Welcome to Visa Inc. Fiscal Q4 and Full Year twenty twelve Earnings Conference Call. All participants are in a listen only mode until the question and answer session. 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 to your host, Mr. Jack Karski, Head of Global Investor Relations. Mr. Karski, you may begin.
And good afternoon, and welcome everyone to Visa Inc. 4th fiscal quarter and full year 2012 earnings With us today are Joe Saunders, Visa's Chairman and Chief Executive Officer and Byron Pollitt, Visa's Chief This call is currently being webcast over the Internet. It can be accessed on the Investor Relations section of our website at investor. Visa.com. A replay of the webcast will also be archived on our site for 30 days.
A PowerPoint deck containing highlights of today's commentary was posted to our website prior to this call. Let me also remind you This presentation may include forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. By their nature, forward looking statements are not guarantees of future performance and as a result of a variety of factors, Actual results could differ materially from such statements. These include setbacks in the global economy and the impact of new financial reform regulations. Additional information concerning those factors is available in the company's filings with the SEC, which can be accessed through the SEC's website and the Investor Relations section of the Visa website.
For historical non GAAP or pro form a related financial information disclosed in this call, Related GAAP measures and other information required by Regulation G of the SEC are available in the financial and statistical summary accompanying our fiscal 4th quarter and This release can also be accessed through the IR section of our website. And with that, I turn the call over to Joe.
Thanks, Jack, and as always, thank you all for joining us today. Let me begin by saying that our hearts and thoughts are with the people on the East Coast of the United States who are now recovering from Hurricane Sandy. Many of our clients, our employees, our partners and investors like you live in affected areas and we hope that you, your families and your neighbors Are all safe and moving toward a full and speedy recovery. Visa closed out fiscal 2012 With a solid 4th quarter delivering net operating revenues of $2,700,000,000 a 15% increase over the same period last year. Adjusted diluted earnings per share for the 4th quarter were $1.54 an increase of 21% over the prior year quarter.
The adjustment in diluted earnings reflects the impact post adjustment by the IRS during the quarter. Byron will provide additional commentary. Revenue gains for the quarter were driven by particularly strong payments volume growth for credit products in the United States as well as continued expansion of our performance for the full fiscal year. Net operating revenue in 2012 was a record $10,400,000,000 a 13% increase for 2011. Adjusted net income was $4,200,000,000 a 19% increase over the prior year.
Full year adjusted diluted earnings per share came in at $6.20 24% ahead of last year. Now let's turn the discussion to what's ahead in 2013. Byron will get into specifics on broad guidance for fiscal 2013, but we are reaffirming our commitment to a growth rate in High teens for adjusted diluted earnings per share. That being said, Visa is taking a measured We are mindful of uncertainties in the global operating environment, including softness in some pockets of the global economy And continued volatility in Europe. And given our better than anticipated performance in fiscal 2012, In fiscal 2013, we are once again setting our net revenue guidance growth to low double digits.
An improving economic environment Well change our view, but we'll take a prudent road for the time being. Effective tomorrow, Charlie Scharf becomes Visa's Chief Executive Officer. I will continue as Executive Chairman of the company until March 31st, at which point I plan to retire. Charlie's appointment was the result of a thorough and robust I am confident that Charlie will hit the ground running, not miss a beat and accelerate our forward momentum. I look forward to working with him to make this transition seamless.
And I'm sure he looks forward to getting to know you better And then he will talk to you directly when he leads our next earnings call. Given Visa's outlook for growth, we 2,500,000 shares at an average price of $127 per share by spending $324,000,000 Earlier this month, our Board of Directors authorized an incremental $1,500,000,000 for Class A share repurchases. Additionally, As reported last week, our Board raised our dividend 50% over last year's rate to $1.32 Per share on an annualized basis. Turning to our business in the United States. Overall, we continue to apply a disciplined approach to expand Visa's business in the rapidly evolving technological and competitive landscape.
Our business is tracking closely with our For credit products, Visa extended our gains. During the September quarter, payment volume 9% with particular strength from our affluent products. Prepaid growth also continues to be strong in the United States with the general purpose and payroll Serving as our 2 biggest growth drivers in the category during the September quarter posting 28% 30% Now let's turn to U. S. Debit, where the situation continues to play out as expected and In line with our guidance.
Quarter by quarter, we are getting smarter about how to operate in the new environment and which during the September quarter. Further, we have been working with issuers to secure long term contracts. To that We secured our top 15 U. S. Debit issuers to long term agreements.
In short, our revised strategies for the U. S. Debit Segment continued to gain traction in the marketplace, achieving Visa's own operational and financial expectations, while simultaneously delivering value and benefit to our clients. As for the U. S.
Department of Justice' Civil investigative demand, I have no material update. We are regularly submitting data to the DOJ. The company will continue to update you as the situation develops, but we remain comfortable in our position on this issue. At the same time, we are Making steady progress towards completing the previously announced merchant litigation settlement in the United States. On October 19, the merchant plants I'll have a motion for preliminary approval.
Subsequently, the judge set an accelerated timetable last week, which calls For hearings on the motion on November 9. We are hopeful the judge will grant preliminary approval shortly thereafter With the rules becoming effective 60 days later. Bottom line, I'm confident that the overwhelming majority of merchants will support the agreement and it will be approved. Now let's briefly turn to Visa's international geographies where payment volume growth moderated Slightly during the fiscal Q4, but still delivered strong revenue growth of 13% as we From outside the United States. To drive growth, we continue to apply a targeted investment strategy, which deploys locally acceleration plans within several key geographies.
In doing so, our goal is to substantially increase Visa's revenue over a 5 year In the interest of time, I won't walk through a list of new and expanded agreements from the quarter. But suffice it to say, We continue to grow our relationships with financial institutions, merchants and governments of all sizes around the world. And these are driving payment volume and process transactions as well as revenue growth for Visa. This approach will continue to be a priority as our organization moves ahead in the future. Lastly, let me talk about Visa's innovation Agenda, an area where we are making considerable progress.
We continue to invest in new technologies that will increase the number of transactions on our core business And most importantly, we know that our innovations must create real value for our clients' account holders who ultimately use these products and Let's start with V. Me, our digital wallet. We are making significant progress putting together the network that will enable us to scale consumer adoption of V. Me. On the issuer front, we recently announced 2 major partners PNC and U.
S. Bank, both of which will make an immediate impact as we begin to grow users of the product. Altogether, we have 34 agreements signed with leading U. S. Issuers including 4 of our 10 largest institutions in the United States.
Looking ahead, we're confident that the number will We look forward to making additional announcements in this area in the coming months. At the same time, we're making progress signing up merchants for By the middle of 2013, we expect to have more than 1,000 online merchants using fee. Me including 20 of the 50 I want to reiterate that V. Me is designed to help capture the significant immediate growth opportunity E Commerce is one of our fastest growing channels with Forrester Research predicting that U. S.
Consumers We'll spend $327,000,000,000 online by 2016, up 45% from the 2 $6,000,000,000 in 2012. As a reminder, V. Me creates a simplified and This offers our clients a differentiated solution to address a real market opportunity today and provides a fast and convenient experience for consumers making online purchases. At the same time, Visa is leader in enabling NFC payments at the point of sale in the United States. As one example, ISYS, the payments Joint venture founded by AT and T Mobility, T Mobile USA and Verizon Wireless is currently enabling Visa payments via NFC mobile wallet as part of their recently launched pilot.
ISIS' open approach aligns with Visa's strategy of enabling consumers to make mobile payments with whatever device they choose using the trusted accounts they already have. Consumer adoption of NSE is in its very early stages today. And I'm very comfortable that Visa is well positioned to deliver the best mobile solutions to our clients, helping them take advantage of this long term shift in consumer Also on the innovation front, I'm pleased that CyberSource continues to deliver exceptional growth and expand its E commerce business around the world. For the most recent quarter billable transactions totaled 1,400,000,000 Growing 25% versus the same period a year ago. CyberSource's unique capabilities are Particularly resonating in international markets.
At the time we bought CyberSource, they had field operations in only four Today that number is 12 and growing and cyber source teams are benefiting from Visa's local market knowledge. To conclude, I'd like to say again how proud I am of what we've accomplished here at Visa. Since our restructuring 5 years ago, we have successfully delivered on all of our investor commitments and transitioned to a solid public that will continue to compete globally well into the future. Visa is built on a simple yet effective strategy To be the best way to pay and be paid. To deliver on that promise, we have created an organization that is delivering payment products and services to the evolving needs of consumers, merchants, governments and financial institutions.
We have also established a culture that can adapt to a fast changing landscape and thrive in the midst of challenges. And we are well positioned to continue to expand our core business, invest in next generation technologies that will define the future and accelerate expansion of our business outside of the United States. Today, I know we have the right people, The right strategy, the right technology and the right experience to continue to be a leader of our industry. And with Charlie as CEO, I am confident Visa will continue to grow globally and deliver innovation that meets the needs of Visa account holders and our clients. I'd like to thank everyone at Visa, all of our partners and all of our investors for the opportunity to work with I look forward to seeing Visa take full advantage of all that lies ahead.
And with that, let me turn the call over to Byron.
Thank you, Joe. I'll begin with some observations and call outs. First, as Joe mentioned at the outset, We reported the quarter on an adjusted basis. We were recently notified by the IRS that the NOPA or notice of have been withdrawn. As a result, we reevaluated and reversed all previously recorded tax reserves and accrued interest associated with all covered litigation expense previously recorded.
This increased net income for the quarter by $627,000,000 2nd, U. S. Revenue growth continues to be supported by solid credit Although our 6 consecutive quarters of double digit growth were interrupted as the September quarter clocked in at 9%. Through the 28th October however, credit payment volume growth has comped at an 11% rate, A notable rebound reflecting a month to month volatility dynamic we've seen more of recently. 3rd, With 4 quarters of lower U.
S. Debit interchange and 2 quarters of the new debit routing rule behind us, the impacts have been manageable. Aggregate U. S. Debit posted a negative 6% growth rate in the 4th quarter versus a negative 9% in the 3rd quarter, led by interlinked payment volume, which was off 48% versus 54% in the Q3.
While we are pleased our mitigation strategies are working as planned and are consistent with our expectations, We would caution that the U. S. Debit environment is still evolving. Finally, as was the case Last quarter, the all in impact from U. S.
Debit regulation, which includes restructured pricing, incentives, Other mitigation strategies and volume loss cost us about $0.04 in EPS for the quarter. Management's view of the future effects have been incorporated into our guidance. Now let's turn to the numbers. As is our practice, I will cover our global payment volume and process transaction trends for the quarter followed by our results through October 28. I'll then cover the financial highlights of our fiscal 4th quarter and conclude with our guidance outlook for fiscal 2013.
Global payment volume growth for the September quarter In constant dollars was 6% unchanged from the June quarter. The U. S. Grew at 1% and rest of world at 12%. More recently through October 28, U.
S. Payment volume growth posted a 3% gain comprised of 11% credit Growth and minus 4% for debit. Global cross border volume delivered a solid 10% constant dollar growth rate in the September quarter, which compares to a 14% rate in the 3rd quarter. The U. S.
Grew 8% and the rest of world 11%. The moderation in growth was broad based with notable step downs in the U. S, North and Southeast Asia and Latin America. Through October 28, cross border volumes Transactions processed over Visa's network totaled $14,000,000,000 in the fiscal 4th quarter, a 2% increase over for the prior year period and up from 1% in the prior quarter. A debit led decline of 1% in the U.
S. Was offset by 19% growth in the Rest of World. For the month of October through 28, Process transaction growth was a positive 4%, driven by an improving trajectory in the U. S. Separately, CyberSource reported $1,400,000,000 transactions for the period, a 25% increase over the prior year.
Three callouts. First, as expected, the brunt of U. S. Debit regulation is being felt by our interlinked product, where transaction growth will continue to be negative until we lap the implementation of the routing rules in the middle of next year. 2nd, Visa process transactions continue to grow at double digit rates for U.
S. Credit and rest of world. Finally, as Joe mentioned at the outset, we are operating under the assumption that the U. S. And global economies will continue their moderate growth over the next 12 months as uncertainty from the fiscal cliff, Continued eurozone concerns and a general slowdown in world trade put a damper on domestic consumer and cross border spending.
Now turning to the income statement. Net operating revenue in the quarter was 2.7 $1,000,000,000 a 15% increase year over year and ahead of our expectations as a result of stronger U. S. Debit and credit performance. For the full fiscal year, net operating revenue was $10,400,000,000 a 13% increase over the prior year and a better performance than we had anticipated going into the year.
After hedges, there was negative 1% foreign exchange Service revenue was $1,300,000,000 up 14% over the prior year period. This reflects strong payment volume growth in the June quarter, the revenue from which is recorded in the September Data processing revenue was $1,100,000,000 up 15% over the prior year's quarter, based on solid growth rates from Visa process transactions outside of the U. S. And for Cybersource globally, as well as competitive pricing actions that became effective last quarter. The step up In gross revenue data processing yield, which we first saw last quarter, continued to carry through this quarter due in part to strategic pricing adjustments, but also driven by the ongoing though moderating decline and interlinked transactions, which are by far our lowest yielding product.
International transaction revenue was up 5% to $796,000,000 reflecting solid but moderating strength in cross border volumes with mid Single digit growth rates in the U. S. And Asia Pacific, low double digit growth in Latin America and low 20s in our CEMEA region, as measured on a constant dollar basis. Client incentives for the quarter as a percent of gross revenues came in at 17%, lower than we had anticipated on a percentage basis due to better than expected revenue performance, but in line in terms of absolute dollars. For the fiscal year 2012, incentives were 17% of gross revenues at the low end of our guidance of 17% to 18%.
While total operating expenses for the quarter were $1,200,000,000 up 18%, It is important to note that this heavier than normal operating expense level is not a new quarterly run rate. When viewed on a Full year adjusted basis expenses grew 12% of which approximately 2 percentage points were due to annualizing acquisition And as expected, this annual expense growth was consistent with delivering a 60% adjusted operating margin, We staged more of our investment spend in the second half of the year to enable a tighter linkage between revenue and expense growth. 2nd, marketing spend of $271,000,000 intensified in Q4 associated with the London Olympics. For the full year, marketing expenses were expenses were $873,000,000 relatively unchanged from the prior year and in line with our guidance. And finally, Our staff into our Foster City campus.
Looking ahead to 2013, we have planned a closer balance between 1st and second half operating spend. Our operating margin for the quarter was 56%, bringing our fiscal Full year adjusted margin to 60%, which as noted earlier was on target with our guidance for the year. Capital expenditures were $141,000,000 in the quarter and ended the fiscal year at 3 $76,000,000 This roughly represents the midpoint of our guidance range. Our adjusted tax rate for Q4 was 33% and for the entire fiscal year 33%. As I mentioned at the outset, both of these figures were affected by events over the course of the year.
During the quarter, total as converted Class A common $324,000,000 of operating cash on hand. This is inclusive of the $150,000,000 escrow funding made in late July. As Joe mentioned at the outset, Our Board recently authorized a new repurchase program totaling $1,500,000,000 effective through October of 2013. This is incremental to the $865,000,000 still outstanding from our previous authorization. We also raised our annual dividend 50% to 21% on 2012 adjusted earnings.
At the end of the September quarter, we had 668,000,000 shares of Class A common stock on an as converted basis. The weighted average number of fully diluted shares for the 4th quarter totaled 6.70
for 2013.
In terms of the top line, as Joe said at the outset, We are guiding to net revenue growth in the low double digits, though the possibility of upside exists if we were to see a noticeably stronger economic rebound over the course of the year than we are currently experiencing. In 2013. That said, the trends in the past two quarters suggest economic assumptions Around 2013, we're too optimistic. Many of the same uncertainties remain. And while we lost significant U.
S. Debit share, we weathered the second half of twenty twelve better than we expected. As we look ahead into 2013, growing uncertainty in the U. S. And world economy has precipitated a slowdown in domestic and cross border spending.
When we combine this global outlook with the higher bar created by better than anticipated 2012 revenue growth, We now find ourselves in a situation similar to 2012 and believe revenue guidance in the low double digit range Is the right call at this time. Adjusted diluted earnings per share growth remains the same at a high teens rate. Client incentives as a percent of gross revenue are expected to range between by a growing level of incentives for financial institutions outside the U. S. In combination with incentive contracts with large U.
S. Merchants And acquirers, marketing expense is projected to be under $1,000,000,000 However, we will see a moderate uptick over the level of fiscal 2012 with more of the marketing spend budgeted in the first versus the prior year. The uptick will be driven by greater investment in our AP CEMEA region as well as incremental investments behind our V. Me and mobile initiatives. Operating margin is expected to remain at about 60%.
The tax rate is expected to be in the 30% to 32% range. This reduction anticipates benefits from foreign tax credits to be claimed in fiscal 2013. We anticipate the timing of these benefits to skewed more to the second half of the fiscal year. Capital expenditures are projected to range from $425,000,000 to 4 $75,000,000 This represents a moderate increase over the $376,000,000 we spent in 2012 and fully funds investments we are making across the globe in support of our core business as well as our mobile and e commerce initiatives. Finally, we expect free cash flow of about $5,000,000,000 Our priorities for use of this cash remain the same.
1st, Reinvesting in the business second, appropriate acquisitions and third, distribution to our shareholders in the form of dividends and share repurchases. Before we take your questions, recognizing Joe's retirement next March, I want to briefly reflect on Visa's 5 years as a merged business entity and our 4.5 year With 2,008 as a base year and despite a deep U. S. Recession and challenging regulatory environment, under Joe's leadership, the Visa team has delivered net revenue growth at a 14% compound annual growth rate and adjusted diluted EPS at a 29% compound annual growth rate. Our adjusted operating margin has gone from 46% In March of 2,008 to 60% today, we lowered our tax rate from 41% to 33%.
We have tripled our dividend rate through annual increases and have collectively returned $1,800,000,000 in dividends to our shareholders IPO to date. Lastly, over that same period of time, we have reduced Our common share count through litigation escrow funding and open market purchases by 100 and 18,000,000 shares representing $9,000,000,000 returned to shareholders. And with that operator for the 19th time
Our first question comes from Bob Napoli of William Blair. Your line is open.
Thank you and good afternoon. Congratulations Joe and I wish you the very, very best.
Thank you.
A question on your new CEO starting tomorrow, Charlie. I guess, why What led you to Charlie Scharf? I mean this is a dynamic type technology business, international growth. Charlie's everything we can tell is Very strong executive, but more of a U. S.
Bank guy. What were the key choices And selecting Charlie and going outside the company today versus internal?
Well, as I mentioned in my comments today, he's a dynamic He's done very well. He understands our business. He's been a client. He has been on our Board. If you remember, he was on The Board of this company for 3 years, he has more than a fleeting familiarity with Visa.
He is very familiar with the staff at Visa and having interacted with many of them for a Number of years. He has run large global operations in the past. And while He's not a technologist per se. He's run large organizations that depend very significantly on technology. We also, as you remember, have parsed our company In a way where we have focused on technology simultaneous to What we do in our core business and there has to be a recognition that our core business is what's feeding this engine and what's creating The revenue and the cash flow that allows us to invest.
We have an extremely A strong technology organization. We've hired a number of extraordinary individuals over the last 2 or We're very, very confident that that organization has the ability to take continue to take us forward. And in fact, I think you'd have to admit that vis a The other companies in our space, we're way up front and we don't intend to lose that lead. So thanks for asking the question.
Our next question will come from Sanjay Sakhrani of KBW. Your line is open.
Thank you. Good luck to Joe as well. Just One of the beauties of Visa's business model is kind of the scalability. And just in looking at your operating margin guidance, it seems like We have another year in 2013 of relatively modest operating margin expansion. Could you just talk about the dynamics that kind of And then specific one just call out or clarification.
I was wondering if there was a call out on the other revenue line because that was up a little bit. Thank you.
With regards to operating margin leverage, we have been Picking up the pace of reinvesting particularly in our growth initiatives that are That really won't begin to drive revenue in a meaningful way until 3, 4, 5 years out. And you can look at mobile, V. Me. And so what we have done up to this point is Invest aggressively in new office expansion and deploying more account executives serving clients in country, All of which drive margin expansion, which as you've noticed has moved from 46%, which seems like a lifetime ago, Up to 60%. And as more of our investment or acquisitions are much more forward looking, there will be more of a lag That leverage is the completely the VisaNet platform.
With regards to other revenue, The reserves associated with the release of the FIN 48 The expenses that we had recorded associated with the NOFA, a part of that
was part of those reserves were
recorded in other income. And as we released those reserves,
will come from Greg Smith of Stern AG. Your line is open.
Yes. Hi. Byron, just two quick questions on the 2013 guidance. Is there any pricing are there any pricing increase assumptions in there? And the second one is just can you reiterate what you said on marketing?
Will we actually see the first Half heavier than the second half or just more of a skew compared to 2012 please?
Could you repeat the last question again?
Well, just the total marketing spend, you Called out that the you said there'd be more of a skew to the first half. Were you talking just total absolute dollars heavier in the first half than the second half? I just wasn't clear
So yes, let me deal with that one first. There was a if you look at the total amount of marketing that we incurred in the Q4. It was $271,000,000 That was 31% of our entire year's marketing budget. And what we have In marketing, is a this year is a percentage and dollar weighted much higher to the 4th quarter or to the second half. And on a percentage basis for next year, we Expect to see a better balance, a more even it won't be fifty-fifty, but there will be it will be much more imbalance between what is spent in the first half and second half.
And even though you asked that question in the context of marketing, let me broaden And say that, that should hold true for our entire operating expenses. We were much more second half weighted this past year than we And I'm sorry your first question was? Price increases. I would say that there is very little in the way of pricing built into the coming year. And in fact, we are giving back some effective pricing as a part of our response in the U.
S. Debit arena. So the revenue growth for next year It's going to be delivered the good old fashioned way by driving hard against payment volume, not only in the U. S, but in the rest of the world in particular.
Our next question will come from Jason Kupferberg of Jefferies. Your line is open.
Thanks guys. And Joe, my congratulations to you as well. Just wanted to get a general update on the e commerce business in terms of either your Percent of volume or percent of revenue or growth or whatever metrics you can provide and some color on to what extent V. Me can accelerate This and perhaps in which timeframe? And then just a quick clarification for Byron.
What caused the jump up in other income here in Q4? Thanks.
Okay. So with regards to Other income, this was it was principally driven by 2 things. The release of reserves, which are related to the reversal of the NOPA Reserves on the IRS situation that clarified itself this past quarter. A part of the the vast majority of those reserves are taxes. But when you are put into a situation where You potentially have to pay back taxes, then you have an interest charge and That interest charge was the source of the release in reserves that hit that column.
In addition, we had some insurance recoveries that occurred that quarter and that's why those popped up. On the e commerce, With regards to the percentage of our business, we don't have an update on that for the moment. But this is our fastest growing channel across the company globally. And within that e commerce channel, the fastest growing form factor is mobile. And this is why we have put such emphasis on V.
Me, which is particularly suited for the mobile form factor and why we have put such strong focus on mobile strategies That go far beyond NFC and are global in scope.
Our next question will come from Tien Tsin Huang. Your line is open from JPMorgan.
Great. Thanks, Joe. Just want to also say thanks and congrats on the retirement. I got 2 quick Maybe just on the rebate line that was nicely lower than we expected for the quarter. I'm curious for next year the line of sight into the 18%, 18 point How much of that step up is sort of signed based on your deals that you've already Renewed or recently won versus anticipated deals?
Just trying to get a better sense of conservatism versus reality there. And then Secondarily on debit, I know there's a little bit of improvement in October. How much of that is paved and some of the other mitigation strategies versus just macro or new wins? That'd be great.
Thanks. Okay. So on the incentive side, I would say, first of all, that the drivers are almost as much rest of world contracts that a number of which a meaningful increment of which have already been signed and will begin annualizing at a higher incentive rate going into next year. And we've already and so that's one major driver of the incentive increase. The other major driver is that we're only 2 quarters into the routing rule changes in U.
S. Debit. And As a result of that, we've got a building momentum of agreements that we are signing with merchants and acquirers, And that also will and has yet to annualize in the coming year.
Our next question will come from Thomas McGrawan of Janney. Your line is open.
Thanks. And Joe, congratulations All your achievements and best of luck in your retirement. Can you expand a little bit about the routing agreements that are still being With the merchant community, just give us
a sense of
how those are going to be structured and how they're going to be flowing through the income statement? Thanks.
Well, what I would say is 2 things. These agreements are very much performance oriented agreements. They for the most part, they only pay out incentives If the volume is delivered. And I think it's important to emphasize that the Agreements themselves don't guarantee volume. They incent it.
If the volume is there, the incentives will be paid. And if they aren't, they aren't. And so there is to a certain extent, there's a degree of variability with regards to how much incentives will be paid out and it will be completely tied to the volume delivered. And then we are still as I said before on a path of Signing additional merchants with these agreements. So we do expect them to be not only performance based, but to grow in number as the year unfolds.
The way these are booked into the income statement, it's virtually 100% Contra revenue incentives.
Our next question comes from Julio Quinteros of Goldman Sachs. Your line is
open. Great. So congratulations Joe as well. Just a quick question on kind of decomposing the EPS growth rate. Understanding where the revenue And the target for the margins, if you think about the buyback that you guys have currently coupled with the lower tax rate, There are some proportions that we should be thinking about in terms of how much of the buyback is built into the EPS growth and then also the tax rate.
I think you said it was in the 30% to 32% range. Is that correct?
Yes. So, Julio, I'm going to let you do the math. What we've done is Given you all the metrics that we typically deploy that we typically give you at this point of time, the clearly, There is a dynamic with the low double digit revenue growth and the operating margin is We'll be the major contributor. Tax once again will allow us to add a little octane to the EPS growth. And then as you have noticed, we're very disciplined repurchases of our stock over the course of the year.
We also have a habit of readdressing the opportunity for buyback At every single Board meeting. So today as we enter into the fiscal the new fiscal year, we have $865,000,000 of Previously authorized but unspent open to buy on share repurchase, we have $1,500,000,000 new program that It was just announced. So that gives us a little over $2,300,000,000 of open to buy. And then of course later in the year should circumstances warrant, However, that the later in the year that the share repurchases occur, the corresponding lower impact they will have on a given year's
Yes. Our next question will come from Bill Karkesh of Nomura. Your line is open.
Hello. Thank you. Thanks for taking my question and I'll add my congrats as well Joe. Some of the U. S.
Data that we've seen It shows a clear consumer preference for PIN over signature. I wonder if you could comment on whether that's in fact what you're seeing As well and if so what you attribute that to? And then if you could just kind of share your thoughts on how strategically you see the role of U. S. Debit in the context of your suite of payment products now that it isn't the growth driver that it once was?
So we're I suppose we're in a bit of an odd Position to comment on this in one sense because with regards to PIN, thanks to a regulatory change, A substantial part of our pin market share was gifted to our competition. And so it's a little hard for us on the margin to Comment on the PIN. However, on the Signature debit or what we refer to as Visa debit, I can tell you that our business has since the implementation of the rules, I think in prior quarters, we have experienced Solid mid single digit growth and that growth rate is On balance drifting a little north in the most recent quarter.
Our next question will come from Rod Bourgeois of Bernstein. Your line is open.
Okay, great. Yes, in terms of the
way growth trends are generally playing out in the month
of October, Playing out in the month of October. Mastercard today indicated growth improvement outside of the U. S. And generally stability in the U. S.
Are you taking somewhat of a more cautious stance on the recent growth trends? Or is your view fairly consistent with the way Mastercard characterized Earlier today?
Well, they have an eloquent way of Stating things as you've mentioned before, but I wouldn't say we're copying Mastercard. I'd say our growth in the United States, particularly In the credit business, which is our highest yielding business is significantly stronger than any of our competition and It continues to grow and I mentioned that in my remarks earlier. We have strong growth outside of the United States as well. Mastercard The deals in Europe and we don't. They have quite a bit of strength in Europe, but our Asian and Latin American businesses are Very robust rates, we continue to believe that we'll have more than 50% of our revenue coming from outside of the United To deal with, I mean, I don't think there's any question about that, but we're doing very well.
And in the parts of world In which we do business, we are competitively advantaged and we intend to maintain Thank you, Matt.
Our next question comes from Bryan Keane of Deutsche Bank. Your line is open.
Hi. Just looking at the rest of world, it was a little bit slower than we expected. I think you mentioned maybe Asia was and obviously looking at the numbers, it looked like Asia was a little bit slower. But can you talk about the rest of world? Was that all economy that's causing the deceleration?
Is there any contract losses And then secondly, on the international revenue growth, it was a little lower than we expected. Byron, maybe you can just help me through that again, because I know cross border was up 7%, so it's a little bit below cross Border growth and usually international revenue growth sometimes is above cross border. Thanks.
Okay. So, I would say in looking over The rest of world that there were no contract losses Material to speak of. In fact, I can't even think of one. So it's much more economic. And as we look at kind of the cross border as well as the domestic spend inside the rest of world countries, Both of them put on the brakes a bit.
Now recognize, Brian, these are still for the most part robust growth rates With that, we would love to aspire to here in the United States. But in terms of feeling like there at least in the Q4, There was a bit of a downshift. That's I think it's economically driven. And with regards to I've just I know 4 weeks does not a trend make, but October was a bit encouraging as it looked like there was a bit of a bounce back In the month of October, as it relates to rest of world cross border as well as rest of world process transactions, both of which we have real time visibility to. With regards to International revenue, let's see, we had nominal cross border growth of 7% and we had international fee growth of 5.
And if I look back over the last 3 or 4 quarters, there is always kind of plus or minus 2 or 3 percentage points of noise. I don't think there is any particular call out as I look at the drivers of international fees. There's just So, I think we're pretty close to the nominal cross border growth and no real callouts.
Our next question is from David Hoxton of Buckingham Research. Your line is open.
Yeah. I'd just like to add my And I wondered, can you just maybe provide a little more color on what you're seeing in the way of spending in Asia, in the U. S, any change Behavior, consumers or corporate customers in terms of spending mix less T
There has been a clear increase over the year Credit spending of more affluent people. A lot of what's going on even in the U. S. Economy is driven by Consumer spending as I'm sure you know as well or better than I do. And I think that most of these things have exhibited some sustainability.
There are different blips So a few countries around the world and in Asia, in particular, that are associated with specific events. Some of the noise between China and Japan So, it has hurt some of the volume between those two countries and the cross border volume and the payment volume in particular. And there have been Other examples of similar situations. On the bias though, Things are proceeding as well as we expected, Given the overriding macroeconomic situation, we're very Happy where we wound up in 2012, including the Q4 and we'll have to go from there. As Byron said earlier and as I said, We can't totally avoid what's going on in the global economy.
But I think that we're certainly positioned to do well next year.
Our next question is from Ken Bruce of Bank of America Merrill Lynch. Your line is open.
Thank you. Good evening. And let me add to the course Congratulations on your pending retirement and very well deserved. My question relates specifically to V. Me And I recognize that it's early days.
You gave some very encouraging information earlier. I was wondering if you could maybe provide some insight as to what you think it will take Close the gap on the remaining top 10 issuers and separately if you think that Either 2013 guidance already incorporates some of the pickup in spending on V. Me or if you think that's really more of a 2014 and forward event, please?
Well, to answer the last part of the question first, I think it's more of a 20 14 of them. I mean going back to the Internet, there were $327,000,000,000 Excuse me, there was $226,000,000,000 spent in 2012. People expect that to move to $327,000,000,000 by 2016, which I mentioned in my earlier comments. We have Extraordinarily significant share of that volume. It is the fastest growing category we have without v.
Me. I think v. Me will enable us to increase our share of the transaction. So not only are we going to be dealing in a category that's increasing, and even though that category may be taking some Sales away from in store sales, I think we will get a larger share of those sales than we have in the past. Anytime you do something like we're doing with V.
Me, it's a chicken and egg kind of a thing. What comes first, all the merchants or all the We're running at a pretty rapid rate as it relates to putting both on. And I think we'll have a successful start up this holiday season. I think that by the middle of the year, We will have a much more robust environment and by the and by a year from now, We'll be poised to take significant advantage of what we've done. As it relates to closing the gap in the top ten, I don't like to speak for my customers before they speak for themselves, but I am looking forward to and I you.
Could legitimately look forward to hearing a lot more about new additions in the very near future.
At this point, we have probably time for one more question, operator.
Our final question will be from Craig Maurer of CLSA. Your line is open.
Yes. Thank you and congratulations Joe. I appreciate your candor going back to my days following Providian. Couple of questions. 1, are there any unique or Specific profit aspirations for V.
Me other than gaining share in e commerce? And secondly, Decoupled debit, Tis has commented that their fast growing debit customer now is a decoupled Debit customer. And it's pretty clear to us that the MCX merchants are going to launch with decoupled debit. So my question is, has something changed in decoupled David, since Capital One failed at that attempt years ago that would make you a bit more nervous of that product? Thanks.
I don't think anything that I'm aware of has happened that should precipitate that. And of course, That failed because they couldn't fund those transactions. They had to have specific they had to be able to specifically List each transaction which they were unable to do. As it relates to MCX, I mean, I think they have lost the Aspirations and they probably have a lot of horsepower to work with. I think we're aware of what we're doing and I mean we're aware of what they're doing and they're aware of what we're doing And we're working hard to compete.
And I don't think That in itself is going to define who Visa is or isn't in the near or the moderate front.
And with that, ladies and gentlemen, thank you all for your participation today. If you have any follow-up questions, feel free to call Investor