Financial Performance

Visa Beats Estimates as Travel Slump Continues

“The recovery so far has been uneven, V-shaped for domestic volumes but L-shaped for cross-border volumes,” CFO Vasant Prahbhu says.
Matthew HellerOctober 29, 2020

Visa reported a 17% decline in quarterly revenue as the slowdown in travel-related spending outweighed growth in domestic payments.

The credit card giant saw its fiscal fourth-quarter revenue fall to $5.10 billion from $6.14 billion a year ago, while analysts surveyed by FactSet had been projecting $5 billion. It was only the second time that Visa’s quarterly revenue declined year-over-year since it went public in 2008.

Payment volume rose 4% on a constant-dollar basis, while cross-border volume, excluding intra-Europe transactions, plunged 41%.

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“The recovery so far has been uneven, V-shaped for domestic volumes but L-shaped for cross-border volumes,” CFO Vasant Prabhu said on an earnings call.

Cross-border spending typically delivers higher yields than domestic payments for Visa, Prabhu said, so the slowdown there is creating “a drag on revenue growth, which will continue into fiscal year 2021.”

Visa also posted $2.14 billion in net income, or 97 cents a share, compared with $3.03 billion, or $1.34 a share, a year earlier. On an adjusted basis, it earned $1.12 a share, down from $1.47 a year earlier and above analysts’ $1.09 consensus.

Total spending decreased 10% on a constant dollar basis and the number of processed transactions tumbled 13% from a year earlier as high unemployment due to the coronavirus-induced recession continued to weigh on consumer spending.

According to Prabhu, September saw a six-point recovery in cross-border volumes that has continued into October. “This recovery was driven by a few corridors [where] travel is now relatively frictionless,” he said, citing travel from the U.S. to Mexico and the Caribbean, travel from and to the Persian Gulf states and travel to Turkey.

“The sharp recovery in these corridors provides some early indicators for how cross-border travel may recover when borders do reopen,” he added.

Prabhu predicted that “if process transactions and cross-border volume growth stay at the levels we have seen so far in October,” first-quarter net revenue “would be down in the high-single to low double-digit range.”

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