Welcome to Visa's Fiscal Second Quarter 2022 Earnings Conference Call. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I would like to turn the conference over to your host, Ms. Jennifer Como, Senior Vice President and Head of Investor Relations. Ms. Como, you may begin.

Thanks, Jordan. Good afternoon, everyone, and welcome to Visa's fiscal second quarter 2022 earnings call. Joining us today are Al Kelly, Visa's Chairman and Chief Executive Officer; and Vasant Prabhu, Visa's Vice Chair and Chief Financial Officer. This call is being webcast on the Investor Relations section of our website at www.investor.visa.com. A replay will be archived on our site for 30 days. A slide deck containing financial and statistical highlights has been posted on our IR website. Let me also remind you that this presentation includes forward-looking statements. These statements are not guarantees of future performance, and our actual results could differ materially as a result of many factors. Additional information concerning those factors is available in our most recent reports on Forms 10-K and 10-Q, which you can find on the SEC's website and the Investor Relations section of our website. For non-GAAP financial information disclosed in this call, the related GAAP measures and reconciliation are available in today's earnings release. And with that, let me turn the call over to Al.

Good afternoon, everyone, and thank you for joining. I want to take a moment to recognize that this is Jennifer Como's first earnings call in her new role. About two months ago, Jennifer was promoted to Head of Investor Relations, a well-deserved acknowledgment of her contributions over the last three years with us. I would like to start by addressing the situation in Russia and Ukraine. I have witnessed the suffering caused by Russia's attack on Ukraine and its people, including our colleagues in both countries. Our focus is on providing them support. The courage and strength of our colleagues is truly inspiring, as is the determination of the Ukrainian military. Despite the invasion of Ukraine and the ongoing effects of Omicron, we experienced strong performance in the second quarter, driven by volumes, transactions, and credentials. Overall, payment volume increased by 135% compared to three years ago. Cross-border volumes, excluding intra-Europe transactions, were up 112% relative to three years ago. Notably, travel-related cross-border volumes rose to 82%, an increase of five points from the first quarter. Processed transactions experienced a 138% increase compared to three years ago. In the broader context, after the brief impact of Omicron during December and January in the U.S. and other regions, the recovery remains strong. So far, we have not observed any significant impact on volumes from inflation, supply chain challenges, or the conflict in Ukraine. In the U.S., payments volume indexed to 2019 was 144 in the quarter. The growth in volume compared to three years ago has been stable and robust for four consecutive quarters. When examining specific spending categories for credit cards, we noted over a 10 percentage point improvement in the three-year index from the first to the second quarter in travel, retail goods, food and drugs, restaurants, quick-service restaurants, and fuel. As a reminder, debit grew over the quarter in fiscal 2021, which included two stimulus distributions. Even as credit continues to recover, debit remains 20% above pre-pandemic trends. Across all products, spending categories that account for 88% of payment volume are over 120% indexed to three years ago, with nearly two-thirds between 140 and 160. In this environment, Visa's performance was solid. Net revenues grew by 25% year-over-year, and non-GAAP EPS reached $1.79, up by 30%. Looking ahead, while our business will undergo a reset due to developments in Russia, we still anticipate accelerated revenue growth compared to pre-COVID levels in the coming years. This growth is driven by significant opportunities globally through our three growth levers: consumer payments, new flows, and value-added services, and our strategy is yielding excellent results. In consumer payments, we continue to successfully displace cash. In the second quarter, debit cash volumes at Visa increased by 2%, while debit payment volumes surged by 12%. The shift from cash to payments continues worldwide. From year to year, we saw 7.9 billion more payment transactions and 16 million fewer cash transactions. Last quarter, I mentioned the cash-to-payments transition in Latin America, and we continue to see that trend this quarter. Similarly, Central Europe, the Middle East, and Africa are also witnessing a comparable shift. In 2019, cash represented 59% of total volume. Last year during the second quarter, it was 50%, and this quarter it fell to 46%. Growth in consumer payments is driven by increasing the number of credentials and acceptance while deepening engagement. Our card credentials rose to over 3.9 billion, reflecting a 9% year-over-year increase, with a 10% rise in the United States. In terms of acceptance, we have 80 million merchant locations, including small businesses, and counting players like Stripe and Square, the number exceeds 100 million. We've recently achieved strong growth in merchant locations in Latin America and Asia Pacific, up 30% and 20%, respectively. Let me share a few regional examples of progress in consumer payments. In Europe, overall credentials grew by 6%, nearly doubling the historic growth rate over the last eight quarters, aided by previously announced deals with BNP Paribas Fortis in Belgium, which added over 4 million credentials since the announcement of their partnership with Visa. Across Europe, we continue to strengthen our debit business with new partnerships that represent substantial credential opportunities. We also renewed our partnership with one of the largest banks in the Nordics, Nordea. In terms of acceptance, we are continuously exploring new areas, even in established digital markets. A recent example in Europe involves electric vehicle charging, where we became the first payments and financial services company to join the charging interface initiative, collaborating with manufacturers to potentially establish 3 million acceptance points by 2030. In Latin America, we experienced strong growth, with credentials up by 21% year-over-year. Noteworthy renewals this quarter include Porto Seguro, Brazil's third-largest credit issuer, and digital bank Neon Pagamentos, one of Brazil's fastest-growing fintechs with over 15 million clients across their credit and prepaid offerings. In Africa, we've partnered with Vodacom South Africa, which, along with our earlier partnerships with M-PESA Africa and Safaricom, covers 130 million customers throughout the Vodacom Group in Sub-Saharan Africa. Through this partnership, Vodacom will exclusively issue Visa payment credentials, implement new payment flows through Visa Direct, and utilize CyberSource. In the U.S., we've renewed and established several partnerships this quarter. Visa and USAA have recently renewed our long-term issuing partnership. Additionally, we extended our existing relationship with M&T Bank to be their issuance partner, including the transition of business from their recent acquisition of People's United Bank. Over the last two years, we've seen increased merger activity among regional banks, highlighting Visa's ability to grow alongside our clients. Finally, supporting the U.S. government remains a priority for us, and we retained our engagement as the financial agent responsible for the U.S. debit card program. This Visa-branded program is a vital part of Treasury's goal to deliver 99% of federal payments digitally by 2030. A significant growth area in consumer payments is co-branded cards, appealing especially to affluent customers. In the second quarter, spending on affluent credit cards exceeded 2019 levels in several markets, including the U.S. and the U.K. Our U.S. co-branded active cards increased nearly 30% from 2019 to 2022, and we hold seven of the top ten co-brands in the United States as well as eight globally. This past quarter, we renewed our co-brand partnership with AAA, Visa's longest-standing co-brand partner, maintaining a relationship of over 40 years. In India, we've signed a long-term co-brand agreement with Airtel, a leading mobile operator with nearly 356 million subscribers. In Central Europe, the Middle East, and Africa, Emirates NBD expanded its long-standing partnership with Visa by launching a premium co-brand program with Etihad Guest, the loyalty program of Etihad Airlines with 8 million members. In Uganda, we've teamed up with the Uganda National Social Security Fund to issue co-branded cards for 2 million beneficiaries. A few weeks ago, we also announced the renewal of the U.S. Amazon Prime Rewards Visa Signature Card with Chase and Visa. Additionally, Visa reached a broad global agreement with Amazon, covering Visa's acceptance across all Amazon stores and sites today, alongside a joint commitment to collaborate on new product and technology initiatives to ensure innovative payment experiences for our customers moving forward. In the second quarter, we continued to facilitate new payment methods, from installments to cryptocurrencies. In the installment space, we previously announced a global deal with Klarna, who has since issued their co-branded card in Europe and opened a waitlist in the U.S. for their 25 million customers. In the cryptocurrency arena, we are working with governments worldwide on potential Central Bank Digital Currencies, and this quarter we were selected as a finalist in Brazil's CBDC lift challenge. This initiative aims to establish a B2B solution that leverages a CBDC to assist small businesses in accessing global investors and promoting financial inclusion. In terms of engagement, Tap to Pay continues to experience significant growth. In the U.S., we see over 20% Tap to Pay penetration, ranking as the second largest market in terms of transaction volume. Target has become the first U.S. retailer to achieve a 50% penetration of Tap to Pay in face-to-face payments. Transit is an effective means of fostering tapping habits, and the first half of fiscal 2022 set records. We've enabled Tap to Ride in 50 cities globally, including Thailand, Japan, Turkey, Italy, Switzerland, Norway, and Canada, bringing our Tap to Ride footprint to over 500 transit authorities. We processed more than 500 million Visa Tap to Ride transactions worldwide, compared to 700 million for all of last year. To summarize, there are significant opportunities in consumer payments. Visa is growing credentials and acceptance while deepening engagement, and we enable innovation and scalability across the ecosystem, from installments to cryptocurrencies to merchants. Moving to new flows, which saw over 20% revenue growth in the second quarter. Our commercial payments volume reached 138% of 2019 levels, with broad-based recovery across segments and spend types. On the B2B card front in the U.S., Umpqua Bank announced two commercial solutions for middle-market businesses: Visa Commercial Preferred, a card aimed at helping manage daily business expenses, and Visa Commercial Pay, which aids in cash flow management, reconciliation, and reporting. In Latin America, we made progress with B2B fintech Tribal, which chose Visa for card issuance, including virtual cards on their modern corporate card and spend management platform for startups in nine countries. Airwallex, a global platform that helps digital businesses manage payments and money movement across borders, previously launched programs with Visa in Australia, Hong Kong, and the U.K., and has recently introduced virtual Visa cards in the United States, Netherlands, and Singapore to facilitate digital card payments worldwide. Visa B2B Connect continues to expand its global footprint, adding banks for the first time in Tanzania, Uganda, Angola, Thailand, and Poland during the first half of 2022. Now, regarding Visa Direct, transactions grew by 20% in the second quarter. Vasant will discuss this further, but note that Russia was our second largest market for Visa Direct, accounting for about 17% of our transactions in fiscal 2021. Consequently, Visa Direct will be impacted by the suspension of operations in Russia. Nevertheless, we anticipate growth in other areas driven by various use cases. For instance, domestic peer-to-peer payments, which made up the majority of our Russian business, remain a significant opportunity as we continue to roll out services in new markets. We are soon launching our inaugural Visa Direct use case in Israel for peer-to-peer payments in partnership with Bit, the largest peer-to-peer app in the region. Additionally, we’re focusing on payouts and remittances. Firstly, in payouts, we're witnessing momentum in several industries, with transactions up 35% year-over-year. For travel, we launched Visa Direct with Booking.com for customer refunds and loyalty payouts. In the gig economy, Payfare has integrated Visa Direct into its platform to provide real-time payment solutions for over half a million gig workers. Similarly, digital commerce partner Payoneer uses Visa Direct to facilitate cross-border payments for their 5 million customers, including marketplaces and gig economy players. Secondly, our cross-border peer-to-peer or global remittances segment, which consists of higher-yield Visa Direct transactions, presents a substantial opportunity. This quarter, we observed transactions nearly growing by 50% year-over-year. Following our partnership announcement in the fiscal fourth quarter with Paysend, which serves over 6 million customers and 17,000 SMEs, they have initiated their cross-border service with Visa Direct from the U.K. and U.S. to more than 100 corridors. While the U.S. remains the leading source of remittances, the UAE ranks second, followed closely by Saudi Arabia, according to the World Bank. In total, the Gulf Cooperation Council countries collectively account for over $100 billion in outbound remittances. During this past quarter, we formed several partnerships aimed at digitizing remittances in the region, including with AL Muzaini Exchange, Kuwait's largest exchange house, Enjaz, the remittance and payment division of Bank Albilad, the leading provider of remittances in Saudi Arabia, and LuLu Money in the UAE, which empowers 5 million Lulu app users to send money across borders. Key Visa Direct partners, Stripe and others, have agreed to strengthen our existing relationships in multiple regions while expanding into new markets across various applications. In summary, we've made remarkable early strides toward capturing the $185 trillion new flows opportunity, and there remains significant room for accelerated growth. Moving to value-added services, which also saw over 20% revenue growth in the second quarter. We recently completed our acquisition of Tink, a European open banking platform connecting over 3,400 banks with a reach of more than 250 million customers across Europe. Through a unified API, Tink allows its users to transfer funds, access consolidated financial data, and leverage smart financial services like risk analysis and account verification. Visa's established infrastructure and commitment to resilience, cybersecurity, and fraud prevention will help accelerate the embrace of open banking and create a secure foundation for innovation. I would like to highlight more progress in value-added services. First, Visa consulting and analytics. Last quarter, I introduced our specialized global crypto advisory practice, which has attracted interest from hundreds of clients globally, and we've established committed engagements with 30, focusing on their digital currency strategies, product development, and go-to-market plans. Secondly, in risk identity and authentication, we've surpassed 3.5 billion tokens across more than 8,600 issuers in over 150 markets and 1.2 million merchants. Tokens have resulted in a 2.5-point increase in approval rates and a 28% decline in fraud rates in card-not-present transactions during this past quarter. Our key risk solutions, Visa Advanced Authorization and Visa Risk Manager, effectively screened approximately 30% more transactions in the first half of 2022 compared to the same period in 2021. Thirdly, our gateway service CyberSource has made significant progress, having onboarded over 1 million merchant accounts. I previously mentioned transit with CyberSource, which may play a vital role in transit acceptance, as we've added nearly 15 projects during the first half in locations like Thailand, Italy, and Japan. To summarize, our value-added services present an excellent avenue to diversify our revenue streams while equipping our clients with innovative solutions for the payments ecosystem. Our global infrastructure offers connectivity through our network of networks, enabling both traditional payment methods and emerging ways to pay and transfer funds. Our brand is strong, our network is growing, our business is performing well, and our team is engaged and passionate. We are confident that our ongoing initiatives will drive accelerated growth in the years ahead. Now, I'll hand it over to Vasant.

Thank you, Al. Good afternoon, everyone. Despite Omicron, Russia and Ukraine, our fiscal second quarter results were very strong with net revenues up 25% and GAAP EPS up 23%. Non-GAAP EPS was up 30%. In constant dollars, net revenue growth was approximately 27% and non-GAAP EPS growth was 30%. A few key highlights. Global payments volume growth has remained strong and stable relative to pre-COVID levels. In constant dollars, the U.S. index was 2 points higher than the first quarter at 1.44 versus 3 years ago. The international index, ex China, was down 2 points at 1.40 versus 2019 due to the impact of Omicron in early January. Omicron's impact on most domestic volumes was short-lived as we hoped it would be. The robust cross-border travel recovery that started in the fall as borders reopened resumed in February as Omicron's impact faded. Border restrictions were lifted quickly and pent-up demand for travel remains very high. Indexed to 2019, cross-border travel, excluding transactions within Europe, jumped from a low of 71 in January to 94 in March. The first 2 weeks of March saw a spike in cross-border volumes from Russia and Ukraine due to displacement caused by the invasion. After we suspended operations in Russia in mid-March, there were no more cross-border transactions in or out of Russia. Adjusted for Russia and the spike from Ukraine, the March cross-border travel index relative to 2019 was around 90. So far, we are not seeing any material impact on cross-border travel in other corridors as a result of Russia's invasion of Ukraine. Our 3 growth engines: consumer payments; new flows and value-added services, all grew revenues well over 20%. During the quarter, we bought back $2.9 billion in stock at an average price of around $210. On March 10, we closed on the Tink acquisition. Finally, our second quarter P&L and balance sheet reflect our best estimates for the impact of suspending operations in Russia. This includes revenues and expenses from terminating all client and supplier contracts, resolution of settlement balances and the deconsolidation of our Russian business. We have adjusted 2 items from our GAAP earnings, expenses to support our employees in Russia and Ukraine and a charge related to net assets in our Russian legal entity. Now on to the details. In constant dollars, global payments volume was up 17% year-over-year and 35% versus 2019. Debit spend remained resilient as credit spend continued to improve. Excluding China, total payments volume growth was 18% or 42% higher than 2019. U.S. payments volume grew 16%, up 44% versus 2019, which was 2 points better than the first quarter. Credit grew 27% and improved 4 points to 35% over 2019, helped by the affluent consumer. Debit grew only 6% year-over-year, reflecting the impact of stimulus last year, but growth remained very strong versus 2019 at 53%. As Al indicated, debit is indexing well above the pre-COVID trend line, benefiting from accelerated cash digitization. U.S. card presence spend grew 17% and was 21% above 2019 at its highest quarterly level since the pandemic. Card-not-present volume, excluding travel, grew 10% and was 70% above 2019. Relative to 3 years ago, e-commerce levels remain well above the pre-COVID trend line even as card-present spend continues to recover. International constant dollar payments volume, excluding China, grew 22% and was 40% above 2019. A few regional highlights. Latin America was up 44% year-over-year and 99% higher than 2019 with robust performance across the region, fueled by cash digitization and client wins. Our Central Europe, Middle East and Africa region grew 18% year-over-year and 76% higher than 2019, led by client wins and cash digitization. Excluding Russia, the Central Europe, Middle East and Africa region was up 100% over 2019. Europe was up 21% year-over-year and 31% higher than 2019. Following an Omicron dip in January, we saw a rapid recovery in most European markets. Ex U.K., European volumes grew 36% year-over-year and were 54% above 2019. Asia Pacific, excluding China, remains our weakest region, up 16% year-over-year and 25% versus 2019. Due to COVID restrictions, recovery across most of Asia has stalled Hong Kong declined relative to 2019. India recovered strongly, up almost 20 points from December. India has been our fastest-growing market in Asia, up almost 80% since 2019, fueled by a tripling of e-commerce volumes. Global processed transactions were up 19% year-over-year and 38% versus 2019. Constant dollar cross-border volume, excluding transactions within Europe, were up 47% year-over-year and 12% over 2019. Cross-border card-not-present volume growth, excluding travel, remained strong, up 16% year-over-year and well above the pre-COVID trend line at 67% above 2019. Cross-border travel-related spend, excluding intra-Europe, grew 111% year-over-year and indexed at 82% of 2019 levels. As I mentioned earlier, after an Omicron driven dip to 71 in January, the cross-border travel index to 2019 rose sharply to 94 in March. Many corridors are now indexing about 90 relative to 2019. Inbound travel to Latin America, the Caribbean and parts of the Middle East has been above 2019 levels for some time now. There's plenty of recovery to come in one important corridor inbound to the U.S., which indexed only at 70 in Q2. Asia indexed in the high 30s, both inbound and outbound in Q2. The pace of travel recovery to and from Asia will be a key driver of the future trajectory. Most Asian borders are now open, except for China, and restrictions remain in place in Japan, Korea and Taiwan. Moving now to a quick review of second quarter financial results. Service revenues grew 24%, faster than the 20% nominal growth in Q1 payments volume. We were able to bill and collect service revenues in Russia through early March. As such, in the second quarter, we recorded almost 2 quarters of service revenues related to Russia. Service revenues were also helped by increasing utilization of card benefits. Data processing revenues grew 16%, below the 19% processed transactions growth mostly due to exchange rate changes. International transaction revenues were up 48% versus the 42% increase in nominal cross-border volumes, excluding intra-Europe. Revenue growth was helped by high currency volatility and select pricing modifications, partially offset by business mix. Other revenues grew 21%, led by consulting, data and marketing services as well as travel benefits. Revenue growth was robust across our 3 growth engines, each growing well over 20%. Consumer payments growth was led by improving cross-border volumes and continued strong domestic volumes and transactions. New flows growth was driven by Visa Direct and carded B2B recovery. Visa Direct transactions grew by 20% impacted by lapping a strong quarter in the U.S. last year and a suspension of Russian operations. As Al indicated, Russia was the second largest market for Visa Direct, accounting for 17% of transactions. This is an unfortunate setback but the Visa Direct business is ramping fast in other international markets as well as in use cases such as cross-border remittances, earned wage access, and other B2C payouts. Commercial or B2B volumes grew 29% year-over-year and up 38% versus 2019. Growth was driven by continued strength of small businesses and the recovery of large businesses across the portfolio of diverse spend categories. Value-added service growth was led by consulting and marketing services, card benefits as well as risk and identity solutions. Revenue growth drivers include the acceleration of e-commerce, client growth in international markets, and select pricing actions. Client incentives were 25.8% of gross revenues at the lower end of expectations. This was driven by a better revenue mix due to the faster-than-expected recovery of our cross-border business and by deal timing, with some Q2 deals being pushed into Q3. GAAP operating expenses grew 11%. Non-GAAP operating expenses grew 16%. We recorded losses from our equity investments of $127 million. Excluding investment losses, non-GAAP nonoperating expense was $133 million. Our non-GAAP tax rate was 19.6%. GAAP EPS was $1.70, non-GAAP EPS $1.79, up 30% from last year. Including our quarterly dividend of $0.375 per share and our stock buybacks, we returned $3.7 billion of capital to shareholders in the quarter. A few comments on our trends through the first 3 weeks of April. On a year-over-year basis, U.S. payments volume was up 12%, with debit up 2% and credit up 26%. Debit volumes are lapping the impact of stimulus payments in 2021. U.S. April spend growth versus 3 years ago was up 45%, with debit up a robust 54% and credit up 37%. These trends are relatively consistent with performance in major markets around the world with the exception of Central Europe, the Middle East, and Africa where we now have no payments volume from Russia. Processed transactions grew 17% year-over-year, up 36% versus 2019. Constant dollar cross-border volume, excluding transactions within Europe, grew 47% year-over-year and were 15% over 2019. Card-not-present non-travel growth was 62% compared to 2019. Travel-related cross-border volumes were at a 92 index to 2019. The small decline in this index relative to March is mostly due to the loss of Russia. Total cross-border volume was up 28% over 2019. Moving now to our outlook for the rest of fiscal 2022. Just as 2021 was a year of 2 distinct halves, due to the recovery, 2022 will be a year of 2 halves due to Russia. The suspension of our business in Russia will reduce second half revenues by about 4%. Russia will also negatively impact the payments volume and cross-border volume index to 2019, each by 4 points. The impact on processed transactions index to 2019 will be under 1 point since we did not process domestic transactions in Russia. Ex-Russia and Ukraine, our domestic volume growth has stayed robust and stable for the past 4 quarters relative to 2019. Our outlook for the second half assumes that these trends are sustained. While there are uncertainties created by high inflation, supply chain disruptions, rising interest rates, and the invasion of Ukraine, there is no evident impact on our global payments volumes. E-commerce spend, both domestic and cross-border has remained strong and stable relative to 2019 at well above the pre-COVID trend line, even as pandemic effects fade, and we are assuming this will continue. In line with payments volumes, we expect processed transactions growth relative to 2019 to remain strong and stable with the variability largely driven by the extent to which small ticket card-present everyday spend comes back. It is important to note that year-over-year growth rates will moderate as we lap the strong second half recovery in fiscal year '21. Ex-Russia and Ukraine, we are assuming no spillover effects on other corridors in our cross-border business. Given where we ended the second quarter, we now expect cross-border travel excluding intra-Europe to fully recover to 2019 levels by the end of our fiscal year despite the loss of Russian business. Including intra-Europe, that would put cross-border travel above 2019 levels. With these assumptions, third quarter net revenues are expected to grow at the upper end of the mid-teens range in constant dollars. This includes Tink and Currencycloud, which add approximately 0.5 point to net revenues. The dollar has strengthened and the exchange rate drag will likely reduce nominal rate revenue growth by around 2.5 points. Due to some deals moving into the third quarter from the first half and the expectation that certain milestones will be achieved on some key contracts, incentives will run higher in the third quarter, between 26.5% to 27.5% of gross revenues. We expect non-GAAP operating expenses in constant dollars to grow in the mid-teens, including expense savings from Russia and almost 3 points of added expense from Currencycloud and Tink. Exchange rates will likely reduce nominal operating expense growth by about 1.5 points. Our tax rate is expected to be in the 19% to 19.5% range. At this point, we expect fourth quarter trends to be generally in line with the third quarter. As always, we will update our fourth quarter outlook in July. Based on results to date and our outlook for the second half, we expect full year net revenue growth in constant dollars in the high teens to 20% range, including approximately 0.5 point of contribution from Tink and Currencycloud. Exchange rates will likely drag nominal growth rates down by around 2 points. There is no change in our expectation for full year incentives. Incentives as a percent of gross revenues are expected to range between 25.5% to 26.5%. We expect constant dollar non-GAAP operating expense growth at the upper end of mid-teens. This includes savings from the suspension of Russian operations and almost 2 points of added expense from Currencycloud and Tink. Nominal operating expense growth will be around 1.5 points lower due to the stronger dollar. Our full year tax rate is expected to be in the 19% to 19.5% range. Despite the uncertainties caused by inflation, interest rates, the invasion of Ukraine and our exit from Russia, we expect fiscal year '22 will be a very strong year of above-trend top and bottom line growth. As we enter the post-COVID era, we remain confident we can sustain a rate of growth above pre-COVID levels for all the reasons Al outlined, which I will summarize again. First, an acceleration away from cash and check for merchant payments, both domestic and cross-border as digitization becomes pervasive across consumers and businesses globally. Second, acceleration of cash, check and wire transfer displacement as our new flows initiatives penetrate a broad range of new use cases with very large total addressable markets. Third, sustainable high-teens growth across value-added services, both from existing services and new offerings. As new flows and value-added services become a larger part of our revenue mix, growing faster than consumer payments, the sustainable growth rate will continue to rise. We are and will continue to invest in the capabilities required to capture the extraordinary growth opportunity ahead of us. With that, I'll turn this back to Jennifer.

Thanks, Vasant. And with that, we're ready to take questions, Jordan.

Our first question comes from Harshita Rawat from Bernstein.

Vasant, I want to ask about cross-border. Had the pandemic not happened, your cross-border volumes would have been at least 20% to 30% of the 2019 levels, if you just kind of go with historical run rates. Now clearly, the travel probably has been solid these past few months. My question is how important is it that Asia, specifically China, comes back for you to have cross-border travel, not just going to 2019 levels, but eventually kind of returning to the pre-pandemic rate of growth?

Yes, Harshita, that is a great question. As you know, two things we mentioned in the last call remain true. First, most countries around the world want to keep their borders open, with China being a notable exception and some restrictions in Japan, Korea, and Taiwan, including Hong Kong. Besides these, travel can generally take place freely elsewhere, with some regions requiring tests and others not. Second, there is still a strong pent-up demand for travel. Early signs for summer bookings have been very positive, and we've been surprised by the speed of recovery, even though we had anticipated a strong rebound. Since January, the recovery has been quite robust. We feel optimistic that inbound travel to the U.S., which was at 70 as of the end of March, is on a solid recovery path. There is still some recovery needed in and out of Europe, which should help us return to 2019 levels. You're correct in noting that the pace and extent of our return to pre-pandemic figures will hinge on Asia's recovery. Asia stood at under 40 in the second quarter, with China remaining significantly down. Japan, Korea, and Taiwan are also critical for Asian cross-border travel. Asia is showing some positive recovery trends, especially in areas like India, Thailand, Indonesia, Australia, and New Zealand. However, achieving the full recovery to 130 will depend on the significant travel markets in Asia, specifically China, Japan, and Korea, returning to form. We'll keep you updated on that in our next call.

Our next question comes from Lisa Ellis from MoffettNathanson.

I had a follow-up question on commercial cards. I think you called out that your commercial card volumes are running at 138% of 2019 levels, so pretty healthy growth there. Can you talk more broadly? I feel like this is maybe a piece of the business that doesn't get the attention it should, given how much cash and checks and wire and other forms of payment are still in commercial. Can you maybe talk a little bit about the initiatives you've got underway to accelerate the digitization or converting more of these B2B payments into cards?

Thank you, Lisa. The B2B segment represents a $122 trillion opportunity, with $20 trillion in the carded space and $10 trillion in the cross-border area. In the carded space, we are already the leading provider of commercial card volume. Our ongoing focus is on increasing the number of issuers of commercial cards, as this number is significantly lower compared to consumer cards. We are paying particular attention to travel and fuel use cases, along with purchasing and corporate cards, which are more traditional components of the carded B2B sector. Additionally, we aim to expand acceptance, as there are gaps in the commercial space that prevent us from capturing the total volume we could potentially achieve. We are making progress, but we still have work to do to establish an acceptance footprint that closely resembles the wide-ranging acceptance we have on the consumer side. This aspect of the business is crucial and offers attractive yields. It typically grows faster than consumer segments, and we believe it can return to that growth pattern as we adapt to a post-pandemic environment, influenced largely by the speed at which business travel resumes. In the cross-border area, our primary initiative is B2B Connect, concentrating on expanding the network by involving more banks across various countries. Our primary focus is on network growth rather than immediate transaction volume. We believe that once the network reaches a robust level, transaction flows will accelerate rapidly. These are some of our key areas of focus in this significant domain, which I firmly believe presents an enormous opportunity for us moving forward.

Our next question comes from Tien-Tsin Huang from JPMorgan.

Thank you so much. Very strong broad-based results, which is what I want to ask about. With you far exceeding your revenue outlook, it looks like the client incentive plan is at the very low end of your expectations. So I just want to make sure I understand the relative performance there between the 2. Is it something that the upside in revenue brings with it very little incentive pressure, or is it more complicated than that?

No, it's 2 things, Tien-Tsin, as I said in the comments. Number one, you saw that our cross-border recovery in the quarter was stronger than we expected. We'd expect a good recovery, but this was stronger than we expected. That improves our mix, but even with the strong recovery, our mix of cross-border is still lower than it was pre-pandemic. So the mix affects the percentage. As you know, the percentage is a numerator and denominator. When cross-border grows disproportionately, the denominator grows without a commensurate increase in the numerator, just given the nature of how many of our incentives work. And that helps that percentage, and that's why the percentage came in at the lower end of the range. The second reason is there are always timing factors, timing factors in terms of renewals, timing as in when we recognize incentives linked to achieving certain milestones that contracts have, and that has pushed some of those incentives into the third quarter. We expected third quarter to run above the upper end of the range, so to speak. For the full year, we still expect to be in the range we gave you. So it's all driven by a combination of mix and timing.

The only thing I would add, Tien-Tsin, you followed us for a while. I mean, there's art and science to this, in forecasting. And a lot of times, just dealing with the timing point that Vasant was talking about, we make assumptions about when deals will get done. We then make assumptions about how long it will take to get a deal launched or get a migration going, and then we make assumptions about the performance of that deal. The odds of us getting all of that right across hundreds of deals that happen during the course of the year make this not the easiest thing to always forecast. But I think we do a largely good job, but the explanation that Vasant gave about why we came in at the low end this quarter is those main 2 factors of timing and mix, driven by outperformance across the border.

Our next question comes from Sanjay Sakhrani from KBW.

Vasant, you spoke to the 4 percentage point impact in the second half from Russia. And obviously, it seems like you're able to overcome some of that with the stronger cross-border trends. Maybe you could just parse through a little bit of the impact to EPS and the flow through for us? I know there's some expenses that you mentioned that can offset Russia, maybe just help us through that.

Sure. There is a 4 percentage point revenue impact from Russia, which reflects the overall revenue effect. Our revenue expectations for the quarter are in the upper end to mid-teens range in constant dollars. Without the impact from Russia, we could have added 4 points to that expectation. Despite this, our performance remains strong, partly due to the stronger cross-border business compensating for the loss in Russia. On the expense side, we anticipate mid-teens expense growth, benefiting from the elimination of Russian expenses. There are two primary Russian expenses that are no longer necessary. Previously, we paid a processor in Russia for transaction processing, which we no longer need to do. While we do incur personnel-related costs in Russia, we’ve made commitments to some employees regarding future roles, so those costs won't fully disappear. Overall, this leads to a reduction in expenses in the second half by approximately 2 to 3 points. On the flip side, Tink and Currencycloud, which we didn't have last year, will contribute about 3 points. This essentially balances out the impacts. Additionally, exchange rates are expected to positively affect expenses by around 1.5 points. In total, our expenses would have been approximately 2 to 3 points higher had operations in Russia not been suspended.

Okay. Great. And you probably get more flow-through from the cross-border outperformance, correct?

Well, partially. Mainly, because the incentives would go with it, tend to be lower, and it's a higher-yielding business, yes.

Our next question comes from Darrin Peller from Wolfe Research.

Listen, it's great to see your constant currency guidance increase for the full year despite what's obviously happening in Russia, Ukraine in organic and to some degree with a small help from acquisitions. Just to be clear, we're still getting a follow-up from a couple of investors asking to make sure that includes the impact for the full year of Russia as well, right? And then I just want to double check. I mean, you guys continuously highlight the potential to exit the pandemic at an accelerated growth rate, and I'm sure it has a lot to do with the new flows and some of the new services opportunities you're seeing grow so well. Can you just reiterate on that and just go into a little more detail on what gives you the confidence there? And what kind of growth rates you should be able to achieve?

I believe the key point is that we have not been idle over the past couple of years in pursuing opportunities to convert business from fintechs and expand our relationships with traditional partners. Additionally, we have significantly increased our acceptance footprint in various regions. There are actions we've taken whose benefits have not yet been fully realized due to the pandemic suppressing spending. However, as we emerge from this period, I expect to see the positive impact of those actions. The pandemic has also sped up the adoption of card-not-present transactions in e-commerce, which I believe will support ongoing growth. We are well-positioned to capitalize on that. Furthermore, we have continually added use cases for Visa Direct, enhanced our risk and identity solutions, and expanded Visa consulting services. I maintain that the market has not yet fully recognized the benefits of many investments we've made during the past 27 months while navigating the challenges posed by the pandemic. As we transition to a more normal environment, these benefits will become clearer. So, that’s the primary consideration. Vasant, would you like to address Darren's question regarding Russia?

Yes. Yes, Darren. Our full year outlook incorporates the impacts of Russia in the second half. It reflects the fact that the second quarter was as strong as it was. So when you look at the first half and what growth we had in the first half, despite the impact of Russia on the second half, in constant dollars, we still expect to be in the high teens to 20%.

Our next question comes from Ashwin Shirvaikar from Citi.

I wanted to shift focus from cross-border issues to Tink and discuss how you plan to leverage Tink for growth, including both geographical expansion and functional enhancements related to debit and Visa Direct's broader payments capabilities.

Thank you. I want to remind everyone that I mentioned Tink, but I didn't highlight that it has thousands of developers supporting 3,400 banks. Currently, it operates in 18 markets across Europe. Its revenue primarily comes from API calls, although some value-added services are subscription-based. Our aim is to position ourselves at the forefront of open banking in Europe, where it's most developed. We believe our complementary strengths will enhance the adoption of Tink’s services and provide additional value to our clients. Our initial focus will be on Europe, where Tink is already strong and has a significant presence. We see an opportunity to help advance their business in this region. However, we also plan to leverage Tink’s capabilities and expand into other markets in the future. We believe it's more effective to concentrate our investment in a single area rather than spreading it too thin across multiple locations. Therefore, we want to strengthen our partnership in Europe first before seeking further growth.

Our next question comes from Jason Kupferberg with Bank of America.

So I was just curious, for the quarter itself here in Q2, I think you expected net revenue growth to be at the high end of high teens. Obviously, that was before the war started. You ended up in the mid-20s. So I'm just curious in terms of order of magnitude, like which revenue lines really surprised you the most to the upside? To what extent was inflation a meaningful contributor? And then it sounded like maybe you pulled forward some Russia service revenue, I think Vasant you made a comment there. I was hoping you could maybe quantify that piece as well.

The main reasons for the quarter exceeding our expectations were primarily due to international revenues. These revenues were not only higher than anticipated, but also showed a significant recovery from 71 to about 94 compared to the 2019 index between late January and March, which was exceptionally strong. This was definitely one of the key contributors. The war in Ukraine led to increased currency volatility, and our cross-border business benefited from this, resulting in higher treasury revenues than we had anticipated. These were two significant factors. Additionally, on the service line, as you know, we recognize service fees with a lag. In the case of Russia, since we had to suspend operations, we managed to bill and collect revenues for the second quarter up until the suspension, which likely contributed just under one point to our revenues, possibly a bit over half a point. Overall, however, the strong performance was driven by strength across the board, and value-added services also performed very well.

Our next question comes from Bob Napoli with William Blair.

Visa has been actively engaged in mergers and acquisitions as well as venture investing. With valuations decreasing, should we anticipate that Visa will engage more in both of these areas? If so, which areas, products, geographies, or verticals would be most appealing for Visa to incrementally invest in?

I'll begin, and Vasant can share additional insights. We prefer to manage things in-house whenever possible. However, we have a strong corporate development team that explores various opportunities. We continually assess different options to see what's appealing and what isn't. If we can acquire people with specialized skills that we currently lack, which is often quicker than developing those abilities internally, we will definitely consider purchasing. Additionally, expanding our capabilities in terms of new flows and value-added services is something we find attractive. I won't go into too much detail here. It's important to note that we don't aim to be an active venture investor. Most of our investments are linked to commercial agreements, and smaller companies often seek our endorsement by requesting a small investment, helping them add to their list of investors. We're not out there just speculating on venture investments; virtually all our engagements are driven by existing commercial deals, which is our primary focus. Vasant, would you like to add anything?

No. I think what you will see in the future is more of what you've seen in the past. Acquisitions that can add to our capabilities like Tink did, like Currencycloud did, expand the suite of services we can offer, which is what both Tink and Currencycloud do. Acquisitions where we decide it's faster or cheaper to buy than to build. In some cases, it could be acquisitions that expand the scope of an existing service like Earthport did with our payouts business around the world. Yes, to the extent that the correction we're seeing in public markets carries over to private markets over a period of time, certainly, we expect to be more active. We have no specific objectives in terms of we're going to do X amount in acquisitions every year. It's going to be based on what makes sense to do and where we can create value.

Our next question comes from Timothy Chiodo with Credit Suisse.

I want to touch on Visa Direct. Clearly, it's a much bigger but still fast-growing portion of your business. You talked a little bit about the growth this quarter and the Russia impact. And you also mentioned it as the second largest geographic market. Maybe you could talk a little bit about that geographic mix? And less on maybe the other large markets, but more importantly, maybe the markets where there's a big opportunity? And the brief follow-up would be if you could just recap the mechanic around your ability to, of course, send to Visa credentials, but also how does it work when you want to send to a Mastercard credential and that capability.

For competitive reasons, I would prefer not to delve too deeply into specifics. However, our largest market is clearly the United States, followed by Russia as our second largest market. Additionally, there are several other markets globally that collectively represent a significant size. At this stage, our focus is on three main areas: first, increasing the penetration of our existing use cases; second, developing new use cases; and third, expanding the geographical reach of all our use cases. We have assembled a dedicated team for Visa Direct, and we leverage our account executives worldwide as our primary sales agents. Following that, we involve solution experts who possess detailed knowledge about Visa Direct. I've mentioned payouts and remittances, and we are actively exploring the potential to pay gig economy workers, a rapidly growing segment globally. We’re also looking into global money movement use cases beyond what I’ve previously discussed in person-to-person transfers. Additionally, we aim to digitize disbursements by replacing checks and slow ACH wherever feasible worldwide. In reality, we see applications everywhere. One of our key challenges, as we work to make up for some of the volume lost from Russia, will be deciding where to invest rather than just identifying investment opportunities. The good news is there are numerous places to invest; we will need to identify where the most promising opportunities lie to drive transaction growth as we move forward with various use cases.

Yes. It's part of our network approach. We are network agnostic, and acquisitions like YellowPepper and our work with Earthport provide us the capabilities to send to any credential, including a bank account, ensuring your money gets where it needs to go, potentially using infrastructure that isn't ours.

Our next question comes from James Faucette from Morgan Stanley.

I appreciate all the details you provided. I have received a few questions from investors regarding the impact of inflation. Could you help quantify how this might be benefiting Visa? Additionally, could you discuss whether you're observing any changes in consumer spending behavior, specifically the balance between discretionary and nondiscretionary spending? Also, does this have any effect on how you are shaping your outlook?

Inflation has various effects on our business. Service fees and international fees are tied to transaction volume. Typically, inflation increases transaction size, but we are managing that. Incentives are also linked to volume, which balances out the increase. When fuel prices rise, consumers may reduce their spending during periods of significant gas price hikes. However, if the dollar weakens over time, it could lead to more inbound cross-border flows, and the U.S. inbound corridor is one of our largest and most profitable. Costs related to personnel, marketing, and professional services might rise. Nonetheless, I want to emphasize that we haven't observed any concerning impact on our numbers. Overall, historically, inflation has had a positive effect on us.

Yes. To add to what Al mentioned, we have observed an increase in ticket sizes, especially in the U.S. and Europe, but this is not solely due to inflation. Part of it is related to the transaction mix, as card-present transactions, which usually are smaller, have not yet fully recovered. Additionally, e-commerce transactions, even for everyday purchases, tend to be larger. We might even experience a decrease in ticket sizes during inflationary periods as card-present transactions return. As Al indicated, inflation has various effects, but overall, it remains beneficial for us. We haven't identified any discernible impact on discretionary spending. In fact, discretionary spending, particularly from affluent consumers and credit cardholders, has been increasing quite robustly. Generally, we don't see any clear effects from inflation, but we will continue to monitor the situation.

James, I'll just share 1 quick data point with you. We recently looked at restaurant spending by various strata, and the highest-performing strata in terms of growth is the $100 to $300 ticket price, and the second best performing strata was over $300. So that just gives you some sense. That's very recent data of the affluent being back in the market and not afraid to spend in an important spend category.

Our final question comes from Jamie Friedman with Susquehanna.

Vasant, I may be misremembering this, but my recollection was that you had contemplated returning to a 90% travel index by September. I apologize if I got that wrong; you were going kind of quick with the updated assumptions. Can you repeat what you were contemplating now in terms of where travel would end the fiscal year?

Yes. So we talk about cross-border travel ex intra-Europe, and we are now expecting, given where it ended the second quarter, to be at or about likely 2019 by the end of our fiscal year. And you’re absolutely right; the last time we talked to you, we said we'd probably be around 90%. We're running better than we expected so far, so we've definitely raised our view of that. Now inclusive of intra-Europe, that would put us above 2019 levels by the end of our fiscal year. So yes, I think you got it right.

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

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