thanks, James. May, at this time we have time for one more question.

We have Tom McCrohan from CLSA.

Hi. Thanks for squeezing me in. You've covered so much ground on the call, I'll just ask a simple question. The total integration cost of $450 million to $500 million over the next three years, any change to that. Thank you.

Yeah, we said it was $80 million this year. We'll wait and see how things go and give you any updates as we get towards the end of the year on future outlook. But at this point, really we wouldn't say anything different about the future. We expect that we will spend the $80 million we thought we would spend this year. Thank you.

Thanks, Tom, and thank you all for joining us today. If anybody has any follow-up questions, feel free to call Investor Relations. And when we have a set date for our June Investor Day, we will put that out in the public domain. Thank you, all.

Thank you.

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