The paragraph is an introduction to Mastercard's Q1 2025 Earnings Conference Call, conducted by Audra, the conference operator. Devin Corr, Head of Investor Relations, introduces the event and states that the call will feature remarks from Michael Miebach, the CEO, and Sachin Mehra, the CFO. Key materials such as the earnings release, performance data, and slide deck are available on Mastercard’s website. The discussion will focus on non-GAAP currency-neutral financial results, and attendees are reminded about forward-looking statements and their potential discrepancies. A replay of the call will be accessible for 30 days. Michael Miebach then begins his remarks.

The paragraph highlights the company's strong performance in the first quarter, with net revenues up 17% and adjusted net income up 13%, all on a currency-neutral basis. The company is capitalizing on significant opportunities in the payments sector, focusing on digital transformation to meet evolving customer needs with secure and smart payment solutions. Despite operating in an uncertain environment with weakened consumer and business sentiment due to tariffs and geopolitical tensions, the company's fundamentals remain solid, and it is well-diversified across regions and product lines. The company is confident in its ability to drive sustainable growth in consumer payments, commercial new payment flows, and value-added services, with a strong emphasis on innovations like contactless payments and tokenization.

Mastercard is advancing digital commerce through Agentic AI by launching Agent Pay, facilitating secure transactions with partners like Microsoft and OpenAI. They are also expanding crypto payments, allowing cryptocurrency spending at over 150 million locations with partners like Kraken, OKX, and Bleap. Mastercard has enabled stablecoin settlement in collaboration with Newway and enhanced security with Crypto Secure. Additionally, they are using blockchain for faster cross-border B2B payments and expanding into new markets, such as China, with localized tokenization capabilities.

The paragraph discusses a series of strategic initiatives and partnerships aimed at enhancing online transaction security, scaling consumer and commercial payments, and driving growth globally. Key partnerships include those with CIMB Niaga in Indonesia, Grupo Promerica in Latin America, MTN Mobile Money in Uganda, and Al Etihad Payments in the UAE. These collaborations focus on leveraging technology and analytics, issuing new cards, and expanding access to new consumer markets. The paragraph also highlights expansion into Africa and the importance of the travel sector, noting new co-brand card programs with Wyndham Rewards and Spirit Airlines to capture spending in this area.

The paragraph outlines the company's strategic partnerships and innovations to capture market opportunities in digital commerce and payments. It highlights the launch of new commercial point-of-sale solutions tailored to different business needs and the development of products like the Business Builder and Mid-Market Accelerator. The company is expanding its invoice payment capabilities through a partnership with Corpay, enhancing cross-border payment solutions and offering Mastercard virtual card programs. These initiatives aim to serve a broader range of businesses and solidify the company's leadership in the evolving payments landscape.

Mastercard is enhancing its virtual card offerings by improving access and deployment for businesses. They introduced B2B Rate Manager to simplify the adoption of flexible interchange rates and are streamlining onboarding for issuers to integrate virtual card technology into platforms like HRS and CVent. Further expanding their reach, they've partnered with Odoo and Stripe to issue Mastercard corporate cards linked with Odoo's Expend module across over 20 countries. Mastercard Move is experiencing over 35% transaction growth and supports various applications such as facilitating domestic and cross-border transfers, gig economy wage payouts, and speeding up purchase return payments. Partners like Samsung, MoneyGram, Instapay Technologies, Curfex, Checkout.com, and Worldpay are utilizing Mastercard's solutions for greater efficiency and quick service delivery.

The paragraph details Mastercard's strategy to expand its services and solutions, emphasizing targeted investments in high-growth areas. Approximately 85% of its value-added services and solutions revenues are recurring, providing stability for growth. Mastercard is leveraging partnerships with global technology companies to embed and distribute its services, such as ethical alerts, open banking, risk scoring, and fraud prevention solutions to protect against cybercrime. The company aims to further penetrate existing customers and attract new ones by offering differentiated solutions that enhance consumer experiences, such as frictionless onboarding and secure payments. An example includes Tangerine Bank in Canada utilizing Mastercard's identity solutions for account opening.

The paragraph highlights how the company integrates identity attributes and open banking solutions to enhance digital banking experiences and customer loyalty. They are involved in various projects, such as collaborating with First Abu Dhabi Bank and Sam's Club to improve customer engagement through AI-powered tools and loyalty programs. Additionally, the company offers services for business and market insights, portfolio optimization, and cybersecurity, leveraging AI for fraud detection and proactive threat prevention. AI is central to their operations, with extensive data access enhancing the accuracy and reliability of their AI solutions, which are featured in about one-third of their products by 2024.

The company highlights its focus on key areas that matter to customers, including AI-powered threat intelligence, and has experienced significant growth through new partnerships and product innovations. The CEO emphasizes the company's adaptation to the macroeconomic environment and its strong, diversified business model aimed at long-term growth. Financial results for the first quarter show a 17% increase in net revenue due to growth in payments and value-added services, with acquisitions contributing to this rise. Operating and net income increased by 19% and 13%, respectively, despite a higher tax rate. Earnings per share (EPS) also rose by 16% to $3.73, partly boosted by share repurchases amounting to $2.5 billion in the quarter. Gross dollar volume increased by 9% year-over-year.

In the U.S., gross dollar volume (GDV) increased by 7%, with credit and debit growth at 6% and 8% respectively, influenced by the transition of Citizens Debit Portfolio to Mastercard in early 2024. Internationally, volume increased by 10%, with credit rising 9% and debit 12%. Cross-border volume grew 15% globally, aligning with expectations and driven by both travel and non-travel spending. Switch transactions rose 9% compared to the previous year, with strong growth in both card-present and card-not-present transactions, particularly boosted by contactless payments, which now account for 73% of in-person transactions. Mastercard and Maestro cards total 3.5 billion globally. Payment network net revenue grew 16% due to domestic and cross-border transaction growth, and value-added services revenue rose 18%, partly due to acquisitions and demand for security and digital solutions. Domestic assessments increased by 12% with worldwide GDV growth at 9%, the difference attributed to mix and pricing.

The paragraph discusses the company's financial performance, highlighting a rise in cross-border assessments and volumes by 18% and 15%, respectively, with the difference attributed to international pricing. Transaction processing assessments and switch transactions went up by 17% and 9%, respectively, with FX volatility and favorable cross-border mix influencing these differences. Network assessments for the quarter amounted to $231 million, subject to periodic fluctuations. Operating expenses, on a non-GAAP currency-neutral basis excluding special items, grew by 14% due to strategic initiative spending, though they were lower than expected for the quarter. This was influenced by the expense cadence throughout the year. Key metrics for Q1 showed stable consumer and business spending, negatively impacted by the leap year, holiday timing, and spending pull-forwards. Early April metrics remained stable once adjusted for these factors.

The paragraph discusses the ongoing strength in cross-border travel growth, although some moderation is observed in the Middle East and Africa. Overall, cross-border activity shows healthy growth, with a 16% increase year-to-date by April 28th. The company expects business strength and healthy consumer spending to continue, supported by low unemployment and wage growth outpacing inflation. However, economic and geopolitical uncertainties pose risks. The company's business is well-diversified across various sectors and regions, with no single cross-border corridor exceeding 3% of total volume in 2024, providing resilience. For 2025, they anticipate consumer spending to remain strong, predicting net revenue growth at the high end of a low double-digit to low teens range, with acquisitions contributing an additional 1 to 1.5 percentage points.

The paragraph discusses financial expectations for the company, highlighting minimal impact from recent currency fluctuations. Operating expenses are expected to grow at the low end of a low double digits range, excluding acquisitions and special items, with acquisitions adding approximately 5 percentage points to the annual growth rate. For the second quarter of 2025, year-over-year net revenue growth is projected to be in the low teens on a currency-neutral basis, with acquisitions contributing 1 to 1.5 percentage points. Operating expenses for Q2 are also expected to grow at the low end of a low double digits range, with acquisitions adding 4 to 5 percentage points. Other financial considerations include an expected $135 million expense from other income and expenses in Q2, due to higher interest rates and debt levels, with specific factors like a one-time Q1 gain, reduced interest income from lower cash balances, and increased interest expenses from recent debt issuance impacting this. The non-GAAP tax rate is projected to be 20% to 20.5% for Q2 and the entire year.

In the paragraph, Sachin Mehra responds to a question from Harshita Rawat about the composition of their cross-border business. He explains that no single cross-border corridor accounts for more than 3% of their total cross-border volume, highlighting the diversity and lack of over-dependence in their portfolio. He references past statistics shared during the COVID timeframe, indicating that their cross-border business was roughly evenly split between card-present and card-not-present transactions, with one-third of the card-not-present transactions being travel-related. He suggests that the overall mix has remained relatively stable over time.

The paragraph discusses the growth in card-not-present and travel-related transactions, particularly in response to the digital shift driven by COVID-19, which led to increased online shopping and omnichannel commerce. This growth is observed both domestically and in cross-border environments. The speaker expresses confidence in their portfolio's positioning, focusing on cross-border growth strategies selectively. Andrew Jeffrey from Truist Securities inquires about the economics of Mastercard's tokenized offerings. Michael Miebach highlights that 35% of their transactions are now tokenized, emphasizing tokenization as a crucial technology for enhancing security and user experience. Mastercard aims to scale this technology globally as part of their strategy.

The paragraph discusses the strategic developments and financial performance of a company, focusing on the implementation and monetization of tokenization solutions. The company has introduced life cycle management on their tokenization platform and is experiencing benefits from these enhancements, particularly in international markets. They have also developed a locally-based solution in China to mirror this impact. The discussion highlights the company's pricing strategies to recoup investments and share value with customers. The conversation then shifts to Tien-tsin Huang from JPMorgan, who inquires about the company's operating expenses, growth versus maintenance costs, and the impact of integrating Recorded Future on their financials. Sachin Mehra responds, explaining that operating expenses were slightly lower than expected in the first quarter due to planned expenditures being deferred.

The paragraph discusses the anticipated changes in operating expenses for the year, particularly in advertising and marketing (A&M). While initial spending was lower than expected due to timing, expenses are projected to increase, especially in the second half of the year. This rise will support investments in several areas, including capitalizing on global market opportunities, enhancing infrastructure vital for their payment network, and expanding services through product development and new capabilities. The company has provided guidance for these increasing expenses in the upcoming second quarter.

The paragraph mainly discusses the company's financial expectations and insights into acquisitions, specifically Recorded Future and Minna. It highlights the anticipated impact of these acquisitions on growth, detailing the associated expenses such as run rate expenses, amortization of intangibles, and one-time integration costs. The speaker notes that there haven't been changes since the last update. During a Q&A, Sanjay Sakhrani asks about consumer spending habits amid tariffs and whether the company's outlook remains unchanged due to any concerns. Michael Miebach responds by emphasizing the company's comprehensive global perspective on consumer spending trends, suggesting confidence in their understanding of consumer behavior.

The paragraph discusses key insights from the Mastercard Economics Institute's 2025 economic outlook, highlighting that consumer engagement remains constant, with a focus on using digital tools to make purchasing decisions. It indicates stable spending patterns in the US, some challenges in Europe, and significant growth in China, driven by share gain. Overall, global spending trends are stable. Sachin Mehra adds that the positive performance in Q1 was mainly due to higher foreign exchange volatility and lower-than-expected rebates and incentives.

The paragraph discusses expectations for rebates, incentives, and market activity throughout the year while noting the unpredictability of FX volatility. It highlights a moderation in inbound travel to the U.S., which is being offset by increased cross-border activity in other regions such as Europe, the Middle East, Africa, and Asia Pacific. The diversified business model helps maintain stability despite these shifts. The company remains focused on monitoring economic indicators, including tariffs, job creation, employment rates, and wage growth, to manage uncertainty and risk effectively.

The paragraph discusses a conference call where Adam Frisch from Evercore ISI asks about the potential impact of a Capital One and Discover deal on the company's financials, specifically if Capital One's debit portfolio moves to Discover. Sachin Mehra responds that the company's full-year financial guidance already accounts for the expected impact of this transaction, although there is uncertainty regarding its timing due to the approval and activation process. Michael Miebach adds that the relationship with Capital One has been strong and mutually beneficial over the years. The second question addresses the role of China in the company's revenue projections, which wasn't directly answered in the text provided.

The paragraph discusses the company's strategic relationships and competition, highlighting a strong ongoing partnership with Capital One. It mentions the company's exposure to China, which primarily involves cross-border revenue, though this revenue's impact is still small as the joint venture is in an investment phase. The discussion includes China’s cross-border travel volumes, noting that inbound travel has surpassed pre-COVID levels, while outbound travel is at about 85% of pre-COVID levels.

In the paragraph, Michael Miebach and Sachin Mehra discuss their company's outlook and expectations for the remainder of the year. Miebach highlights the company's preparedness with tools like tokenization to enhance contactless and online transactions, while noting the importance of monitoring external factors like US-China relations. Trevor Williams from Jefferies inquires about the company's full-year guidance, specifically regarding switch volumes, cross-border dynamics, and the impact of FX volatility. Mehra responds, stating their base case assumes continued strong consumer spending despite uncertainties. He mentions the impact of lapping last year's successes on current performance, which will progressively manifest throughout the year, contributing positively to outcomes.

The paragraph discusses factors impacting a company's financial outlook, including portfolio-associated revenue, year-over-year growth rate changes, and the effects of pricing adjustments from the previous year. The speaker also mentions lower Research and Innovation (R&I) spending in the first quarter, anticipating this as a timing issue that will balance out over time. FX volatility is highlighted as an unpredictable factor, with last year's high volatility presenting a tougher comparison for this year. Despite efforts to estimate outcomes, FX impacts remain uncertain, influencing the company's guidance range. An operator then introduces Darrin Peller from Wolfe Research, who inquires about pricing strategies, particularly concerning past adjustments in cross-border transactions and future opportunities to implement similar pricing changes in the second half of the year, albeit potentially not perfectly timed.

In the paragraph, Michael Miebach discusses the company's pricing strategy, emphasizing that they operate in a competitive market and generally set prices based on market conditions and the value they provide. He highlights that value is offered across their range of payment solutions and value-added services, such as safety and security, fraud reduction, and customer engagement tools. Miebach explains that the company consistently looks for opportunities to regain investments and adjust pricing according to the value delivered to customers. They focus on showcasing the benefits and return on investment their products and services can offer, and he notes that there are no planned spikes or events in their pricing outlook.

The paragraph discusses the dynamics of incentives in contracts, specifically around the beginning and end stages. At the start of a contract, there are typically both fixed and variable incentives provided to customers to encourage them to bring volume onto the system. These incentives can include rebates, with the variable component fluctuating based on volume, while fixed incentives are amortized over the contract's life. Towards the end of a contract, these incentives may be reduced or turned off, especially if the contract is being converted or migrated away, as seen in cases like Capital One. The process involves projections and adjustments based on expected volume.

The paragraph discusses the complexities of customer contract negotiations. It explains how, when a contract expires and isn't renewed, there might be other opportunities with the customer that lead to a new negotiation. This negotiation may involve getting less volume or incentives than before but gaining additional benefits. An example from 2014-2015 with Chase illustrates how contract volumes can be adjusted, sometimes leading back to standard rates without incentives. The outcome depends on various factors, such as the customer's readiness for migration, and this influences the timing and structure of new agreements.

The paragraph discusses the strategic approach of Michael Miebach's business, emphasizing the importance of forming long-term strategic partnerships rather than just maintaining relationships. The business prioritizes growing payment volumes, which generates more data and enables the development of additional services. When asked about outperforming competitors in a slowing economic environment, Miebach highlights the company’s diversified business model as a key advantage. This diversification benefits the company in both booming and challenging economic conditions, as economic situations can vary globally.

The paragraph discusses key trends in the business landscape, emphasizing the shift from cash and checks to digital payments, which provides companies with valuable data to optimize their operations. It highlights the increased importance of cybersecurity as fraudsters use advanced technologies like AI. Moreover, the paragraph emphasizes how data insights from digital solutions can help businesses make informed decisions and gain a competitive edge. These trends—digital payments, cybersecurity, and data-driven decision-making—are presented as enduring and crucial for navigating economic fluctuations.

The paragraph discusses the net revenue growth of 16% in the fourth quarter and an increase to 17% in the first quarter, despite a slight volume slowdown. Bryan Keane from Deutsche Bank asks for an explanation of this growth. Sachin Mehra attributes the increase to high FX volatility and lower than expected rebates and incentives in the first quarter, noting that these incentives are expected later in the year. Additionally, the 17% growth figure includes the impact of acquisitions, indicating that comparisons should consider this factor.

The paragraph discusses the focus on cryptocurrency and the incorporation of crypto tools, emphasizing the involvement in digital assets and blockchain technology over the years. While crypto has not been a significant part of the business yet, there has been growth in facilitating crypto asset transactions. The technology for optimizing payments using blockchain and stablecoins is still emerging due to a lack of regulatory clarity. The mention of two bills under discussion in the United States highlights ongoing developments in regulatory frameworks in this area.

In this paragraph, the speaker discusses developments in the European regulatory environment for stablecoins and highlights the readiness of the ecosystem for further growth. They emphasize the role of their company, likely Mastercard, in providing safety, security, and interoperability standards similar to those in traditional card payments. The speaker also mentions their excitement about payment innovation and the need for regulatory clarity for economic models to develop. The closing comments express optimism for the future and gratitude to Mastercard employees for their hard work.

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