Good morning, ladies and gentlemen. I'm Joseph W. Saunders, Chairman of the Board and Chief Executive Officer of Visa Inc. As Chairman of today's meeting, I would like to welcome you all to Visa's 2012 Annual Meeting of Stakeholders. I'd like to begin by introducing the other members of our Board of Directors, if you'd please stand. Thank you. Next, I'd like to introduce the members of our Operating Committee, if you would please stand. Thank you very much. Josh Floum, our General Counsel, also will act as secretary of this meeting. Thank you, Josh. Also present today are Michael Pierce and Irene Altman, representatives of KPMG LLP, our independent registered public accounting firm. Finally, Andrew Wilcox, on behalf of Broadridge Financial Solutions, has been appointed and duly sworn in as the Inspector of Election of this meeting.
As each of you signed in this morning, you were given a leaflet containing the agenda and the annual meeting guidelines. The meeting will be conducted in accordance with the agenda. We've set aside time for questions after the conclusion of the formal portion of the meeting, so please hold your questions until that time. This meeting is being audio recorded for our archives and will be available on our Investor Relations website. I remind you that cameras or recording devices are not allowed in the room. I now command the meeting to order. Josh, may we report on the giving of the notice of the annual meeting to our stockholders and the presence of a quorum?
Thank you, Joe. I have a complete list of the holders of record of the company's common stock at the close of business on December 5, 2011, who are entitled to vote at this meeting. The list was prepared and certified by Wells Fargo shareholder services. Our transfer agent has been available at our offices for the past 10 days and is available at this meeting for inspection by any stockholder for any purpose germane to the meeting. I also have received an affidavit of a representative of Broadridge Financial Solutions, which states that on December 14, 2011, our proxy materials, including the notice of annual meeting, were mailed or made available to our stockholders of record at the close of business on December 5, 2011. There are 414,670,103 shares of Class A common stock present in person or by proxy at this meeting.
I hereby certify that, as required by Visa's bylaws and Delaware law, the holders of a sufficient number of the 521,591,943 shares of Class A common stock outstanding as of December 5, 2011, the record date for this annual meeting, are present in person or by proxy, and therefore that a quorum is present. The notice of annual meeting, the list of registered shareholders, and the affidavit will be filed with the minutes of this meeting. Mr. Chairman?
Thank you, Josh. With a quorum present, I hereby declare the 2012 Annual Meeting of Visa Inc. properly and legally convened and ready to transact business. If you've already submitted your proxy, your shares will be voted accordingly. If you have brought your proxy with you, please provide your proxy to the Inspector of Election. If there is any stockholder present who has not yet voted and wishes to do so, please raise your hand so we may distribute ballots. If you have previously voted by proxy, please do not fill out a ballot unless you wish to change your vote. Does anyone need a ballot? There are four proposals to be voted on at this meeting. We will open the polls for voting and present the proposals. Following the closing of the polls on the proposals, we will announce the preliminary results of voting on each of the proposals.
It's 8:35 A.M. on January 31st, 2012, and the polls are now open. Josh, would you please present the proposals?
Proposal one. To elect the 10 directors nominated by our Board of Directors and named in our proxy statement. The nominees are Gary P. Coughlan, Mary V. Cranston, Francisco Javier Fernandez- Carbajal, Robert W. Matschullat, Cathy E. Minehan, Suzanne Nora Johnson, David J. Pang, Joseph W. Saunders, William S. Shanahan, and John A. Swainson. Each director elected today will hold office until our 2013 Annual Meeting of Stockholders or until his or her successor is duly elected and qualified. Biographies of each of these nominees are included in the proxy statement provided to stockholders in advance of this meeting. Proposal two. To approve on an advisory basis the compensation of our named executive officers. Proposal three. To approve the Visa Inc. 2007 Equity Incentive Compensation Plan as amended and restated. Proposal four.
To ratify the appointment of KPMG LLP as our independent registered public accounting firm for our fiscal year 2012. Each of these proposals was described in detail in the proxy statement, which also included the Board of Directors' recommendation on how to vote on each of these matters.
Does anyone have a comment on any of your comments at this time? Should be limited to the proposals presented. There being no discussion on the subject of these proposals, there being no further discussion on the subject of these proposals, let's proceed to the ballot and the adoption of proposals one, two, three, and four. If you are voting by ballot, please raise your hand so we may collect your ballot at this time. We now have all the ballots. Since all those desiring to vote by ballot have done so, it is 8:38 A.M. and I declare the polls closed. The ballots and proxies will be held by the Inspector of Election, who will count the votes and return the preliminary results to the secretary.
Have been counted.
Thank you.
Secretary, please report the preliminary voting results on the proposals.
Yes. The preliminary results for the Inspector of Election indicate that the ballots and proxies with respect to proposal one have been counted, and the 10 persons nominated each have received a majority of the votes cast for his or her election as a director. Accordingly, these individuals have each been elected to serve as directors for a one-year term expiring on the date of our 2013 Annual Meeting or until his or her successor is duly elected and qualified. Proxies with respect to proposal two have been counted, and a majority of the shares of Class A common stock entitled to vote and represented at this meeting in person or by proxy have been cast in favor of the advisory vote on executive compensation.
The ballots and proxies with respect to proposal three have been counted, and a majority of the shares of the Class A common stock entitled to vote and represented at this meeting in person or by proxy have been cast in favor of the approval of the Visa Inc. 2007 Equity Incentive Compensation Plan as amended and restated. Finally, the ballots and proxies with respect to proposal four have been counted, and a majority of the shares of Class A common stock entitled to vote and represented at this meeting in person or by proxy have been cast in favor of the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for our fiscal year 2012. The Inspector of Election will make and certify a final report of the vote along with the number of abstentions within the next few days.
That report will become part of the record of this meeting, and we do not expect it to affect the preliminary results announced today. We will file a current report on a Form 8-K with the Securities and Exchange Commission detailing the final results of the vote within four business days after today's meeting.
Thank you, Josh. Based on the results, I'm pleased to announce each of the 10 director nominees has been elected. Our executive compensation has been approved on an advisory basis. The Visa Inc. 2007 Equity Incentive Compensation Plan, as amended and restated, has been approved, and the appointments of KPMG LLP as our independent registered public accounting firm for fiscal year 2012 have been ratified. That concludes the formal portion of the meeting. There being no further business, I would now like to adjourn the meeting. Do I hear a motion to adjourn?
I so move.
Thank you. I declare the meeting is now adjourned, and I'll conclude with a brief presentation and then open the floor to questions and answers. On behalf of Visa's Board of Directors, Executive Management Team, and its 7,700 employees, thank you for joining us today. Before I turn the page, let me remind those of you who are listening via webcast that a copy of the presentation I am using today can be found at Visa's Investor Relations website, and I was supposed to press a button that I didn't press. Okay. Where's the obligatory forward statement? This thing only goes forward. Really? This is extremely important, and I just, I didn't want to get it wrong. This is a review of our obligatory forward-looking statement. Has everybody read it? It will be on our website if you want to look at it. All right.
Getting to the actual presentation, fiscal 2011 was another solid year for Visa, set against a still somewhat challenging global economy and increased regulatory challenges. Nonetheless, we delivered adjusted net operating revenue of $9.2 billion. Adjusted diluted earnings per share was $4.99, and total global payment volume eclipsed $3.7 trillion. Our positive results in fiscal 2011 were supported by strong fundamentals: assets, our network, products, brand, and people that continue to position Visa well for the future. In fiscal 2011, we made a number of incremental investments in innovation to drive our long-term growth beyond the secular trend of electronic payments. Important among these were the acquisitions of PlaySpan and Fundamo, assets that have provided us with the necessary technologies to allow us to move forward in deploying our longer-term mobile and e-commerce strategies.
Finally, we returned over $3.6 billion of excess cash to our stockholders in the form of share buyback and dividends. While ongoing regulatory issues and growing economic uncertainty around the globe present us with challenges, we've met those challenges head-on and adapted where necessary to maintain our stature as a long-term growth company. We are invested in the due debt landscape with a multi-prong strategy that we believe will allow us to remain a leader in this important space. At the same time, we are working diligently with our issuer partners and the merchant community to ensure that consumers continue to realize the same value in the product as they always have. In the medium to longer term, we are making the necessary investments in new technologies like mobile payments and the continuing growth and evolution in areas like e-commerce.
The new environment we are facing demands that we compete on a different level to grow our business. Over the past year, we have invested in physical assets, but more importantly, added to our base of extremely talented employees in order to ensure that we remain the leader in the electronic payment space. As I said to you last year, I feel strongly, and you should as well, that Visa is well-positioned to lead this industry, even in the face of challenges both known and unknown. In fact, the following video describes one of our current initiatives in the developing world, which speaks to both Visa's leading-edge technology and our belief in economic inclusion by the masses.
People who are excluded from financial systems that disempower their employment, the possibilities of being able to develop and grow above. About 70% of the world's population is cut off from access to all financial services. Being financially excluded today is almost like being locked out [of position of the 21st century era].
Not having a card app, not having a bank account. It's about having [the tools] that work.
[That's very important. The systems that are designed for people who don't have access to those systems].
I'd like to come back to that. It's a good choice for the generation of the tools to get people to that.
People who don't have access to traditional financial services conduct their lives with cash. They pay the cash, pay the cash, and have to manage that cash, and it is fundamentally risky and inconvenient.
[If they can let go of those then] we have a population who is going to be more productive.
Our.
Thank you. In sum, despite uncertain economic and regulatory environments, we remain a growth and have committed to delivering in fiscal 2012. Annual net revenue growth in the range of high single to low double digits, growth in earnings per diluted share in the mid to high teens range, and lastly, over $4 billion of free cash flow. As has been the case for close to four years now, with this free cash flow, we will continue to fund growth in our core business, launch and support new products, and pursue selective acquisitions in order to further maximize shareholder value. What is left over will be returned to our shareholders in the form of repurchases and dividends. In our fiscal first quarter of 2012, we have already spent over $1.6 billion reducing the number of as-converted Class A shares outstanding.
This past October, we increased our quarterly dividend payment amount by 47% to $0.22 per share. It's a nice start to the year. That concludes my prepared remarks. At this time, I'd like to invite questions from our shareholders on the matters concerning the general business of the company. Our Investor Relations team is in attendance today and can assist you after the meeting as well. If you have a question, please proceed to the microphone stand located in the aisle. At the microphone, please state your name and indicate whether you are a stockholder or acting as a proxy holder. If you are acting as a proxy holder, please state the name of the person or company you represent. In fairness to others, please limit yourself to one question so we may hear from all who may have questions.
I have a question. My name is Shelton Ehrlich. I've been a shareholder since the IPO. My question is about the recent news reports that imply that then speaker Nancy Pelosi was granted unusual access to Visa's IPO shares. I heard the author of that book, Throw Them All Out, Peter Schweitzer, state that Ms. Pelosi got 5,000 friends and family shares. The furor has been directed at the politician and not at our company. That's good. My question is, did any Visa employee or agent offer to help Ms. Pelosi and her husband gain access to shares at the IPO or even the friends and family price? Has the company been asked for information on this matter by any state or federal agency?
The answer to the question is unequivocally no. We did not do anything or have any contact with Nancy Pelosi. The only thing Nancy Pelosi has done for Visa is to vote for the Durbin Amendment and extol the virtues of that amendment as far and widely as she can.
Hi, I have a question. My name is Steve Bowles. I'm a stockholder also since the IPO. I'm also CEO of SRI Federal Credit Union down in Menlo Park. We have 3,700 members. My question is, and I have to applaud Visa for all the chip technology that we're getting into place. We really love that. It's going to help cut fraud. I'm concerned about the costs of this for the small institutions and whether or not Visa might have a program to help defer some of those costs.
I don't think that you should be concerned, but after the meeting, we'd be happy to get together with you and talk about your particular situation. A lot of what we're doing with technology and as a result of Durbin, we have made arrangements with most of the credit union processors to deliver what you need in an efficient way. As it relates to your specific credit union, I can't answer the question standing here, but would be perfectly happy to have a conversation with you.
Thank you.
My name is Harry Miller. I'm a shareholder. I will ask a more general question, and can you make some more comments on the impact of the digital wallet on your business?
This is probably an evolution, not necessarily a revolution, and there will be many things as a result of implementing an electronic wallet. In the short run, I think the first thing that we're focused on is creating a wallet that will enable us to have a single-click environment on the internet with an aliasing capability. If you go back in time, we've always said that we wanted Visa to be the safest, most reliable, most efficient, quickest way to do business, whether it was at the point of sale or it was on the internet. I think that this will help fulfill that promise to our shareholders and to consumers and to financial institutions. Once that's in place, there are other things that can accrue to the fact that we have that infrastructure. That might include things that deal in offers through merchants, which are digitally transmitted to consumers.
It's a pretty exciting area. I'm not sure, Jack, what the last thing we did publicly in terms of talking about that.
Just general timeframe for the year.
We will make other comments about it on our earnings call, which anyone can dial into next week.
My name is Tina Gallagher, and I'm a shareholder in an investment club that owns your shares. I have two questions. One of them was just that the merchants' cost of having the equipment to do the electronic wallet, can you give us an idea of what each merchant has to pay to do that? The second issue, okay.
Ironically, right now, from a merchant point of view, the terminals are already in place. All we're doing is creating a different access to how you purchase things. Remember, all of the electronic wallet, it includes a chip that you can use at the point of sale if the right terminal exists, or it's something that you can use from a PC or from a mobile handset to access the internet.
I'm talking about the terminals. How much does the terminal costs [actually accepts ] smart cards, I mean, smartphone payments?
It will replace the magstripe, and right now, that's up to the merchant. There are not a lot of contactless chips, either on cards or accepted in terminals by the merchant community. Cost of terminals depends, it just depends on what you want it to do. How large a merchant, I mean, you can get something from Square if you're a small merchant and put it in an iPhone, and that, you know, that's your terminal. You can swipe a card on it. You'll ultimately be able to read a chip on it. It's a de minimis cost in the aggregate. For Macy's or for Nordstroms and what they want to do and the information they want to collect and how they want to deal with that, those terminals can cost $100, can cost $200.
It just goes from almost nothing to a lot, depending on what you want the terminal to do. There's nothing about what we're doing in the electronic payments space with mobile technology that, in and of itself, other than reading a chip on a card, would cause a merchant to have to invest in a different terminal. Everything that we do, we do to make it simple to plug in our environment to their environment. In June, we will have up the ability to go to very small merchants and plug them into this environment in a very, very simple way.
Interesting.
By answering your question.
Yes, that's not what I'd read. I'd read that you're having a hard time convincing the merchants to spend money to buy the equipment necessary to link cell phones to their cash registers. That's not correct.
That is only partially true, and it's partially true as it relates to putting a chip in a cell phone and waving the cell phone over the terminal, because most terminals can't do that right now.
Okay.
I think the thrust of what we're doing in the short run, what's more important, is the single-click and the aliasing, which allows people to purchase via the internet in a secure, simple manner. That's a different issue.
The question I actually came up for is that you've changed your receipts to about 58% debit instead of 50% credit. I mean, 58% debit where you see 50% debit. I assume you're getting less money for debit receipts than you are for credit card receipts. If so, how's that going to affect your shareholders?
We've always gotten less on a per transaction basis, depending on what type of a debit card was used. We had more volume, and when you added it up, we thought it being about 50/50 in terms of revenue because the revenue from the credit card transaction was more robust. If there are no other questions, that concludes the meeting. Thank you, everyone, for coming, and I look forward to giving you an updated report next year. Thank you.