Jack Carsky - Head, Global IR Byron Pollitt - CFO Charlie Scharf - CEO.

Sanjay Sakhrani - KBW Tien-tsin Huang - JPMorgan Chase Bryan Keane - Deutsche Bank Glenn Fodor - Autonomous Research Dan Perlin - RBC Capital Markets James Friedman - Susquehanna Financial Group/SIG Don Fandetti - Citigroup David Hochstim - Buckingham Research Craig Maurer - CLSA David Togut - Evercore Darrin Peller - Barclays Capital Jennifer Dugan - Sterne, Agee.

Welcome to Visa Inc.’s Fiscal Q2 2014 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, Adrian. Good morning, everyone, and welcome to Visa Inc.’s fiscal second quarter 2014 earnings conference call. With us today are Charlie Scharf, Visa’s Chief Executive Officer, and Byron Pollitt, Visa’s Chief Financial Officer. This call is currently being webcast over the Internet.

It can be accessed on the Investor Relations section of our Web site at www.investor.visa.com. A replay of the webcast will also be archived on our site for 30 days. A PowerPoint deck containing financial and statistical highlights of today’s commentary was posted to our Web site prior to this call.

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 the result of a variety of factors.

Additional information concerning those factors is available in our most recent reports on Forms 10-K and Q, which you can find on the SEC’s Web site in the Investor Relations section of our Web site.

For historical non-GAAP or pro forma related financial information disclosed in this call, the related GAAP measures and other information required by Regulation G of the SEC are available in the financial and statistical summary accompanying today’s press release. This release can also be accessed through the IR section of our Web site.

And with that, I'll now turn the call over to Byron..

Thanks, Jack. Let me begin with my usual callouts and observations.

First, turning to revenue, as expected and previewed on our call last quarter revenue growth moderated during the quarter, growing 9% year-over-year on a constant dollar basis or 7% nominally, which includes the expected 2 percentage points of FX headwind we had been guiding to since the beginning of the fiscal year.

As a reminder the current Q2 is lapping 15% revenue growth in the prior year quarter, which benefited from a number of favorable one-time adjustments. Looking ahead to Q3, we expect nominal revenue growth to be in mid single-digits which could be a couple of percentage points below Q2’s growth rate.

As signaled on last quarter’s call, a softer Q3 growth rate was also anticipated given continued FX headwinds of 2 percentage points, a 17% revenue comp in the prior year quarter, also driven impart by one-time events and a moderation in cross-border spend which we view as short-term.

After two softer quarters in fiscal Q4, we expect to see constant dollar revenue growth more reflective of the secular shift as well as the e-commerce and mobile trends that have driven and will continue to drive attractive growth for years to come.

As a footnote to fiscal Q4, we expect very little impact from Chase card conversions, particularly given our quarter lag and reporting of service fees. This event will have more impact in fiscal year 2015.

Our guidance for client incentives remains unchanged, despite delivering first half client incentives as a percent of gross revenues of 15.8%, we expect incentives to be second half weighted and finish the year within the current guidance of 16.5% to 17.5%.

On a full fiscal year basis, we now expect our guidance of low double-digit constant dollar net revenue growth to be in the 10% to 11% range with a negative 2 percentage point impact from FX. Now let’s turn to payment volume and transaction growth. On a constant dollar basis global payment volume growth was 12% unchanged from Q1. U.S.

payment volume growth for Q2 was 8%, also unchanged from Q1. With a boost from Easter timing and better weather U.S. payment volume growth for the first 21 days of April rose to 12%. The deceleration in cross-border growth seems to be bubbling out.

Q2 constant dollar growth was 8%, 4 percentage points down from Q1, but the first 21 days of April registered 7% growth nearly flat to Q2. Cross-border weakness is pronounced in Latin America, as in Brazil, Argentina, Venezuela, the Canada to U.S. corridor and Russia.

Visa process transaction growth was a healthy 11% in Q2 and rose to 14% for the first 21 days in April. Taken together we are seeing a sustained economic recovery, but no signs yet of acceleration. A word on Russia and Ukraine, we have clearly seen a drop-off in cross-border volume and sanctions are expected to have some impact on volume.

Our guidance assumes several pennies of EPS impact for the fiscal year. We are fully engaged with all parties involved and we’ll continue to adjust our outlook as the situation clarifies overtime. Next callout relates to our effective tax rate for the period.

At 22% for the quarter, our rate was positively influenced by the recognition of tax benefits under IRS Section 199 which allows for the deduction of a portion of the income related to U.S. domestically produced computer software.

As a reminder, successfully employing strategies to manage our tax rate lower has been a consistent component of our earnings guidance since we went public in 2008 and will continue to be in the future.

The total benefit to the quarter was $218 million, $184 million of which represented prior years and $17 million of benefit for each of the first two fiscal quarters. We expect an additional 30 million to 35 million of benefit over the remaining two fiscal quarters and a continuing benefit in future years.

Accordingly, we are adding to our guidance for fiscal 2014 a full year tax rate approaching 30%. Please note, this rate was contemplated in our full year EPS guidance for fiscal 2014. Last callout, we remain bullish on our future growth prospects and fully committed to returning excess cash to our shareholders.

To this end, we repurchased a total of 5.1 million shares during the quarter at an average price per share of $217 and change resulting in the total cost of 1.1 billion. This leaves an outstanding open to buy of 3 billion at the end of March, and as always we will take advantage of market movements to effectively repurchase at attractive rates.

Now let me dive a little deeper into the numbers. As noted earlier global payment volume growth for the March quarter in constant dollars was 12%, the U.S. grew 8% and international grew 16%. Drilling down further for the March quarter, U.S. credit growth was 11%, slightly higher than the 10% in Q1. Through April 21st credit improved to 14% growth, U.S.

debit was 7% in Q2, flat compared to Q1 and through April 21st debit also improved, rising to 11% growth. As mentioned earlier, global cross-border volume delivered an 8% constant dollar growth rate in the March quarter, down from 12% in the December quarter. The U.S. grew 7% and international grew 8%.

Through April 21st cross-border volume on a constant dollar basis grew 7% with the U.S. growing 8% and international registering 7% growth. Transactions processed over Visa’s network totaled 15.4 billion in the fiscal second quarter, an 11% increase over the prior year period, the U.S. grew 7% while international delivered 23% growth.

Through April 21st, processed transaction growth rose to 14%. Now, turning to the income statement.

Net operating revenue in the quarter was $3.2 billion, a 7% increase year-over-year, driven primarily by growth in both domestic and international transactions and as mentioned earlier, negatively impacted by a 2 percentage point foreign currency headwind.

Moving to the individual revenue line items, service revenue was $1.5 billion, up 7% over the prior year and was driven by moderating global payment volume growth. The difference between the 7% reported revenue growth and the 12% growth in constant dollar payment volume is largely due to 3 percentage points of negative FX.

Visa service fees are disproportionately impacted by foreign exchange translation, compared to other revenue lines. Data processing revenue was $1.2 billion, up 7% over the prior year’s quarter based on solid growth rates in Visa process transaction both in the U.S. and internationally.

The difference between 7% revenue growth and 11% transaction growth in the period was due to one-time SAMs accrual reversals in the prior year in combination with the influence of the fixed fee component associated with the SAMs pricing structure that does not grow with transactions.

International transaction revenue was up 5% to $871 million reflecting some moderation of growth across the globe that first impacted us at the outset of calendar year 2014. Total operating expenses for the quarter were $1.1 billion, up 2% from the prior year.

Certain expenses have been rephrased to the Q3 and Q4 fiscal quarters and as signaled last quarter, we continue to expect elevated marketing investments in Q3 and Q4 relative to Q1 tied to the 2014 FIFA World Cup event.

Operating margin, 65% for the second quarter, ahead of our annual guidance of low 60s, but consistent with our expectations for higher expenses in the fiscal third and fourth quarters. That said we now expect our full year operating margin to be in the low to mid 60s. Capital expenditures were $97 million in the quarter.

At the end of the March quarter, we had 629 million shares of Class A common stock outstanding on an as converted basis. The weighted average number of fully diluted shares outstanding for the quarter totaled 634 million. Finally, given our year-to-date results and our outlook for the balance of the year, let me recap our full year guidance.

Constant dollar net revenue growth 10% to 11% with 2 percentage points of negative FX impact; client incentives in the 16.5 to 17.6 range; operating margin in the low to mid 60s; tax rate approaching 30%; EPS growth of mid to high-teens; free cash flow of about 5 billion. And with that I’ll turn the call over to Charlie..

Thanks a lot Byron and good afternoon everyone. Let me start with a couple of comments about the quarter and reiterate some of the things that Byron had said. First of all and probably most importantly to us as we look at our results underlying what we see the business drivers from the most part remains steady from last quarter. Specifically the U.S.

spending levels grew consistent with that of the prior quarter, not accelerating or decelerating but still reasonably strong and as Byron had mentioned April is off to a strong start which is certainly encouraging for us. Non-U.S. domestic spending grew consistent levels as well and non-U.S.

cross-border spending was weaker and as Byron mentioned, it’s from very specific corridors which we can certainly talk more about. Revenue growth came in where we expected and as we mentioned it was impacted by the strong U.S.

dollar and these non-recurring comps from the prior year, and we expect these effects to be slightly more pronounced in the third quarter. And looking even beyond the third quarter, we would expect in the fourth quarter to see revenue growth more reflective of the strong payment volumes that continue to underpin our quarterly results.

Let me move now for a second and just describe what we see in Russia. As I’m sure you all know the U.S. government imposed economic sanctions a few weeks ago which has forced us to take action. We’re complying with U.S. law as you would expect which means that two affected banks cannot issue or acquire transactions for Visa.

These banks represent less than 1% of our volume in Russia and you would expect that we would continue to comply with U.S. law as sanctioned situation evolves. As of now all of the Visa systems are processing normally and we continue to serve all of our other clients in Russia today. Due to U.S.

sanctions the Russian Duma is working on modifications to the current national payment system law, President Putin has directed the Duma to pass a series of changes which could pass as early as tomorrow.

The proposed modifications are evolving, but as we understand them could include the following; first of all, all domestic data processing would need to be onshore; second, most domestic transactions data would need to remain domiciled within Russia; third, a payment network must provide continuity of services in compliance with Russian law; fourth, the creation of a settlement center 100% owned by the Central Bank of Russia; fifth, a collateral requirement for foreign payment systems; and lastly, the ability to impose volumes on foreign payment system providers.

Keep in mind, this is all still fluid and while none of this is certainly helpful for Visa if passed, parts might even cause us to rethink our domestic processing opportunity in Russia. But we are hopeful that there is still opportunity for Visa to participate in the growing in the electronic payments business in Russia.

We will not understand the impact on our business in potential future until the laws and regulations are completed. But we remain committed to finding ways to provide our services as long as U.S. government and Russian governments allow. On the legal and regulatory front, not a lot to talk about this quarter as I’m sure you know in late March the U.S.

Court have appealed for the DC Court rule but the Federal reserve acted properly in its interpretation of Dodd-Frank a result which we are obviously pleased with.

A quick update on payment security and specifically industry collaboration, last quarter I spoke at length about the need for the industry defined broadly to work together to create payment standards and improve security. We believe there is an opportunity for this collaboration to occur and are encouraged.

We and MasterCard have formed a cross-industry working group to accelerate this joint-collaboration. The purpose is to work with a broad group of participants in the payments landscape, not just to move forward to more secure technologies in the short-term, but to think in long-term as well.

This includes driving EMV adoption, but it looks to create a clear roadmap for the future of payment security, inclusive of both physical, POS as well as card-not-present transactions. The group will have representation of banks of all sizes, credit unions, acquirers, retailers, point of sale manufacturers and industry trade groups.

We also look forward to broad network participation so we can be as effective as possible. On EMV specifically First Data Star Network, FIS’s NYCE Network, Discovery Financial Services PULSE Network, and other regional network providers have agreed to participate in the common debit solution that these introduced last year.

The collaboration between Visa and our partners will help enable the deployment of debit EMV solutions. This is again an example of industry players working together to move payment security forward. Let me talk for a second about tokenization.

The standards, services and technologies we’re working on will play an important role, not just in security but in enabling and securing new payment experiences in the online mobile and face-to-face channels. We are making progress on our work towards getting it into the marketplace.

The token standard that we, MasterCard and American Express jointly wrote and sponsored has been adopted by EMVCo, the industry standards body, and is currently at a common period across the other card networks, banks and security industry groups.

We will be rolling out our token services capable of associating a limited use of Visa token with an underlying card credential and are working with issuers, processors, and acquirers that introduced our first wave of token programs.

You will see applications deployed within the next 12 months and these tokens will play a role in our offerings but also those of select strategic partner engagements ranging from remote online or mobile purchases to proximity mobile interactions. We have also talked a great deal about our merchant efforts.

We recently reorganized the Company to strengthen the outreach to our merchant partners. We are lucky to have hired Ramón Martin, a well-respected industry expert in payments with a great deal of merchant knowledge. As an example, he has a history as the member of the Board of Directors of the National Retail Federation.

We are excited that he will lead our efforts relative to our merchant strategy, and help deliver customized products and services, and look forward to discussing more specifics in the future. Let me now just turn for a second and just talk about small business merchants.

We have had made changes to our FANF structure, our fixed acquirer network fee, including modifications that are designed to lower or in some cases eliminate FANF, on volume from small merchants with less than $15,000 in annual gross Visa sales.

Most importantly, we believe these changes can serve to expand the Visa acceptance among very small businesses, while eliminating the fees for smaller retailers we’re also making other adjustments to FANF to improve the alignment of these fees, regardless of whether a merchant connects to Visa through an acquirer, a processor, a payment facilitator, or other party.

We have also talked on these calls about rules in the past and our efforts to simplify our operating regulations. On October 1st we will be eliminating close to half of our operating rules.

This includes reducing the complexity of our dispute resolution processes, and while we are making substantial changes now we continue to get client feedback and we will continue to introduce more changes beyond. Let me talk for a second about Japan.

I have spoken about two things here in the past, both the opportunity within Japan but also the importance of growing our processing business globally.

Just a reminder, that although Japan is the third largest economy in the world by GDP, the number of payment cards in the market and usage is still very low, only 14% of PCE and just 8% on Visa products.

Earlier this month we acquired 100% ownership of GP Net, a joint-venture that we have founded with seven leading Japanese issuers back in 1995, as a result of having total control, we now control our domestic transaction processing activities.

It will allow us to further integrate our processing and product solutions to merchants, acquirers and issuers something that we are very excited about. We are also very focused on the debit opportunity in Japan.

While debit is still considered in its infancy stage, there is a meaningful opportunity for growth given the large deposit base which exists in the banks from which to grow a debit business.

As an example, this quarter we launched Visa Debit with Bank of Tokyo-Mitsubishi, one of the three mega banks, again just one example of how we’re working collaboratively with the banks to target a very meaningful opportunity. So to conclude, let me just make a couple of comments looking ahead.

First of all I continue to remain very excited about the opportunity that we have to continue growing the business. While the strengthening U.S. dollar and difficult comps from the prior year have affected our reported revenue and will again next quarter, the underlying revenue growth of the business is strong.

It will accelerate as the economic recovery accelerates as well, and most importantly the long-term secular trends and our competitive position remain as strong as ever and I’m constantly reminded that there’s more cash to dis-intermediate than when the Company went public in 2008. And with that Byron and I are glad to take your question..

Question:.

and:.

(Operator Instructions) Our first question is from Sanjay Sakhrani from KBW. Sir, your line is open..

Thank you. I guess I just wanted some more context or on some of the comments Byron had about the volumes. Byron you talked about cross-border weakness being temporary and seeing some firmness in the decline.

Could you just talk about what gives you comfort that we could rebound from here or at least flatten out? And then second, you guys talked about sustained economic growth and not accelerating growth, is that simply just by observing the absolute volume statistics or there something else you’re seeing underneath the covers that lead you to believe it’s more sustained versus accelerating? Thank you..

Thank you. I guess I just wanted some more context or on some of the comments Byron had about the volumes. Byron you talked about cross-border weakness being temporary and seeing some firmness in the decline.

Could you just talk about what gives you comfort that we could rebound from here or at least flatten out? And then second, you guys talked about sustained economic growth and not accelerating growth, is that simply just by observing the absolute volume statistics or there something else you’re seeing underneath the covers that lead you to believe it’s more sustained versus accelerating? Thank you..

So, let me start with cross-border, we haven’t seen single-digit cross-border growth rate since I would say 2009, that was five years ago and given the underlying secular trends in our business none of those are diminished, none of those are going away. As Charlie said, there’s more cash to dis-intermediate today, note, outside the U.S.

in particular, then it was when we went public, so from our standpoint, we look at cross-border, the fundamentals are still in place, it recovered nicely from 2009, so we expect to see the same, hard to predict when, and it may be a little early to call, given the April results, but by -- given the 4 percentage point drop we saw between the two quarters and given the fundamentals underpinning this secular shift, our view is we could be reaching a bottoming out, and in any event looking forward we would expect this to move north.

In terms of the broader economic question of sustained recovery, this is very much anchored in the volume trends we’re seeing, recognizing that there is modest but if not weak job creation in the U.S., at some point that will begin to accelerate but we are adding jobs, so the underlying fundamentals that should inform and drive spend are in place, they’re just in first gear, and so that’s our take on the environment.

Charlie, would you like to add?.

The only thing that I’m going to add, back to the first part of the question on cross-border, as Byron and I both pointed out, the corridors that we’re seeing the weakness are very-very specific places, so for instance when you look at U.S.

cardholders traveling abroad, that volume, those growth rates are actually flat quarter-to-quarter, which is obviously a good sign for the core U.S. and the health of the U.S. consumer, again in very-very specific places and not at all across every single geography which would give us more cause for concern..

Next question....

Could I ask one more follow-up, if you don’t mind? Embedded in your guidance is what assumption around cross-border growth for the rest of the year?.

Could I ask one more follow-up, if you don’t mind? Embedded in your guidance is what assumption around cross-border growth for the rest of the year?.

No acceleration..

Okay, great. Thank you..

Okay, great. Thank you..

Our next question is from Tien-tsin Huang from JPMorgan Chase. Your line is open..

Great. Thanks. Just to clarify is the revenue revision at the high-end of the revenue outlook is that really just explained by cross-border or is there something? Just wanted to clarify.

And then just maybe on the Russia front, did you disclose how much it represents in terms of revenue, today and I’m curious as a bigger picture question, sorry to build on this but, maybe Charlie, does this Russia situation sort of build this case that maybe countries are going to consider creating their own domestic schemes like the ones that Putin’s talking about? Thanks..

Great. Thanks. Just to clarify is the revenue revision at the high-end of the revenue outlook is that really just explained by cross-border or is there something? Just wanted to clarify.

And then just maybe on the Russia front, did you disclose how much it represents in terms of revenue, today and I’m curious as a bigger picture question, sorry to build on this but, maybe Charlie, does this Russia situation sort of build this case that maybe countries are going to consider creating their own domestic schemes like the ones that Putin’s talking about? Thanks..

Great. Thanks. Just to clarify is the revenue revision at the high-end of the revenue outlook is that really just explained by cross-border or is there something? Just wanted to clarify.

And then just maybe on the Russia front, did you disclose how much it represents in terms of revenue, today and I’m curious as a bigger picture question, sorry to build on this but, maybe Charlie, does this Russia situation sort of build this case that maybe countries are going to consider creating their own domestic schemes like the ones that Putin’s talking about? Thanks..

I’ll tell you what Tien-tsin, could you re-ask your first question, I didn’t actually understand it..

Yes, I’m rambling a little bit Byron, just the first question in a simple way, is the revenue revision in terms of your outlook, I think you said it was 10 to 13 before, and now we’re looking at 10 to 11, if I heard that correctly.

It’s the difference there just across the border or is there something else?.

Yes, I’m rambling a little bit Byron, just the first question in a simple way, is the revenue revision in terms of your outlook, I think you said it was 10 to 13 before, and now we’re looking at 10 to 11, if I heard that correctly.

It’s the difference there just across the border or is there something else?.

Yes, I’m rambling a little bit Byron, just the first question in a simple way, is the revenue revision in terms of your outlook, I think you said it was 10 to 13 before, and now we’re looking at 10 to 11, if I heard that correctly.

It’s the difference there just across the border or is there something else?.

Yes we would -- it’s heavily driven by cross-border. We would also add that U.S. debit down shifted more than we had anticipated when we constructed the original range. And so those are the -- I would say those are the two primary..

Understood.

And then on the Russian stuff?.

Understood.

And then on the Russian stuff?.

Understood.

And then on the Russian stuff?.

On the Russia, let me answer the first part of the question, which is the revenue part and then I’ll turn it back over to Charlie for the second part.

When we said that there were several pennies of impact, you may attribute 100% of that to revenue, and we didn’t put any expense offset against that, so it would be the revenue equivalent in this fiscal year, and heavily weighted, 90% weighted to fiscal Q’s 3 and 4..

And the only thing I would just, on that point, and then going to your last point Tien-tsin is, remember, we don’t know exactly, what our position will be in the marketplace. So the issues that exist really today relate to domestic processing within Russia.

We still think by the way that there is meaningful reasons why the Russian government should want ourselves and the other established networks to participate there. And so we’re not assuming that it’s in the best interest of them for us not want to be there.

And away from the domestic business there’s obviously a very big part of our opportunity there is cross-border, which as you know is extremely hard to build a cross-border brand and processing assets in a short period of time. So again we really are still trying to understand ourselves exactly how this could play itself out.

But still are hopeful that we still have a meaningful opportunity to continue to participate in the growing electronic payments business in Russia. And then we are broadly, kind of your last part of question on national payment systems, certainly the activities within Russia get people thinking about what it means for them.

I’m not sure how many parts of the world are actually contemplating the types of activities that Russia has taken upon themselves to bring about the sanctions which certainly should factor into people’s minds. But as you know there are national payment schemes in different parts of the world that we compete with.

And you know we firmly believe that what we have to offer goes well beyond what a national payment scheme can offer in terms of the capabilities of our network, our global acceptance, our ability to be accepted across all channels, fraud screening, I mean we can go on and on with the list.

And so we are used to competing, and as long as there is the opportunity to compete, then we feel okay about the prospects. But certainly it’s an issue..

Excellent, thank you..

Excellent, thank you..

Excellent, thank you..

Next question. .

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

Yes hi guys just a couple of questions. One, just the down shift in U.S.

debit and then obviously the lower cross-border volume, is any of that impacted by a share shift or share loss, or do you think that’s all economically driven? And then secondly just a clarification on Russia, is the a couple of pennies, that you’re talking about in earnings hit, is that 100% of Russia going away, or is that just the piece you think is going away due to the written proposal of the legislation that Charlie highlighted? Thanks..

Yes hi guys just a couple of questions. One, just the down shift in U.S.

debit and then obviously the lower cross-border volume, is any of that impacted by a share shift or share loss, or do you think that’s all economically driven? And then secondly just a clarification on Russia, is the a couple of pennies, that you’re talking about in earnings hit, is that 100% of Russia going away, or is that just the piece you think is going away due to the written proposal of the legislation that Charlie highlighted? Thanks..

On U.S. debit, it is, and we expect it to continue to be a pretty competitive space without full access to all the other debit spend just yet hard to know whether there is any shift going on. But we think that there has been a down shift in debit spend.

We saw some of it occur right after the target breach, and so this is one where -- we’ll just have to see it play out where we are encouraged by the spike post to Easter. So I think we will stay with this question over the next couple of quarters and get better informed. Cross-border, we don’t think so, in terms of share shift.

When you revert back to very specific corridors, very specific countries that have regulatory and tax events namely in Brazil and Argentina, manipulation of exchange rates by the Venezuelan government, those things are going to impact everybody. And so we don’t think there is a sense of share shift there.

This is just something much more fundamental to cross-border travel, and it should impact all. With regards to Russia a portion of the down shift in revenue growth is very clearly cross-border. In the quarter leading up to the Crimea crisis we began to see a down shift in Russian travel. But it was a modest deceleration.

It then dropped quite a bit further after the Crimea crisis unfolded. This is a level of travel that this country generates a level of cross-border travel that if things quote return back to normal whatever that is in the future, we could easily see a rebound in Russia, Russian cross-border.

We have got some place holders in for sanction effects that could be ongoing but honestly as Charlie said it’s way too early to call this the situation is very much fluid at the moment and we’ll keep you updated as we progress.

Charlie do you want to add?.

No I think that’s fine..

Next question..

Our next question is from Glenn Fodor of Autonomous Research. Your line is open..

Hi.

Thanks for taking my question I appreciate all the color on a confusing situation like Russia, but Charlie turning to a issuer that you know very well during the quarter Chase gave a little more color on what they’re doing with ChaseNET so now given the largest wallet initiative out there among the large issuers so just thinking about it this initiative takes hold in other and successful for them and other large issuers start considering the same strategy what you think it means for your efforts with V.me and I’m sure this issue comes in your discussions with large issuers.

Can you shed some light on how they reconcile the thoughts between their own initiatives on wallets and V.me? Thanks..

Hi.

Thanks for taking my question I appreciate all the color on a confusing situation like Russia, but Charlie turning to a issuer that you know very well during the quarter Chase gave a little more color on what they’re doing with ChaseNET so now given the largest wallet initiative out there among the large issuers so just thinking about it this initiative takes hold in other and successful for them and other large issuers start considering the same strategy what you think it means for your efforts with V.me and I’m sure this issue comes in your discussions with large issuers.

Can you shed some light on how they reconcile the thoughts between their own initiatives on wallets and V.me? Thanks..

Sure. Listen I can’t speak for every issuer or certainly I cannot speak for Chase as well what I can tell you from our point of view is we are fairly agnostic as to whether it’s our wallet or someone else’s wallet as long as our cards are appropriately represented on a fair level playing field.

And in the case of Chase whether it’s our cards or whether it runs over VisaNet or their version of VisaNet again we view those as our transactions.

So to the extent that other issuers choose to want to go build their own wallets we’ll be supportive of that but that doesn’t stop us from continuing to build our wallet capabilities which I don’t like to use the word wallet I like to use the word digital acceptance as a way to think about what we’re trying to build.

So that every bank out there and to serve its customers properly in digital commerce with digital acceptance. So hope that answers your question..

Next question..

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

Thanks.

So just quickly I thought I heard you say Charlie that there you’re dropping as of October 1st you’re eliminating say 50% of your operating rules is that?.

Thanks.

So just quickly I thought I heard you say Charlie that there you’re dropping as of October 1st you’re eliminating say 50% of your operating rules is that?.

That’s correct..

Okay.

And so what I was trying to get at I guess in that question is what is it that I guess you’re hoping to achieve by simplifying that I know it’s a big part of your strategy that you’ve highlighted in the past but I’m wondering is that hope that it’s going to come with incremental volumes and the retailers are looking to this and you’ve also adjusted the stamp fee for small merchants so I’m just trying to understand from a bigger perspective what is it that you’re hoping to gain by changing half of your operating rules that’s a pretty significant change?.

Okay.

And so what I was trying to get at I guess in that question is what is it that I guess you’re hoping to achieve by simplifying that I know it’s a big part of your strategy that you’ve highlighted in the past but I’m wondering is that hope that it’s going to come with incremental volumes and the retailers are looking to this and you’ve also adjusted the stamp fee for small merchants so I’m just trying to understand from a bigger perspective what is it that you’re hoping to gain by changing half of your operating rules that’s a pretty significant change?.

Shortlist and I think all of these things that you pointed out in addition to the operating regs go towards the point of I think most people would tell you whether you’re an issue or merchant or in an acquirer people would say that historically that we were probably pretty difficult to deal with and we operate in a very competitive world today people have choices both established choices and have the opportunity to think of other ways to process payments and we want people to enjoy doing business with us and to think that we treat them openly, fairly and clearly and our operating regs which I’ve got the version and they’re sitting on my desk it’s actually 1,538 pages pre our changes.

Okay.

And so imagine trying to be -- you are an issuer or an acquirer and you’ve got to live by those and so simplification redundancy helping people understand what it means to do business with us as well as going out and what we’ve been doing is asking again issuers, acquires, merchants what don’t you like in that, what doesn’t makes sense and a big part of the feedback that we received was on charge backs and the processes that we have put in place, the reporting requirements documentation and things like that.

So we’re very committed to continuing to support the integrity of our brand, the integrity of the payment system security and things that go towards the quality of our network but we have to be the kind of place that people say I understand the rules, I understand what it means to do business with you and you don’t have a bunch of things buried on page 1,427 that they didn’t understand.

That in combination with these other things again I think just as if I was on the other side trying to figure out who I would want to do business with is the way I’s wanted to be treated and that’s way we’re approaching it..

Got it, thank you..

Got it, thank you..

Next question..

Our next question is from James Friedman of SIG. Your line is open..

Hi.

I wanted to ask you about NACHA and the prospects for acceleration in ACH, either Charlie or Byron, if you could help us think about the competitive dynamics in the instance that ACH were to be accelerated how if at all might it impact your business?.

Hi.

I wanted to ask you about NACHA and the prospects for acceleration in ACH, either Charlie or Byron, if you could help us think about the competitive dynamics in the instance that ACH were to be accelerated how if at all might it impact your business?.

Hi.

I wanted to ask you about NACHA and the prospects for acceleration in ACH, either Charlie or Byron, if you could help us think about the competitive dynamics in the instance that ACH were to be accelerated how if at all might it impact your business?.

Sure I guess I can start with this, which is we, our -- the differences between what the established payment networks have and what ACH’s the differences are huge.

It’s not just the frequency of settlement it’s the underlying ease of use of the ability to integrate within your systems it’s the data that we have collected and then enable both issuers, acquirers and merchants to use it in the way which is good for risk purposes scorings that we’ve developed and we have a whole series of capabilities that again that we’ve all developed over 10, 20, 30, 40 years that really is not easily replicable.

Our view is that certainly the issuers understand the benefits of working with that in this ecosystem they control the customer relationships and so we’re very confident in that position that we have and the ability to differentiate our services versus what ACH can do.

And I think if you look at some of the big players that use ACH and actually track through ACH and see well how does that actually impact the customer experience? It’s a terrible experience for the customer as opposed to a network like ours.

And in the environment that we live in today and the way banks are viewing the importance of their customer relationships it’s just another differentiator that we had. So we love the position that we have relative to ACH..

Thank you..

Thank you..

Thank you..

Next question..

Our next question is from Don Fandetti of Citigroup. Your line is open..

Yes Byron just given the slowdown in cross-border I was wondering if you could talk a little bit about your relative revenue yield my understanding is in the U.S.

the yield is pretty high compared to domestic I mean is there a difference between let’s say [indiscernible] and Asia can you talk a little bit about that?.

Yes Byron just given the slowdown in cross-border I was wondering if you could talk a little bit about your relative revenue yield my understanding is in the U.S.

the yield is pretty high compared to domestic I mean is there a difference between let’s say [indiscernible] and Asia can you talk a little bit about that?.

There are differences and there are different practices with regards to yields across the globe. We typically don’t get into that level of detail to be a little helpful in this arena to the extent that there is a strong growth by U.S.

cardholders that it’s a strong consistent yield from an area of the world that is particularly well positioned to grow cross-border because of the strength of the U.S. dollar. You’ll note that when we referenced the cross-border weakness before we called out a specific corridor it was Canada to the U.S. the U.S.

to Canada corridor is doing just fine and as Charlie said the outbound travel by U.S. cardholders has remained quite strong and so I will leave the color at that..

Next question..

Our next question comes from David Hochstim of Buckingham Research. Your line is open..

Yes. Thanks.

I was wondering could you just give us an update on what’s happening with CyberSource there is a little bit of a deceleration in volume growth in V.me filings too?.

Yes. Thanks.

I was wondering could you just give us an update on what’s happening with CyberSource there is a little bit of a deceleration in volume growth in V.me filings too?.

Okay, I’ll take the CyberSource, so there has been some deceleration in the growth of CyberSource we contribute that specifically to two large customers or clients that we lost in fiscal year ’13 and we’re starting to see the impacts of that in ’14 that said we are very bullish on CyberSource we recognize the issue, we are investing significant sums to upgrade and add to the features of our CyberSource platform both for large enterprise businesses as well as for small businesses, we are actively adding people to this business.

So our enthusiasm remains robust I will caution that it will take several quarters before we can get this turned around but remain very bullish and very confident on the outlook of CyberSource’s future with Visa..

And let me take V.me. So I think I’ve talked to on the prior year’s call we have learned an awful lot since our initial rollout of V.me and we have altered our approach to really take away all the functionality other than what I described before as meaningful digital acceptance.

And so we’re getting really excellent feedback from merchants and issuers alike. We’ve actually rolled out the first phase of the new platform a few months ago and we have begun launching it with those merchants.

It’s incredibly -- it's just hugely more simple for them to actually integrate it into their checkout experience literally days as opposed to months and the new integrations that we have include Lululemon, Autozone, Petco and the Wine Enthusiast.

But probably more exciting those are terrific names but we’ve also executed term sheets or master service agreements with an additional 38 large merchants which represent almost 60 billion in addressable volume. 23 of those merchants are actually in the Internet Retailer Top 100.

So we’re going to -- we're continuing a press forward, we have a much better solution in the market, and it’s resonating..

Next question..

Our next question is from Craig Maurer of CLSA. Your line is open..

Yes hi thanks. A couple of things, regarding just I want to clarify, so you’re EPS guidance fully contemplates the tax benefit you received in the quarter. Please clarify that.

And secondly, regarding Russia, should we see the changes to law that you discussed earlier, specifically related to the basically trapping data and transaction flow and what not we’ve seen in Russia. Is your current network structure capable of doing that, as of tomorrow.

Because if I remember correctly, you guys were in a hub and spoke network where your data flows back through the states?.

Yes hi thanks. A couple of things, regarding just I want to clarify, so you’re EPS guidance fully contemplates the tax benefit you received in the quarter. Please clarify that.

And secondly, regarding Russia, should we see the changes to law that you discussed earlier, specifically related to the basically trapping data and transaction flow and what not we’ve seen in Russia. Is your current network structure capable of doing that, as of tomorrow.

Because if I remember correctly, you guys were in a hub and spoke network where your data flows back through the states?.

Let me take the tax and EPS question first. The direct answer to your question is yes. The tax benefit that we recorded this quarter was contemplated in our full year guidance. That said, let me just provide updated perspective.

When we give guidance as we did at the beginning of the fiscal year, so this was back in October, our style is to offer guidance without caveat and without excuse. And so when we give guidance it is naturally broader and have to take into a number of unknowns and you make educated judgments on how the year would unfold.

The rate of economic recovery, unknown, cross-border impacts given a stronger U.S. dollar and currency movements, unknown, cross-border impacts due to global tensions, unknown.

Thing about taxes is that as you get into the range where we are currently operating on taxes, this becomes more initiative driven as opposed to where your operating throughout the country, throughout the world.

And so as these initiatives, as this one often take several years to research, prepare, occur, recording, and so the timing of these is often outside of our immediate control and therefore unknown with regards to when we can actually take them. And so all of these things are contemplated. We did contemplate including tax.

We also began the year with a range of revenue that was low double-digits constant dollar which was 10% to 13%.

Had we delivered in 12% to 13% constant dollar as opposed to what we are now seeing given other impacts in other areas of 10 to 11, then we would have been at the upper-end, certainly at the upper-end of our guidance if not a little above because more than one factor is playing out in our favor to a greater degree than we might have contemplated in the beginning.

So that’s the context.

Charlie, Russia?.

So let me..

So it’s like, it’s on to the Russian expert here..

So on the question, and I just want to reiterate to be clear that the law is still evolving. As it gets red, it does evolve and get -- and there are changes that occur from day-to-day, and then once the law is actually passed there do have to be regulations to coincide with those laws before they get implemented.

So there are some things in the law which there would be relatively quick implementation. There are other things which I think some of the dates go out until 2016. To answer your specific question, today, we do not have the ability, in a very quick way to deploy a separate version of VisaNet in a specific country.

Having said that, we do have instances where we can start to move parts of it, whether authorization is much easier for us to do than entire clearing and settlement, and there it’s certainly something that we’re capable of building even though it might take a little bit of time.

But also remember, I mean this is critical, because you’ve got very much, we’re caught between the politics of the United States and the politics of Russia. But you just get down to reality for a second. We have 100 million cards in Russia today.

We have 100 million cards there and if not in anyone’s best interest inclusive of the Russians to make those cards not available to their own citizens. And so that’s why we are hopeful that as this situation unfolds, that people understand things like that and that to the extent that they believe it’s important to build a national payment system.

It can be done in a way where there is the appropriate transition and we have the ability to figure out whether it makes sense to compete in that marketplace, because there would be unlikely that, unless there’s some draconian things that are passed that it wouldn’t evolve in a way like that..

Just on that point, because I think this is important looking out concerning the NSA concerns and what not, if they did go ahead and make those changes have you contemplated the length of time it would take to restructure your network to comply because this could apply in the future to how China opens up.

And we know that your biggest competitor is already there with the technology in place so if it was a short window, given a conversion could theoretically be done away from you..

Just on that point, because I think this is important looking out concerning the NSA concerns and what not, if they did go ahead and make those changes have you contemplated the length of time it would take to restructure your network to comply because this could apply in the future to how China opens up.

And we know that your biggest competitor is already there with the technology in place so if it was a short window, given a conversion could theoretically be done away from you..

Okay, so two different things, number one is absolutely we’ve done an awful lot of work and you can assume that we’re preparing for everything that we should prepare to, the second is, I would just caution you to make the statements that others can comply..

Okay, thank you..

Okay, thank you..

Next question..

Our next question is from David Togut of Evercore. Your line is open..

Thank you very much, can you give us an update on the size of the commercial card as a percentage of total volumes and give us also a sense of the growth rate and whether that’s been affected at all by the issues you put forward today?.

Thank you very much, can you give us an update on the size of the commercial card as a percentage of total volumes and give us also a sense of the growth rate and whether that’s been affected at all by the issues you put forward today?.

On the first part of your question, no, not, but Investor Relations could give you an update on that afterwards, let me just quickly look, commercial payment volume growth, we can give you a perspective from the U.S., and since the beginning of the calendar year it has been low double-digit growth, very high single to low double-digit growth consistently January, February, March, with an uptick in April..

Thank you..

Thank you..

Next question..

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

Thanks. I just want to shift gears to margins for a minute, the personal expense came in below our estimates and you also raised your outlook for margins to the mid 60s versus low 60s previously.

First, is there anything new that’s driving the change versus your initial expectation and can we expect that to really continue off of a new base being mid 60s now into future years, and then just a quick housekeeping Byron, I know that you -- you should metrics into April 21, most of them looked like they were expanding or accelerating, just what impact did Easter actually have, given the timing in April this year versus last year, I don’t know if you said that on the call before? Thanks..

Thanks. I just want to shift gears to margins for a minute, the personal expense came in below our estimates and you also raised your outlook for margins to the mid 60s versus low 60s previously.

First, is there anything new that’s driving the change versus your initial expectation and can we expect that to really continue off of a new base being mid 60s now into future years, and then just a quick housekeeping Byron, I know that you -- you should metrics into April 21, most of them looked like they were expanding or accelerating, just what impact did Easter actually have, given the timing in April this year versus last year, I don’t know if you said that on the call before? Thanks..

We didn’t, what I said on the call beginning with the April results is that it’s very clear, I’ve been in a form of retail for 18 years before coming to Visa, the Easter impact is absolutely a phenomenon that exists, typically you look at the run rate going in, the run rate going out, you compare it to the prior year.

we’re several weeks away from being able to do that metric but the lift, part of the lift is certainly due to Easter, it’s also sensible that part of the lift could well be a return to be more normal weather, it’s very hard to isolate specific weather impacts but we have done a lot of work around those states in the U.S.

for example that had much more severe weather than normal versus those that didn’t, the growth rates, there’s a clear delta in the growth rates, some of it but not all of it mitigated by e-commerce, so as we get back to more normal periods post Easter, post weather, I think we’ll see a more normalized growth rate and one that may very well have some pent up demand fueling it.

With regards to expenses, the, at some point predictably as we continue to invest aggressively in extending our network, the reach of our network like a CyberSource, those, that investment will come with margins that are not that attractive or we wouldn’t invest but they’re not going to be in the 60s, we’ve not reached that inflection point yet, and so that’s why you saw us on the margin move up from low 60s to low to mid 60s, and with regards to personnel if you think about it, when we went public in 2008, we had 4,000 plus employees, today we have 10,000.

And so in the span of a little over five years we have more than doubled our employee base and we go in searches, we digest, we optimize, we go forward, we will continue to invest in talent which is a key driver of our success and we would expect growth of the personnel base that you see today despite the more than doubling of our personnel over the past five years..

Adrian, at this point we have time for one more question..

Okay our final question is from Jennifer Dugan of Sterne, Agee. Your line is open..

Thank you, most of my questions have been answered but I was wondering could you give us a little bit more color on the expected fiscal 2015 revenue impact from the Chase conversion that’s going to happen towards the end of the year?.

Thank you, most of my questions have been answered but I was wondering could you give us a little bit more color on the expected fiscal 2015 revenue impact from the Chase conversion that’s going to happen towards the end of the year?.

At this point we would, we do expect to have an impact, it should not be, it’s a valued and important addition to our business, I think to the extent that we wouldn’t give color on that specifically but we do expect it to start showing up in the first fiscal quarter and I’ll remind the group, some of the conversions are taking place today and will pick up pace or expected to pick up pace as the year unfolds, but to the extent that that revenue shows up in service fees, we book our service fees on a one quarter lag, so any conversions that take place say in the fourth fiscal quarter, the service fees won’t show up until the first fiscal quarter of fiscal ’15..

And with that we’d like to thank everybody for joining us today, if anybody has follow-up questions feel free to call Investor Relations. Have a nice evening..

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