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

Jim Schneider - Goldman Sachs Craig Maurer - Autonomous Research Darrin Peller - Barclays Capital Dan Perlin - RBC Capital Markets Don Fandetti - Citigroup Sanjay Sakhrani - Keefe, Bruyette & Woods Christopher Brendler - Stiefel Nicolaus & Company Inc. Jason Kupferberg - Jefferies & Co.

Bryan Keane - Deutsche Bank David Togut - Evercore Partners David Hochstim - Buckingham Research.

Welcome to the Visa Inc.’s Fiscal Quarter Four Earnings Conference Call. All participants are in a listen-only mode, until the question-and-answer session of today's call. 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, Charles. Good afternoon, everyone, and welcome to Visa Inc.’s fiscal fourth quarter and full year 2014 earnings conference call. With us today are Charlie Scharf, Visa’s CEO; 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 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 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 Reg 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.

With that, I'll turn the call over to Byron..

Thanks, Jack. Let me begin with my usual callouts and observations. First, as you can see from our earnings press release, we reported the quarter on an adjusted basis based on the litigation accrual we took in the wake of the $450 million escrow deposit we made in late September.

As a reminder, this litigation provision is covered by our retrospective responsibility plan.

The $450 million additional litigation accrual has been estimated off of recently completed settlements with selected opt-out merchants representing approximately 3% of the total opt-out merchants based on sales volume, as well as the status of negotiations and discussions with other opt-out merchants.

Excluding this litigation accrual, we reported adjusted diluted earnings per share of $2.18.

In addition, consistent with past practice, the company’s funding of the $450 million litigation escrow deposit had the same effect as a share repurchase, as it reduced the Class B share conversion ratio by an amount equivalent to buying back 2.1 million Class A equivalent shares at $215 per share.

As a result, at the end of the fiscal year, we had 618 million shares of Class A common stock outstanding on an as converted basis. We continued to experience solid constant dollar payment volume growth in the low double-digit range both in the U.S. and internationally. U.S.

credit continued to strongly perform, led in large part by Chase portfolio conversions. That said, looking ahead to fiscal 2015, our near-term outlook remains cautious given the modest pace of economic recovery, the geopolitical situation, Ebola, low currency volatility and continued FX headwinds from a very strong U.S. dollar. Turning to revenue.

As expected and previewed on our call last quarter, revenue growth for the fiscal fourth quarter rebounded growing 10% year-over-year on a constant dollar basis or 9% nominally, which reflects about 1 and 1.5 percentage points of FX headwind in the quarter.

For the full fiscal year, revenue growth was 10% on a constant dollar basis and 8% nominally recognizing close to 2 percentage points of FX headwind for the entire fiscal year. A word on international transaction revenue. Revenue growth for the quarter was 4% compared to 9% nominal growth in the cross-border payment volume.

The difference can be explained by the continuation of historically low currency volatility discussed last quarter. That said, we saw an uptick in volatility across a basket of currencies in September, which continued into October. While we remain cautious in projecting this metric, results in September and October are encouraging.

Client incentives for the fiscal fourth quarter came in at 19.2% putting us right on target with our full year guidance of around 17%. As we telegraphed on last quarter’s call, the elevated level of incentives was the result of key renewals in Canada and CEMEA which completed in fiscal Q4. I’ll speak to fiscal 2015 in a moment.

Lastly, as always, we remain confident in our future growth prospects and full committed to returning excess cash to our shareholders. To this end, in Q4, we committed $1.2 billion to reduce the number of Class A equivalent shares by 5.7 million at an average price of $213.

This was accomplished through open market purchases and as noted earlier, a deposit of $450 million in the company’s litigation escrow account.

Further, our Board approved in October a new $5 billion share repurchase authorization that in combination with the 682 million remaining from the prior authorization gives us 5.7 billion to deploy in the coming quarters. We also recently announced a 20% increase in our quarterly dividend from $0.40 to $0.48 per share.

This level of increase is consistent with our previously stated objective of a 20% payout of the previous fiscal year’s net income or in this case adjusted net income. Now let’s turn to payment volume and transaction growth. Global payment volume growth for the September quarter in constant dollars was 11%, slightly down from the June quarter. The U.S.

grew 10% and international grew 13%. Drilling down further, for the September quarter, U.S. credit was 13% slightly higher than the 12% in Q3 in part due to Chase conversion activity. Through October 21, U.S. credit improved to 15% growth. U.S. debt was 7% in Q4, a 1 percentage point downshift compared to Q3. Through October 21, U.S.

debt is back up at 8% growth. Taken together, U.S. payment volume growth through October 21 was 11%, up 1 percentage point from the Q4 level. Global cross-border volume delivered a 10% constant dollar growth rate in the September quarter, up nicely from 7% in the June quarter.

The increase was attributable to stronger activity across a broader set of travel corridors with some effect from the timing of Ramadan. Notably, there was a nice pickup in travel to the EU from the Middle East, China and Australia. The U.S. grew at 7% and international grew at 11%.

Through October 21, cross-border volume on a constant dollar basis held steady at 10% growth with U.S. growth at 6% and international registering 11% growth. Underperforming travel corridors includes several countries in Latin America along with Russia and Ukraine.

Transactions processed over Visa’s network totaled 16.9 billion in the fiscal fourth quarter, a 9% increase over the prior year. The U.S. grew 8% while international delivered 14% growth. Through October 21, processed transaction growth improved to 11% growth rate, up 2 percentage points. The U.S. grew 9% while international grew 15%.

Now turning to the income statement. Net operating revenue in the quarter was $3.2 billion, a 9% increase year-over-year driven primarily by growth in service and data processing globally and as mentioned earlier, negatively impacted by about 1 and 1.5 percentage points of foreign currency headwind.

For the full fiscal year, net operating revenue was 8% over the prior year or growth of 10% on a constant currency basis. Moving to the individual line items for the fiscal fourth quarter. Service revenue was 1.5 billion, up 8% over the prior year and was driven by moderating global payment volume growth.

Data processing revenue was $1.3 billion, up 14% over the prior year’s quarter based on solid growth rates in Visa processed transactions both in the U.S. and internationally. The delta between the quarter’s 9% processed transaction growth and the 14% revenue growth was largely due to higher year-over-year growth in U.S. debt fees implemented in 2012.

Of the delta, approximately one-quarter was due to lapping a one-time refund of an overpayment in Q4 of the prior year. The balance is ongoing as this fee structure stabilizes after having been implemented two years ago.

As highlighted earlier, international transaction revenue was up 4% to $938 million versus 10% constant dollar cross-border volume growth over the prior year period, as a result of a broad range of currencies experiencing volatility well below the 10-year median.

In contrast to the year-ago quarter when volatility was near record highs, we are hopeful for a return to a more normalized volatility pattern in the coming quarters. Turning to other revenue, it showed a slight uptick in the quarter reflecting a true up of the Visa Europe licensing fee, some of which was catch-up.

Initially, the licensing fee was $142.5 million annually. The annual rate for fiscal year 2015 will be around 148 million. Excluding the litigation provision, total operating expenses for the quarter were $1.2 billion, flat from the prior year. For the full fiscal year, adjusted operating expenses were also flat to fiscal 2013.

Adjusted operating margin was 62% for the fourth quarter and 64% for the full fiscal year both in line with our guidance of low to mid-60s. Capital expenditures were $227 million in the quarter and 553 million for the full fiscal year.

The weighted average number of fully diluted shares outstanding for the quarter totaled 623 million and 631 million for the full fiscal year. Before I speak to specific items of guidance, let me provide some early perspective on how we see the timeline of fiscal full year 2015 playing out.

We approach 2015 bullish on the long term, given the underlying strength in payment volumes and processed transactions and cautious in the short term. Here are some of the underlying observations and assumptions in forming our planning for next year. First, while we expect U.S.

and international payment volume growth to remain healthy, we have not yet seen acceleration in global economic growth.

Cross-border volumes are rebounding as we reported 10% growth in the quarter but this is still below the low double-digit levels we experienced at this point last year and so we remain appropriately conservative in positioning this metric.

As a perspective, we know that these growth rates can recover without notice and that the notable declines in Latin American growth rates lap in January of 2015 and the market declines related to the Russian-Ukraine crisis will lap in March.

Everything else equal, once these events anniversary, the pickup in cross-border growth could be in the 2 to 3 percentage point range. As to currency volatility, as I said earlier, while we have seen a bounce in September and October, we are not sure how sustainable this is.

Turning to a different subject, we will be taking selected pricing actions commencing in April of 2015 on certain U.S. acquirer fees, which will result in higher revenue growth in the second half of our fiscal year.

Given that we have not taken actions in this area in four years, we believe the length of time and the substantial value these cross-border transactions bring to merchants make a modest adjustment appropriate.

In addition, based on recently completed significant client renewals that Charlie will speak to in a moment, as well as the successful growth in client payment volumes for both issuers and merchants, we will see higher levels of client incentives as measured by a percent of gross revenues with the highest percentage levels expected in the first half of the year.

In dollar terms, quarterly incentives in fiscal 2015 should be more indicative of the $700 million plus level seen in fiscal Q4. Finally, consistent with past practice, we expect to deploy our excess cash flow in 2015 to service our recently increased dividend and to continue to repurchase our shares.

To sum up, in terms of guidance for fiscal 2015, we are contemplating constant dollar revenue growth of low double digits with 2 percentage points of negative foreign currency impact. Absent any catalyst, we see our constant currency growth today at the very low end of the double-digit range.

As previously stated, our guidance contemplates several pricing actions to be effective at the beginning of fiscal Q3. This means our year-over-year revenue growth rates are expected to be double digit in the second half and in the mid single-digit range in the first two quarters as we lap low levels in incentives in the prior year.

Turning to client incentives, as a percentage of gross revenues, we expect it to be in a range of 17.5% to 18.5%, operating margin in the mid-60s, full year tax rate in the low 30s.

On tax, as a reminder, when viewed quarterly on a year-over-year basis, the tax rate in Q2 of fiscal year 2014 was significantly reduced due to a tax benefit recognized under IRS Code Section 199 that included prior years along with an ongoing benefit.

Turning to earnings per share, on an adjusted basis, mid-teen growth and annual free cash flow in excess of 6 billion. Lastly and before I had the call over to Charlie, I wanted to address the topic of cross-border growth.

In my conversations with analysts and investors, there have been a number of questions raised regarding our cross-border volume growth rate. In that light, on a one-time basis, we thought it would be useful to provide some incremental perspective, which we have included on Page 3 of the appendix of our PowerPoint presentation.

During our earnings report out each quarter, Visa includes in its operational performance package its cross-border volume growth rates on both a nominal and constant basis, excluding Europe. The first two columns show what we have historically reported in the operational performance data pack.

The third column is new and represents a global view of Visa including Europe on a nominal basis to facilitate competitive comparisons across a common geographic footprint.

The next two columns also include Visa Europe and present cross-border growth rates recognizing there are at least two different methods for calculating those growth rates, which can have very different outcomes.

When Visa historically measures and reports cross-border growth in constant currency, it uses the year-over-year change in exchange rates for the country currency and which the merchant transaction took place. Those growth rates are presented in the fourth column labeled merchant country.

Alternatively, one could also calculate cross-border growth rates using the currency representing the country in which the issuer resides. Those cross-border growth rates are presented in the fifth column labeled issuing country.

Of course, other factors can also impact growth rates such as relative portfolio exposure to different countries and their currencies, the method for selecting FX rates and translating back to the U.S. dollar and share shifts, but those are much harder to isolate and quantify.

Recognizing the complexity of this topic, in addition to the one-time slide, we have provided an illustrative example of a cross-border transaction and the effect it can have on growth rates depending on the underlying methodology employed.

You will be able to find it on our IR Web site located with the other earnings-related materials and that will be posted at the immediate conclusion of this call. We will then be available for follow-up conversations if you would like further explanation. With that, I’ll turn the call over to Charlie..

Thank you very much, Byron, and good afternoon, everyone. First, I thought I’d start with just a couple of brief thoughts on our fiscal fourth quarter. As Byron went through, our performance came in pretty much as we would have expected; adjusted earnings per share growth this quarter of 17% and 19% for the full year.

As we think about it, it’s actually gratifying given the continued subdued economic environment globally and the volatile geopolitical environment which do affect our business. It says a great deal about the business itself and the company that we’re lucky to be able to be a part of here.

Revenue growth continued to be constrained by the strong dollar, the low currency volatility compared with historical norms and cross-border growth below historical levels. As Byron mentioned, we believe that these items that have constrained our revenue growth are cyclical and can change very quickly.

More importantly, we really spend most of our time looking at the underlying fundamentals of the business and they continue to perform very well. In constant dollars, our double-digit payment volume growth with particular strength in the U.S. in addition to double-digit cross-border payment growth. Processed transaction growth was strong as well.

As Byron mentioned, these trends improved slightly in October through the 21st. Beyond our data through the 21st, our ability to see the future is the same as yours but we’re cautious about the global growth as we plan for next year. Just a couple of comments about capital now.

We’ve been very consistent as a company in how we think about capital allocation. We continue to believe the highest and best use of our excess capital is to reinvest it both organically and through acquisitions to further our growth.

After that, we believe in growing our dividend as our earnings grow and maintaining a payout ratio of about 20% of our trailing earnings. We will opportunistically return the rest of our excess capital through share repurchases. In 2014, we did all of these things; investing both organically in the business, outside investments.

As Byron mentioned, we effectively bought back 4.6 billion of our stock during the year. And as we look forward, we remain committed to continuing our practices.

Last week, our Board approved a 20% dividend increase from $0.40 to $0.48 a share per quarter and they also approved a new $5 billion share repurchase program in addition to the roughly 680 million remaining from the prior authorization.

Given the opportunities in the payment space, we will continue to look for and prioritize growth opportunities, but our Board’s actions should give you an indication of how we feel about our opportunities to grow in the future. Let me talk for a second about Russia. Russia continues to move towards its goal of controlling domestic processing.

Last Tuesday, President Putin signed modifications to the national payment system law, which positions the Russian Central Bank owned national payment card system as the preferred domestic payment processor.

The law delayed the implementation of a guaranteed deposit from the end of October 2014 to March 31, 2015 to allow for an appropriate transition. When the national payment card system is utilized, there is no guarantee deposit requirement. We’re working closely with the government and our clients to ensure a smooth transition.

We continue to expect to lose a portion of our domestic processing revenues in fiscal 2015 of about $50 million. This is likely to grow up to about $70 million on a full year basis when fully implemented. We continue to believe we’ll play an important role in Russia.

Once this transition occurs and our baseline is reset, we will continue to focus on helping our clients grow both domestically and internationally.

With that, I will talk for a second about our client franchise and just talk about some of our most significant markets, especially some of the things, which do create lumpiness in our incentives as we look forward into 2015. First, let me start with Russia. We continue to work with our clients to support their businesses.

We recently signed multiyear agreements with several Russia banks including Sberbank, by far the largest issuing bank in Russia. In the United States, we continue to have great success. We renewed a multiyear credit and debit agreement with the Bank of America, our second largest client globally.

To put this into perspective, if BofA were a country, it would be one of the largest in the world for Visa. Our agreement provides the opportunity to grow our share from our prior agreement and we’re thrilled with the relationship we have with the Bank of America. Remember, when we signed our 10-year agreement with J.P.

Morgan Chase, they agreed to move the majority of their non-Visa volume to Visa. These conversions have begun and are going extremely well. Per Nielsen, total expected volume to convert has been estimated at over $40 billion. It’s a bit less than 10 million cards overall and the conversions are expected to be completed by February 2015. In the U.S.

credit market, we continue to gain share and remember this is the largest driver of our profit in the world. Canada is one of our other large countries. Over the past two years, we’ve signed long-term contracts with issuers and partners representing over 85% of our business including Scotia, CIBC, RBC, TD and Aeroplan.

Visa’s Canadian issuers have invested heavily in new rewards programs for Canadian consumers driving very strong growth and we benefit from these great partnerships that we have. Brazil is a complicated market for us given the elections and the recently implemented cross-border taxes, but we continue to grow our relationships there as well.

We’ve renewed a multiyear credit and debit and commercial agreement with [CAHSA], the fifth largest issuer and we renewed a multiyear credit, debit and prepaid agreement with Banco do Brazil, our largest issuer in Brazil and the Latin American region. Just a second on co-brands, which seem to be getting a lot of press these days.

First just as a reminder, we think we have the best and we have the largest co-brand platform in the world with seven of the top ten programs exclusively Visa and great partners outside of the U.S. as well. This quarter, we renewed a multiyear credit agreement with Gap.

We’ll continue to be the payment brand and network for the Gap, Banana Republic and Old Navy co-brand cards and our partnership with Gap extends beyond the retail store environment. Websites for the Gap and its family brands are now offering Visa Checkout as an online payment service.

In addition to the deals that we’ve announced today, we’ve agreed to terms to move a significant consumer credit co-brand from a competitor to Visa. We look forward to sharing more about this as cardholder plans take shape.

We’ve talked a bunch about bringing new capabilities to market for merchants and in addition to what we are doing in Visa Checkout, we are continuing to start to rollout products for the merchants.

Last quarter, we forged a proprietary relationship with TrialPay and had a small team from TrialPay join Visa to lead the development of a new product platform designed to help our merchants acquire more customers and sales opportunities.

TrialPay is one of the leaders in presenting consumers relevant merchant offers during a transaction and we’re using their technology and experience together with all of the capabilities that exist at Visa to build the platform that will drive millions of new customers to our merchant clients. You’ll be hearing more about this in the coming months.

We rolled out a new product called Visa Transaction Advisor in August. It’s a new solution, which helps U.S. fuel retailers prevent credit and debit fraud at the pump. This service enables merchants to use real-time authorization risk scores to identify transactions that can involve lost, stolen or counterfeit cards.

More than 65 million transactions per month are being reviewed by the service at 25,000 locations across the U.S. Some merchants have seen a 23% reduction in fraud at participating locations. Merchants using this service include top U.S. brands such as Shell and Chevron.

These are just the beginning of our focus on directing our capabilities towards merchants. Just say a few words about payment security and U.S. chip cards.

At this point, most people understand most of the benefits that we get from moving from magstripe towards chip-enabled cards, but there are also some important unappreciated benefits just what I want to highlight.

Approval rates, again this is in the U.S., of chip cards versus magstripe are 97.9% for chip cards versus 92% for magstripe on cross-border and 99.2% for chip cards versus 98.4% in domestic transactions.

Today, only 3.6 million terminals at 55,000 locations accept chip cards; 19.8 million Visa cards are in circulation, up 56% from 12.7 million but still a very small number relative to the total cards that are outstanding.

Having said that, we assume most people have read issuers, acquirers and merchants are working diligently to increase these numbers dramatically. The payment security taskforce that we participate on with a series of other people in the industry put out a press release that said that acquirers representing 80% of U.S.

purchased volume estimate that at least 40% of U.S. merchant terminals will be chip-enabled by the end of 2015. The group also reported that nine of the country’s largest payment issuers estimated that they would issue more than 575 million chip-enabled cards by the end of 2015.

There are also estimates that over 90% of cards will be chip-enabled by the end of 2017. Turn for a second and just talk about our digital efforts, which are a huge focus for us inside the company. This quarter, we’ve started to see some tangible progress as we have begun to introduce new digital solutions into the marketplace.

First, a reminder that online purchased transactions for us are 19% of our business today and also that in the U.S. online, tablet and mobile purchases are growing at high double digit to triple digit rates versus a face-to-face rate of single digits. We are aggressively pursuing this market with the expectation of growing our share.

We’ve seen several things to support this; Visa Checkout, Visa Token Services, Visa Digital services and Apple Pay. First, let me talk about Visa Checkout. Remember, this is our solution, which enables you to pay online in a very simple, secure way with a username and password.

It’s easy and secure for consumers and it’s a terrific solution for merchants. It’s easy to integrate and it’s been proven that it increases the checkout floor rate for merchants. We continue to make great progress.

We passed 1.9 million registered users, over 200 financial institutions are partnering with us to roll this out to their clients and merchant reaction has been terrific. Merchants live today include Neiman Markets, Pizza Hut, Staples, 1-800-FLOWERS, Ticketmaster, Live Nation, Lululemon, Petco and Popsugar.

Other new merchants who were live include the Gap and its brands, Tory Burch, Gymboree, Crutchfield and Orbitz and more who have signed but have not yet gone live included United, Virgin America and American Apparel.

Hopefully many of you have seen the advertising both in traditional media as well as digital and social with great partners such as Pizza Hut, Neiman Markets, Newegg and Staples. We intend to win and love the fact that we’re partnering with merchants to drive Visa Checkout as a preferred solution in online commerce.

To increase our region scale, we also integrated two partners; 3DCart and ProPay that provide access to a combined total of over 100,000 merchants. In addition, our merchant acquired partners such as First Aid and (indiscernible) are integrating Visa Checkout for both their core platform and subsidiaries.

As we evaluate our progress, we’re focused on addressable online volume not the number of merchants and are very happy with our progress. To-date, over 33 billion in live addressable volume accepts Visa Checkout, another 30 billion has been signed and we’re very confident that these numbers will be much larger as we get to the end of 2015.

In early September, we announced the launch of Visa Token Services. We talked about this a bunch, so I won’t dwell on it. But it enables all Visa clients to offer their cardholders a secure and easy way to pay for mobile and online transactions, as well as it enables new forms of payment which are more secure that exist today.

Apple Pay is the first used case in the market but many more will follow. We’re excited about Apple Pay but for us as we think about what’s going to be coming into the marketplace, it’s only the beginning. We expect a proliferation of exciting mobile and digital solutions leveraging our new capabilities.

In October, we launched our sandbox development and testing environment for Visa Digital services as well as updated our SDKs that will enable issuers to begin embedding new forms of contactless payments in their Android applications.

Eventually, merchants and approved third parties will be able to harness the safety and security of Visa payments to create new proximity payment experiences for their uses. These services will be commercially available in the U.S. in January of 2015.

Clients have already begun integrating to our development environment and our building and testing their applications in advance of our full commercial launch in 2015. As far as Apple Pay goes, just a couple of quick comments. We’re excited about our participation.

We believe it’s good for consumers, it’s good for merchants and it’s good for our industry. Our focus has been on security, scalability and inclusiveness. To the last point, we’re working with over 1,000 financial institutions today and hope to see all of our issuers participate.

On Monday, Tim Cook announced that over 1 million cards had been loaded to iPhone 6s in the first 72 hours. Visa represented over 600,000 of those requests; early days but very encouraging.

And then just a note for us to be able to deliver all of these differentiated services in the marketplace, we continue to build our engineering and technology capabilities. To that end, we announced that we plan to add a 1,000 technologists and engineers in the U.S.

This is in addition to the 1,000 that we’ll be hiring into a new facility in India, which will open in 2015. Just to wrap it up before we open it up for questions, let me just say a couple of other things here. There’s been much talk about disruption in payment and what it means for us.

Most of the disrupters are great enablers for consumers, merchants and our industry. Apple is the first great example. We and our clients can be great enablers of great consumer and merchant experiences. We bring thousands of banks, millions of customers and a convenience security customer service rewards and other great features that consumers like.

You’ll see many other enablers evolve that we will partner with and we’re doing this all in support of our existing clients. As we look to the future, we continue to see great growth opportunities for payments.

We have our traditional channels and traditional ways of doing business, but we sit here today and we see the mobile opportunities in both the developing, the less developed and the developed world as being great drivers of our mission, P2P, commercial and our merchant relationships as all things that we’re going to focus on to continue to build our business.

With that operator, I think Byron and I are ready for questions..

Okay. (Operator Instructions). Our first question comes from Jim Schneider from Goldman Sachs. Your line is now open..

Good afternoon and thanks for taking my question. With regard to client incentives, you talked about those being first half weighted in fiscal '15.

Can you talk about how many of your top 10 issuing clients are renewing this year? And do you expect all those renewals to happen in the first half of the year given the frontloading that you talked about earlier?.

Byron here. So of the top 10, I would say one is scheduled to renew this year. And the frontend loading is really a function of two things and it’s not what you just described. It’s really a function of the deals that we most recently completed.

We had a heavy deal flow that came to completion in Q4 and then will begin working their way through the fiscal year '15. But also as we have commented on many times before, incentives can be very lumpy in the way that they unfold.

And so in the way that the deals were executed and we expect a frontend loading of incentives with regards to the P&L and then the guidance that we have given on a full year basis fully contemplates the lumpiness, so to speak, and we expect to deliver full year incentives somewhere in the 17.5% to 18.5% range..

Thank you..

The only thing – this is Charlie – that I would just add is that also keep in mind that client contracts sometimes renew off cycle and that’s contemplated in our guidance as well..

Next question..

Our next question comes from Craig Maurer from Autonomous. Your line is now open..

Hi. Thanks. Two questions. First, if you could comment on the apparent announcement out of the Chinese government this morning that they’re going to move to open up that market for additional settlement clearing networks for bank cards? Secondly, a technical question on Apple Pay.

We’ve noticed that American Express is able to provide real time transaction alerts whether these are Apple Pay transactions or any other swipe, you’re always getting an alert. On Chase transactions, which you’ve provided a bespoke version of Visa, they don’t seem able to provide this service.

It would seem that Chase is not fulfilling the promise of that transaction that you had entered into with them or am I missing something? Thanks..

Okay, let me do the second part first. So first of all, just to be clear, when you complete an Apple Pay transaction, there is immediate notification on the device itself that shows you that the transaction has taken place, the dollar amount and who the merchant is.

You can then effectively flip the card over and see the running tally of all of your transactions. So, there is no – at least from our experience, my personal experience, there is no lack of clarity whether or not you’ve completed transactions and it is very real time.

The question about whether people are then providing additional alerts on top of that, that you got to talk to your individual bank about. We offer a service, which we provide to a series of banks out there that do allow for real-time alerts. I can tell you I personally signed up for it and I get it on as real-time basis as you can expect.

But different banks choose what they want their consumer experiences to be. But having said that, again, it exist in real time on the Apple device.

As far as China goes, there’s really not a lot more to talk about than what you’ve read, which for those who haven’t read it, there was an announcement today that the Chinese government will open up the market to competition in our business. We don’t know anything specific other than that.

We obviously welcome it and we look forward to seeing the specific details and working with people within China to figure out what we need to do to participate in that marketplace where we believe we can add a lot of value..

Next question..

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

Thanks, guys. Look, following a year where revenue growth ended up being a little more challenged than expected given some of the cross-border trends being slower, it’s obviously nice to see the end of year pickup in those trends.

But I guess following up on the guidance, if you can help us understand the assumptions you’re making around a couple of different attributes includes volume growth versus the way it’s trending in October as well as what part of this is from pricing, just because we’re getting a lot of questions on how much pricing can actually impact the overall top line guidance of low double digits? Thanks, guys..

So the headwinds that we had this past year, many of them still continue into this year. Our currency volatility we’ve guided – we didn’t actually expect to guide to two full percentage points of FX headwind a second year running, but particularly the strengthening of the U.S. dollar over the past two months has now made that much more likely.

We were thrilled to see cross-border beginning to bounce back but it’s too early to call that a trend. With regards to volume, it’s based on low single digit constant dollar growth in volume gains, low double digit.

And with regards to pricing, we don’t go in – it’s not our practice to go into the details of pricing but we have guided that it will take place in Q3 – beginning of Q3.

So this is very much second half weighted and we also indicated in our guidance that we would expect to, with that pricing boost, be in double-digit revenue growth in the second half of the fiscal year..

Let me just pick up on that. As you’ve heard from both of us, we know what we know. We don’t know what we don’t know. But we look at what’s going on in the world and as we plan the company for next year, we have a cautious point of view of that.

And so our cautious point of view suggest that we don’t plan for very big increases in things driven by what’s going on in the outside world. Albeit we know that they will improve at some point. We don’t know when, but we think it’s prudent to plan otherwise..

Next question please..

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

Thanks. Good afternoon. I wanted to follow back up, Charlie, on your 19% online.

I guess it’s volume or revenue, I need to get clarification of that, but the question really is that sounds like that piece of business is growing somewhere around three times faster than what you referred to as the face-to-face business and I’m just wondering if you could give some sort of characteristics around how should we be thinking about revenue yields or all the products that you’re going to be able to put around that type of volume, it sounds like there’s more pricing opportunities in the future with those types of transactions and maybe what we’ve seen on a legacy basis? And then just for level setting, Byron, is it 907 plus the mid teens that’s the guided number or are we adjusting for the second quarter last year benefit? Thanks..

So on the first piece, what I referenced in my remarks was really to talk about two different things. Number one is we have a big business in the online world today and the way we think about it is we’ve been remarkably successful in a world where we haven’t had great products to compete.

We also stand back and we look at the growth and the growth rates of transactions done online, on tablets and on mobile are multiples of what’s done face-to-face. So we both have a defensive reason to do it, but more importantly an offensive reason to help that migration and to participate in it.

So the things that we’re doing from Visa Checkout to Apple Pay to the things that are going to be – using our Token Services and our Digital Solutions are all about having the best products in the marketplace to capture where the growth is, which is in the digital channels.

Relative to what it means for us from a pricing perspective, again we’ve been very, very consistent on this which is we’re not sitting here today thinking about this as an opportunity to capture more price.

We’re looking at this as an opportunity, one, to both be where the natural growth is but two, to help migrate all those cash transactions whether they’re big value transactions or small value transactions into the electronic space where we’ll hopefully capture more than our fair share. We do have a pricing schedule for our tokenization services.

We said we’re waving those fees for a year and we’re going to see how this all plays itself out. But again, we look at this as this is the future of commerce, we want to be there.

We see that there will be more volume in that world than there is for us sitting in the world that we are today, and if we make this up on volume as opposed to price that’s just fine with us. If there are pricing opportunities in the future, we won’t look the other way but that’s not our reason to do this..

To you second question, Dan, the short answer is 907 and the perspective is you were with us at the very beginning when we did our IPO. From the very beginning part of our investment thesis was that we would manage down the tax rate every single year to the best that we could. We started out at 41%.

We said we’d manage it down to below 34%, 35% over about five years. We didn’t stop at five. We have continued to manage our tax rate. We have never adjusted or provided any EPS guidance that adjusted for a full year tax rate, because that’s just one of the levers we have to manage the business and we will continue to do so.

So it’s mid teens off of 907..

Excellent. Thank you..

Next question please..

The next question comes from Don Fandetti from Citigroup. Your line is now open..

Yes. Charlie, I was just curious your thoughts on the U.S. market. I mean we’re seeing some of your large bank issuers put up some loan growth. Consumer confidence has picked up, but we’re not really seeing it in the spend.

I was just curious on your outlook and just want to confirm that there’s no real improvement baked into guidance in the U.S.?.

Byron walked through some of the recent trends. Our performance in the U.S. credit market is strong but we don’t look at it as – or let me say it differently. Certainly, in a really good performing economy should look much better than it looks today and we’ve not factored that into our thinking for next year..

Okay. Thanks..

Next question please..

Our next question comes from Sanjay Sakhrani from KBW. Your line is now open..

Thank you. I got a question on client incentives. Understanding that you guys had a big renewal in 2015, but how should we think about its trajectory looking ahead to 2016 and 2017? Are there large renewals coming up? And then just one clarification on the assumptions embedded in the guidance.

Currency volatility as it stands right now, is that a tailwind in 2015 and are you assuming no tailwind? Thank you..

With regards to client incentives, from the beginning we – in fact going all the way back to the IPO, we have always viewed client incentives on an upward trajectory recognizing that the typical client contract is five years and that when a client contract comes up for renewal and if they have been successful, as most are, nearly all are in growing their portfolios, then the level of incentive adjust to a higher level recognizing the growth over the previous five years or whatever the term was and that’s the way the businesses worked forever.

In addition, client incentives were – back at the IPO we’re much more a developed market phenomena and as the rest of the international group of countries have grown, we have applied client incentives more regularly to those multiyear contracts. And so there’s a natural and healthy and expected upward trajectory in client incentives.

And so that’s what you’re seeing and it’s to the extent that we have one big renewal next year or this fiscal year, that’s not driving it. What’s driving it is what I’ve just described..

It drives the lumpiness, but not that trajectory..

That’s very fair. It drives the lumpiness but not the upward trajectory.

And then your – I’m sorry, your second question was…?.

Currency volatility..

Yes, so on currency volatility – boy, this one’s tough. No one saw last year coming. It was at historically low levels.

We’re quite sobered about how to think about that and it would be very consistent for us to say that we have approached currency volatility with a high degree of caution and as Charlie said earlier, we absolutely know what we don’t know about how currency volatility will behave in the future.

So, as I said before, we were very pleased to see the September and October bounce. We didn’t see it coming but we’re pleased to see it happened, but we remain very cautious in our guidance with regards to the roll of volatility in the coming year..

Next question please..

The next question comes from Chris Brendler from Stiefel. Your line is now open..

Hi. Thanks. Good evening. I wanted to get a little more color, if I could, Charlie, on the pricing you mentioned in April. I think Byron also was saying about cross-border.

Is this a similar pricing action to what one of your major competitors did on inbound cross-border? And if it is, does that change your thinking at all on how you wanted to view pricing? And I think we had talked about in the past that this is a situation where you are drawing a line in the sand and saying we’re going to be independent in our pricing decisions and price for value.

Just give me a little more color on that. And then a follow-up, if I could on union pay. It seemed like the articles are focused more on clearing rather than the entire food chain in the payments business of authorization and settlement. Can you give us a rough idea how much clearing is of total Visa revenues? Thanks..

Why don’t we start with the second one?.

The union pay and clearing..

Yes..

I don’t have the answer. I’m not sure – so the way we charge for our services, we charge service fees in data processing. And if we process the transaction then we reap data processing fees and that number is on our income statement and service fees if our brand is on the card.

We can’t sit here today and know what China is contemplating when they talk about opening up the marketplace quite frankly. But we really have to wait and see what they say and then understand what it means for us. Beyond that, we really don’t know any more than you know at this time. Then the second one on pricing, why don’t you start on pricing..

So on pricing, I can say absolutely this was an independent decision. And as I said in my remarks, it has been four years since we have done something in this arena. Meanwhile, we have continued to invest in the transaction environment related to cross-border and in our domestic markets.

And at some point we cross the line and say the value created for both our issuers and our merchants warrant a modest change in pricing which is what we’ve taken..

And we’ve said very consistently and I’ve said it consistently and Byron said it consistently, there is no line in the sand any which way that the decisions are going to stand on their own and we have to look people in the eye and explain why they make sense for us in the environment that we live in and we booked this one for a long time and feel it’s the right thing to do..

Great. Thanks so much for the color..

Next question please..

Our next question comes from Jason Kupferberg from Jefferies & Co. Your line is now open..

Thanks, guys. From what you see in your data, are lower gas prices in the U.S. sparking consumers to spend more actively in other verticals or are the lower gas prices just a drag on volume without any real offset? Because I guess we might have thought that the U.S.

volume growth in the September quarter may have accelerated versus June, just given the Chase conversion, but it looks like it was pretty steady.

So I’m just wondering if there was a dampening effect from lower gas prices or what you guys are seeing there?.

So this is a story that is undoubtedly going to unfold a bit. There is no question that there is a modest drag that we see in the numbers with the drop in gas prices. It’s less than 100 basis points but it’s clear there is a drag. You saw debit growth, which carries a lot of the gasoline transactions.

You saw debit growth drop to 7% in the September quarter, you saw it bounce back to 8% through the first 21 days of October.

But the data is still a little unclear whether that is spend that’s being redistributed or in the prior year, if you may recall from October 1 through October 16, the government went into a partial shutdown and arguably depressed some spending during that period. And so this particular comp period is not clean.

But the thesis that we punch way above our weight when it comes to gasoline prices, use of cards at the pump works on the upside. It also can be a drag on the downside. Then the big question is how is that money redistributed as it frees up, and at this point too early to call..

Next question please..

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

Hi. It’s Brian from Deutsche Bank. Just looking at the data processing revenues growth at 14% and I think volume at 9%, one of the things that you talked about Byron was the higher U.S. debit fees, some pricing that kicked in. I just want to make sure I understand what that was.

It sounded like there was a pricing kick that finally is having an impact in 2012 with three quarters of it still going to have an impact. I just want to make sure I understand what that is. And then finally on the pricing in April 2015, you guys expect – can you quantify that impact and where it will show up in the P&L? Thanks so much..

With regards to the data processing fees, to be absolutely clear there were no pricing actions in this area. This is about the pricing structure that we implemented back in 2012 and it was a – as you recall, it was a very different pricing structure than the one that we had previous to that point.

And whenever you do that, it’s going to take a couple of years to stabilize as you work your way through the full and complete implementation of that structure. That’s what it is. It involves no price increase or no pricing action. And what I referred to earlier in my script has nothing to do with what you’re seeing.

And further this kind of stabilizing should have a positive effect in the next couple of quarters but diminishing and by the end of the fiscal year should be in our view pretty much stabilized. With regards to the other since we’re not yet public on the details of the pricing, we will wait for another day to consider addressing that..

Next question please..

Our next question comes from David Togut from Evercore Partners. Your line is now open..

Thanks for taking my question.

Could you address your pricing strategy more broadly over the next two to three years, perhaps gauge your pricing power and to what extent you intend to use it?.

Sure. I would say there’s nothing new in our thinking which is first of all when we think about our ability to grow the company for the long term, given what the opportunities are for us to grow volume, using pricing to get to numbers that we hope to be able to show over a period of time is not something that we rely on.

Having said that, we do think we should be paid fairly for what we do. And to the extent that we look at the services that we provide and feel that there is growing value in what we do, that’s an opportunity for us to consider raising price.

We know that people have options and so there has to be reasons to be able to do it whether it’s on the issuer side or on the merchant side. And as I’ve talked about before, we’re spending a lot of time working with the merchant community on providing value for them.

And as we do that, some of those things will result in things that will help us from a pricing standpoint. Other things support our existing price. So everything we do will be dealt on an individual basis. There is no line in the sand in any way we look at it.

But again, as we come into the year and we think about what the opportunities are, pricing is something that we think is tactical for us and not particularly strategic at this point..

We have time for one last question..

Okay. Our final question comes from David Hochstim from Buckingham Research. Your line is now open, sir..

Thank you.

I wonder – could you give us an update on what’s happening with CyberSource? Still pretty good growth in transactions, but the growth rate continues to slow?.

Yes. So as we’ve said – I’d be happy to give you an update. We’re not happy with the update. As you’ve noted, the transaction growth has been slowing and as we’ve said on an earlier occasion, we missed an investment cycle. We are now investing significantly to catch up both in our capabilities and our staff.

You should expect the anemic growth, so to speak, to continue for at least another couple of quarters. We expect that that will begin to turn around by the end of this fiscal year. And then just one callout. The measure we give you is transaction growth.

The transaction growth that we have lost has been among the least revenue generating of our transaction. So the revenue growth side of the equation has held up much better than the deterioration in transaction.

But that said, we’re not happy with the results but we have a very important role for CyberSource to play in our strategies going forward and we are investing aggressively to bring that back to a much stronger growth rate..

With that, we want to thank everybody for joining us today. And if anybody has follow-up questions, feel free to give Victoria or myself a call. Thank you..

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