When Visa’s top executives reported fiscal fourth-quarter earnings this week, they emphasized the stability of the card network’s business over the past nine months to a year, and said they’re dismissing the possibility of a recession for the purposes of planning next year.
Strong consumer spending and a recovery of cross-border travel as the deadly COVID-19 pandemic faded pumped up revenue and earnings for the year ended Sept. 30. Results have been “very strong” despite four-decade-high inflation, the ongoing pandemic, the impact of sanctions following Russia’s invasion of Ukraine last year and the threat of a global recession, Visa CEO Al Kelly told analysts on a Tuesday webcast.
Visa reported fiscal fourth-quarter net income jumped 10% to $3.9 billion over last year as revenue soared 19% to $7.8 billion, according to a Tuesday press release from the San Francisco-based company. Results for the fiscal year were similarly positive, with net income climbing 21% to $15 billion on a revenue increase of 22% to $29.3 billion.
Kelly’s outlook is for more of the same next year, driven by “significant opportunities” from consumer spending, finding new payment flows and providing value-added services, he said on the call.
He and Chief Financial Officer Vasant Prabhu made little mention of the four-decade-high inflation’s impact on consumers, noting consumers are spending at the same rate and using their usual methods of payment. For the company’s purposes, inflation is a driver of increased revenue for now, assuming consumers don’t suddenly become more frugal. Even COVID provided a silver-lining for the company by boosting online payments.
Still, Visa’s executives said they’re mindful of economic risks and said they’re prepared to swing into action if the economic climate suddenly changes, noting the headwinds created by a strong dollar and difficult foreign exchange dynamics.
“While COVID’s impact is largely behind us, as you all know, we are in a very uncertain macroeconomic and geopolitical environment,” Prabhu said during the company’s Tuesday call. “Clearly, there is a high risk of a global recession,” he added, noting that the company doesn’t have a point of view on when or how it might happen.
“For internal planning purposes, we are assuming no recession,” Prabhu said. Nonetheless, he stressed that the company will closely monitor trends and stay flexible. “We will have contingency plans in place should we have an economic or geopolitical shock that impacts our business and we will be prepared to act fast should we need to.”
The executives also laid out what the emergency plans would mean — essentially a playbook for reducing investments in special projects and chopping costs.
“Should there be a recession, or a geopolitical shock that impacts our business, slowing revenue growth below our planning assumptions, we will of course adjust our spending plans by reprioritizing investments, scaling back or delaying programs, and pulling back as appropriate, in personnel expenses, marketing expense, travel and other controllable categories, Prabhu said.
Even taking into account the risks, Kelly was sanguine about the company’s prospects.
“We recognize that some economies around the world could face increased pressure so we will be monitoring things very closely,” Kelly said on the call. We will “be flexible and prudent in the management of our expenses. As a leadership team, we have demonstrated Visa’s ability to manage through many different environments and I remain confident that our strategy will continue to position Visa as a center of money movement for years to come.”