COMPANY PROFILE

Visa Inc. (NYSE: V) is the world’s leader in digital payments. Our mission is to connect the world through the most innovative, reliable and secure payment network - enabling individuals, businesses and economies to thrive. Our advanced global processing network, VisaNet, provides secure and reliable payments around the world, and is capable of handling more than 65,000 transaction messages a second. Our relentless focus on innovation is a catalyst for the rapid growth of digital commerce on any device for everyone, everywhere. As the world moves from analog to digital, Visa is applying our brand, products, people, network and scale to reshape the future of commerce. For more information, visit usa.visa.com/about-visa.html, usa.visa.com/visa- everywhere/blog.html and @VisaNews.

Dec. 8, 2021-- Visa (NYSE: V) today announced that the U.S. Spending Momentum Index (SMI) was 111.9 in November (seasonally adjusted), up 1.3 points from October, marking the second consecutive month of acceleration in consumer spending momentum. The SMI’s further increase above 100 signals that even more consumers are spending more than they did a year ago.

The Visa SMI is an economic indicator of the health of consumer spending. When the Visa SMI rises above 100, the consumer spending momentum is strengthening and when it falls below 100, the spending momentum is weakening as fewer consumers are spending more relative to the previous year.

By category, the SMI for discretionary purchases rose 1.4 points from the previous month to 107.9. The SMI for non-discretionary purchases fell 1.1 points to 99.8, which marks a contraction in momentum for the category. On a regional basis, the SMI accelerated the fastest in the Midwest, rising 2.8 points followed by the Northeast (+1.1 points). The South (+0.6 points) and West (+0.5 points) also posted improvements for the month. The strong rebound in the SMI for the Midwest now makes it the region with the highest reading at 112.5 as of November with the Northeast the softest reading at 110.8.

“This month’s SMI reading once again reinforces the narrative that consumer spending remains robust to round out this year,” said Wayne Best, Visa’s Chief Economist. “It appears that consumers are looking past the high inflation readings in recent months at least for the time being.”

Style Factor Screening

From a factor scoring perspective versus the other 199 brands in the brands index, here’s where Visa scores well as of 12/28/21:

• 100% high margins versus industry peers

• 87% high shareholder yield

• 95% wide moat rating

• 87% best sales surprise last quarter

• 89% high projected 3YR dividend growth

• 71% high strong free cash flow growth

• 92% high absolute free cash flow

• 82% sales surprise last quarter

• 71% top dividend yield

1/28/22 Update:

Earnings:

Beats across the board - the death of credit & debit card use has been greatly exaggerated. Quarterly reports can be lumpy at times across a full business cycle but these businesses are FCF machines and at the center of 7b people using less cash every year. Tough performers over the last few years relative to significant outperformer’s since these companies went public. There is no change to our long-term secular theme of people using less cash and more credit and debit cards. The stocks are as cheap as they have been since they went public. They generate significant free cash flow and their businesses are generally pretty stable. As the price of goods and services stays high their transaction volume should generate strong revenues and offer a great inflation hedges. They have been aggressive buyers of their own stocks in the weakness last 6 months which should allow for strong eps beats later in the year and beyond. These are stable predictable businesses that will really recover well when cross border travel recovers on a sustainable basis. Right now the recovery is lumpy so quarter to quarter we can see fluctuations correlated to Covid restrictions and policies.The payments group has seen a rare period of underperformance relative to the market. Have things changed and is this a meaningful pivot against these card processors?

12/31/2021:

I think not. Visa, Mastercard, American Express, Paypal, etc are all tied to a massive and unstoppable theme: the death of cash. In developed economies, card use is the norm, in emerging market economies, cash is still a large part of transaction volume. Over time the use of cash should continue to be reduced in favor of card and mobile payments of all kinds. Add to that the travel-link with cross-border transactions and you have some meaningful upside as global travel trends normalize and humans get out and explore again. The pent up demand for travel and experiences has never been higher and the services sector is the only part of the economy that has not fully recovered since 2019’s peak. I think 2022 will be the year when the payments brands have a wicked snap-back and begin resuming their traditional outperformance versus the market. These brands are asset light businesses, run with high margins and are at the center of how global consumers pay for goods and services. Fun fact: 70% of every revenue dollar generated by Visa drops directly to the free cash flow line. Management is aggressively buying back stock while its low and has recently increased the buyback authorization to over $12billion. The combination of aggressively reducing share count through buybacks with a much better business environment should allow Visa and its peers to have some meaningful EPS beats in 2022 and at a time when these beats will be harder to come by for most companies. That will make this group stand out even more and flows will find these names again. Not to mention, credit card businesses benefit greatly from some excess inflation as they thrive on transaction volume. When the price of what we buy goes up and we continue to spend, Visa’s revenues go up even if transaction volume stays flat YOY. That’s a nice sneaky inflation hedge. Lastly, the BNPL thematic is NOT a disruptor of their business. Most of these BNPL providers ride on the rails of Visa/Mastercard and they get paid once for the initial transaction and again on further payments. And yes, all of these card brands are implementing crypto strategies and only over time will we see if thats a new meaningful addition to the revenue line.