The conference call for Mastercard's Q1 2024 earnings has begun, with the operator welcoming everyone and introducing the speakers. The call will include a Q&A session and non-GAAP financial measures will be used. The speakers will make forward-looking statements and the call will be available for replay. The CEO, Michael Miebach, notes the company's continued momentum and strong revenue and earnings growth.

In the first quarter, Mastercard saw an increase in net revenues and adjusted net income on a non-GAAP currency neutral basis, driven by strong consumer spending and cross-border volume growth. The company also had new deal wins and is focused on scaling innovative technologies. Despite a mixed macroeconomic environment, Mastercard is positive about the growth outlook and is reiterating its full year 2024 outlook. The company is closely monitoring factors such as inflation, monetary policy, and geopolitical uncertainty. Mastercard's strategic priorities include consumer payments, new flows and services, and new networks, and the recent realignment of the organizational structure will help them execute these priorities faster. The company's growth algorithm includes being in the flow, accelerating the shift to electronic payments, penetrating new flows, growing market share, and optimizing customer portfolios.

Mastercard's shift to digital payments has been a major contributor to their growth, with their acceptance footprint and contactless technology leading the way. They are now live in over 100 markets and have seen a significant increase in tokenized transactions, which not only improves security but also drives more revenue and data for the company. As payments become more digital, there is a growing demand for a simpler and more secure payment experience, which Mastercard is able to provide through their tokens.

Mastercard sees further opportunity in under-penetrated verticals such as housing and healthcare, and is working with partners to enable digital payments in these areas. They have also increased their switching penetration in markets where it was historically low and will continue to focus on this. The company has also seen success in winning new deals and retaining key business with issuers and co-brand partners in the Americas, such as signing an agreement with Banco Bradesco in Brazil and converting previous debit wins in the United States. They are also strengthening their leadership position in retail co-brands in the US with an exclusive network for the city-issued Dillard's co-brand.

Mastercard has extended partnerships with Target, TJX companies, First Abu Dhabi Bank, Global Hotel Alliance, Axis Bank, and Cridia Crical. These partnerships showcase the company's innovative product capabilities, differentiated service offerings, and solution-selling approach. The company is also focused on penetrating the commercial payments and disbursements market, and has secured key partnerships with traditional banks, travel and ERP providers. The conversion of Wells Fargo's small business card portfolio to the Mastercard network has also been successful.

In the last quarter, Mastercard secured a commercial credit issuance deal with SBI card in India and expanded its commercial solutions with partners such as Banco Bradesco and First Abu Dhabi Bank. They also introduced a new mobile virtual card app for commercial clients, allowing for easy and secure payments and optimized back office processes. Mastercard also continues to be a leader in the open loop commercial fleet space and has grown transactions by over 40% in the first quarter. They have combined their domestic and international money movement capabilities into one offering called Mastercard Move, which now includes a partnership with Alipay in China and Verituity and Pagero in the US and Sweden respectively.

The company's growth strategy includes diversifying its solutions and services, such as fraud prevention, data analytics, and marketing, to increase revenue and differentiate its payments. This includes increasing penetration with existing customers, expanding services to new customers and payment flows, and developing new solutions. Examples of this include providing digital strategy and credit risk management services to banks. The company also plans to further penetrate the services market and expand its reach beyond the Mastercard network.

Mastercard Access offers a convenient way for customers to access a variety of services, and it has been gaining popularity. The company is constantly developing new solutions to meet the changing needs of its clients, such as Smart Subscriptions, which provides a simple overview of all subscriptions. To combat cybercrime, Mastercard has partnered with organizations like Verizon to create tools that use AI and open banking to prevent scams. Additionally, their real-time fraud solution, Decision Intelligence, has been enhanced with generative AI to improve its effectiveness.

The company has experienced strong demand for its services and new networks from a diverse customer base, leading to revenue and earnings growth in the first quarter. Their differentiated capabilities, diversified business model, and focused strategy have positioned them well for future opportunities. On a currency-neutral basis, net revenue increased by 11%, operating expenses by 9%, and operating income by 12%. Net income and EPS also saw significant growth due to strong operating income and a lower tax rate. The company has also repurchased $2 billion worth of stock and an additional $815 million. Key drivers of growth include a 10% increase in worldwide gross dollar volume, with 6% growth in the U.S. and 13% growth outside of the U.S. in both credit and debit transactions.

In the first quarter, cross-border volume increased 18% globally, driven by growth in both travel and non-travel related spending. Switch transactions also saw strong growth of 13%, with contactless payments representing 67% of all in-person transactions. The number of Mastercard and Maestro-branded cards issued globally is 3.4 billion. Net revenue for Payment Network increased 8%, while Value-added Services & Solutions saw a 15% increase. Domestic assessments and worldwide GDV both grew 10%, while cross-border assessments and volumes grew 22% and 18% respectively. Transaction processing assessments were up 12% and switch transactions grew 13%. Other network assessments were 226 million.

The assessments related to licensing, implementation, and franchise fees fluctuate from period to period. In the first quarter, non-GAAP operating expenses increased by 9% due to increased spending on strategic initiatives and indirect taxes. Operating metric trends were generally stable, with U.S. switched volume and transaction growth benefiting from a portfolio conversion. Outside of the U.S., growth was negatively impacted by lapping the conversion of a network's debit portfolio to Mastercard. Cross-border card-not-present and travel showed strength, but travel growth was impacted by tougher comps due to COVID restrictions in Asia Pacific.

The company remains positive about their growth outlook for the remainder of the year, with strong fundamentals and a diversified business model. They expect net revenue to grow at the high end of a low double-digit range, with minimal impact from acquisitions and a slight headwind from foreign exchange. Operating expenses are expected to grow at the low end of a low double-digit range, with minimal impact from acquisitions and a potential benefit from foreign exchange. Year-over-year net revenue growth for Q2 2024 is expected to be at the low double-digit range.

The company expects minimal impact from acquisitions and a 2 ppt headwind from foreign exchange in the upcoming quarter. Operating expenses are projected to have low double-digit growth, with acquisitions adding 0-1 ppt and foreign exchange providing a 1 ppt tailwind. Other factors to consider include a higher expense of $85 million due to lower forecasted cash balances and a non-GAAP tax rate of 17% for both the quarter and full year. The company is optimistic about volume and yield trends and expects conversion to improve in the future.

The company's full-year guidance remains unchanged and consumer spending is healthy. The strengthening U.S. dollar has had an impact on reported numbers, but this was expected. The recent slowdown in European cross-border transactions may be due to Easter. The first transaction in the Chinese domestic market is expected soon, and it is unclear if existing cards will be able to be used or if reissuing will be necessary.

The speaker agrees with the observation that entry into Europe is impacted by the timing of Easter, leading to exaggerated numbers in intra-Europe. They also discuss the progress of obtaining a license in China and their plans for building acceptance and partnerships in the country. The Chinese government is also working to increase acceptance of international cards for in-bound cross-border travel.

The speaker discusses the importance of value added services in Mastercard's growth strategy, stating that the link between volume and data is crucial. They mention the need for focused execution in order to successfully cross-sell these services to existing customers. The company closely monitors their cross-sell ratios and is aware of which customers have been offered these services and which have not.

The speaker mentions a previous statistic about having more services with top 50 customers and emphasizes the potential for growth in this area. They mention having a broad approach to reaching these customers and utilizing data to drive growth. The speaker also mentions a recent settlement with U.S. merchants and expresses relief that it is behind them. The focus of the settlement was on balancing merchant costs with consumer protection.

The company expects minimal impact on their business from changes in interchange rates and surcharging rules. They have accounted for legal fees associated with these changes. Rebates and incentives were in line with expectations in the first quarter and the company will continue to work on winning business.

The company expects rebates and incentives to be similar to slightly lower in the second quarter. These are used to bring more volume onto their network, which helps them grow and deliver more services. The company is focused on winning targeted deals that meet their financial criteria and strategic focus. They also discuss travel trends and consumer behavior, noting a deceleration in April, potentially due to Easter timing, but they expect a rebound.

The speaker is discussing cross-border travel and the impact of Easter on growth rates. They mention that Asia's late recovery from COVID has created tougher comparisons this year. However, the value proposition remains strong and travel growth rates are healthy. The speaker also mentions that the Chinese government is focused on driving inbound tourism, and this trend is also seen in other countries like Indonesia, India, and Spain.

The company is working with governments to use data to promote destinations and improve the travel industry. There is a potential for growth in digital payments, both in developed and developing economies, due to changes in consumer behavior. Examples include takeout food and public transport, which could lead to multiple transactions throughout the day.

The company is seeing a significant opportunity for growth in Value Added Services, driven by changes in consumer behavior and new sectors like healthcare and rent. The company is focused on each layer of this opportunity and expects it to last for a while. The outlook for future growth in Value Added Services is strong, with the company actively driving and pushing for growth across various areas. The growth rates for the remaining quarters are expected to be higher than Q1, based on the pipeline and delivery of these services.

The speaker is optimistic about the company's growth in the coming quarters, thanks to their focus on Value-added services and solutions. These services not only generate revenue, but also drive growth in other areas such as payments. The company will continue to focus on growing their other solutions, but it may not reach the same growth rates as safety and security and consulting, as these areas have a larger and faster growing TAM. The majority of the company's Value-added services and solutions are made up of safety and security and consulting, marketing, and data analytics. The company plans to cross-sell to existing customers and target new customer segments to further drive growth.

The speaker discusses the competitive landscape in Europe for Mastercard's payment network. They mention strong growth in the region and partnerships with local players, but also acknowledge competition from other traditional competitors. Overall, they see Europe as a significant growth opportunity for the company.

The speaker discusses the company's efforts to establish mutually beneficial partnerships and the decision of UniCredit to work with them due to their success in meeting customer needs. They also mention the potential for growth in Europe and the conversion of Maestro to debit Mastercard. The question is raised about potential impacts on Mastercard from shifting consumer spending preferences, but the speaker notes strong growth in cross-border and travel spending and no significant concerns at this time.

The speaker discusses the strong performance of cross-border e-commerce and the travel industry, which is driven by the trend of seeking experiences. They also mention that different countries may be impacted differently by inflation and government policies. They remain optimistic about the future of travel and highlight potential for growth in Asia Pacific, particularly in China.

In Q1, cross-border travel inbound and outbound to and from China was at 80% of pre-COVID levels, leaving room for further recovery. Despite a slower domestic economy, there is potential for long-term recovery in travel. Mastercard is seeing a 6% growth rate in U.S. debit and the impact of conversions is being felt. The impact of routing and Reg II is not material, allowing Mastercard to focus on the opportunity to gain back-of-card position for Visa debit cards in the U.S.

The company is making changes to its organizational structure in order to align with its growth strategy and focus on core payments, new payment flows, integrated services, and AI. This realignment is being led by four experienced leaders and is expected to drive competitive advantage and opportunities for the company.

The company's main goal is to increase speed and provide more value to customers. The CEO hopes to see growth and financial impact as a result of this strategy. They are focused on aligning structure and strategy to drive services growth. In terms of positive yields in cross border transactions, the company attributes this to a combination of pricing, mix, and winning the right portfolios. The impact of FX volatility is seen in the transaction processing assessment line, not the cross border assessment line.

The company has seen a growth in inter-border transactions, which have higher yields compared to intra-border transactions. This has helped increase their overall yield. The company also mentioned a lift in pricing for cross-border assessments, which will continue throughout the year. Advertising and marketing spend was lower in the first quarter due to the timing of promotions and sponsorships.

The speaker discusses the company's plans to increase spending on advertising and marketing as the year progresses. They also mention the importance of investing in their brand and their partnerships with issuing partners. They end the call by thanking their colleagues and shareholders for their support.

This summary was generated with AI and may contain some inaccuracies.