Good morning. My name is Audra, and I will be your conference operator today. I would like to welcome everyone to the Mastercard Inc. Q1 2023 Earnings Conference Call. All lines have been muted to prevent background noise. After the speakers’ remarks, there will be a question-and-answer session. Mr. Warren Kneeshaw, Head of Investor Relations, you may begin your conference.

Thank you, Audra. Good morning, everyone, and thank you for joining us for our first quarter 2023 earnings call. With me today are Michael Miebach, our Chief Executive Officer; and Sachin Mehra, our Chief Financial Officer, and Devin Corr, our Incoming Head of Investor Relations and my successor. Following comments from Michael and Sachin, the operator will announce your opportunity to get into the queue for the Q&A session; it is only end of queue we’ll open for questions. You can access our earnings release, supplemental performance data, and the slide deck that accompany this call in the Investor Relations section of our website, mastercard.com. Additionally, the release was furnished with the SEC earlier this morning. Our comments today regarding our financial results will be on a non-GAAP currency-neutral basis unless otherwise noted. Both the release and the slide deck include reconciliations of non-GAAP measures to GAAP reported amounts. Finally, as set forth in more detail in our earnings release, I would like to remind everyone that today’s call will include forward-looking statements regarding Mastercard’s future performance. Actual performance could differ materially from these forward-looking statements. Information about the factors that could affect future performance are summarized at the end of our earnings release and in our recent SEC filings. A replay of this call will be posted on our website for 30 days. With that, I’ll now turn the call over to Michael.

Thank you, Warren. Good morning, everybody. Another quarter, let's jump right in. The headline is that in quarter one, consumer spending has remained remarkably resilient in that despite continued economic uncertainty. We kicked off the year with strong revenue and earnings growth. Quarter one adjusted net revenues were up 15% and adjusted operating income was up 17%, both versus a year ago, and as always on a non-GAAP currency neutral basis excluding special items. Focusing on the macro for a moment. Let's take stock of the positive and negative factors we have been monitoring. First, the labor market in aggregate remains strong with savings remaining above historical levels and consumers continuing to access credit, all of which are key drivers of consumer spending. Second, central banks continue to combat elevated inflation levels with higher interest rates. Although we are seeing signs of inflation, additional stresses on the banking sector have emerged. We will continue to monitor how banks respond to these evolving conditions. And finally, economic growth around the globe continues to vary by country and sector. The reopening of China is a positive catalyst; however, the impact of monetary and fiscal tightening in many countries will likely be with us for some time. So overall, many moving pieces, but even so, consumer spending levels have remained resilient while the mix of spending has continued to rebalance towards experiences. Looking at our switched volume trends, domestic volume growth has remained relatively stable with some recent moderation in the U.S., in part due to lower tax refunds. Cross-border travel in quarter one reached 148% of 2019 levels, with all regions above 2019 levels. This includes notable improvement in Asia; cross-border card not-present ex travel continues to hold up well. We will continue to watch the environment closely, and as we have demonstrated in the past, we are prepared to adjust investment levels appropriately while maintaining focus on our key strategic priorities. And as a reminder, these three priorities are expanding in payments, extending our services, and embracing new networks. Now I've been on the road for much of the quarter meeting with customers, partners, government leaders, and, of course, our teams. These conversations have reinforced the energy we have for our collaborative approach and show the importance that digital payments play in driving much of today's economic activity. And it's with that in mind that I'll share some examples of how we are progressing against our three strategic priorities. First, we're expanding in payments by winning deals across a diverse set of customers, innovating in and growing acceptance, and expanding solutions to address new payment flows. We see our partnership deepening with diverse co-brand partners, financial institutions, and fast-growing fintechs around the world. This quarter we had a significant win with Costco Wholesale in Taiwan, the largest co-brand portfolio in the market. The deal is a competitive flip that ensures exclusive co-brand issuance and exclusive acceptance of Mastercard co-brand cards in stores effective in August this year. We also announced our exclusive partnership with Wells Fargo and Choice Hotels to launch their new credit card program in the United States. In the Middle East, we inked a renewal with National Bank of Egypt, the largest issuer in the country. And on the fintech front, we renewed our deal with N26, one of the largest neobanks in Europe, for Mastercard to be the exclusive provider for issuing and processing services. And in Latin America, we've expanded our relationship with Ualá, one of the fastest-growing fintechs in the region, to be the exclusive network for prepaid debit and credit. So we are continuing on our trajectory, delivering another solid quarter of new and renewed wins, an important element of our growth algorithm. Beyond new wins, we are driving growth in payments through the development of innovative solutions, like our installment offerings. In Australia, we're scaling our solutions with some of the largest banks in the market, including Commonwealth Bank of Australia, National Australia Bank, and Westpac. Providing the way to pay is central to what we do, so too is making sure people and businesses can use those payment tools whenever they want. Along those lines, we are continuing to drive growth in acceptance, expanding connectivity and trust across all forms of card payments. Our acceptance footprint has now surpassed 100 million locations, effectively doubling over the past five years. And that's just the start. Our innovative contactless, cloud commerce and click-to-pay solutions give more merchants the ability to accept electronic payments with simple technology connectivity. To us, that's an opportunity to bring more physical and digital transactions onto our network. Over 100 markets have now reached at least 50% contactless penetration, double the number three years ago. Contactless drives higher consumer engagement and helps to accelerate the secular shift to digital payments by accessing lower-ticket size purchases that have historically been cash-based. In quarter one, our tokenization capability was selected as part of mobile payment launches in South Korea and even a significant number of private label cards for contactless, thereby giving us the opportunity to deliver services on those transactions. We continue to see momentum in tap-on-phone, with programs across more than 70 markets globally. We continue to scale, including the announcement in quarter one that Stripe has enabled tap-to-pay on Android in multiple markets. In addition to helping our partners bring tap-on-phone to market, our cloud commerce acceptance technology is now live in Europe. Our cloud commerce capabilities make it easier and quicker for businesses of all sizes to accept payments on virtually any device. Click-to-pay is now live in nearly 30 markets globally, including key markets such as Australia, Brazil, the U.K., and the U.S. We are partnering with payment service providers in Mexico and Italy to further expand our presence. This is all complemented by our workers' partners to grow acceptance by integrating the payment experience where their customers are. You see that in the social commerce space with what's happened in Brazil, enabling consumers to make purchases directly from small businesses right within a chat. Further, we remain focused on expanding our set of new capabilities to capture a prioritized set of new payment flows. I'll highlight a couple of areas we are targeting, starting with commercial. We had strong growth in the space, with volumes across our commercial credit and debit products in quarter one, up 21% versus the prior year on a local currency basis. We see substantial opportunity to grow in commercial, particularly with our virtual card and small business solutions. With virtual cards, where we are the market leader, one of our initiatives is to integrate our solutions with leading B2B technology platforms. This quarter, we signed a partnership agreement with Coupa to enhance their Coupa Pay solution, which embeds virtual cards to address accounts payable flows. On a small business front, today, only a small fraction of payments are captured on card. We are enhancing the value propositions from programs like Easy Savings, which offers automatic merchant-funded rebates to nearly 40 million enrolled cardholders in over 80 countries. And we are growing by establishing new issuance deals through partners like Galileo in the United States, where Mastercard will be the preferred brand for small business and commercial programs. Now beyond commercial, disbursement and remittance flows represent a significant opportunity for growth through geographic expansion, new distribution partners and an expanding set of use cases. In terms of new markets, our gaming use case is now live in Canada and Peru, and we have added cross-border origination to the UAE and Uzbekistan. By connecting with MFS Africa, a leading digital payment company, we have enabled mobile payouts across 10 markets in Africa. We are working with distribution partners like checkout.com to increase our reach to even more customers in Asia and the United States. We are enabling our cross-border services solutions to small and midsized banks through cross-border services express, with this simple-to-use digital-first solution; participating financial institutions can offer their customers the ability to send money or pay vendors across the globe quickly and securely. In terms of expanding use cases, we have enabled cash in the U.S., in Europe and the U.K., facilitating underbanked customers to safely load cash into their accounts from a non-bank location, which can also help drive follow-on card spend. So as you can see, we continue to make broad-based progress in addressing our prioritized set of new payment flows. Turning now to services. We love services, where we are focused on growth and resiliency through scaling our existing solutions and adding new capabilities. As merchants and consumers shift to digital, our comprehensive set of cybersecurity solutions becomes even more critical. For instance, Risk Recon helps an enterprise identify their own cybersecurity vulnerabilities as well as for their ecosystem partners. With our acquisition of Baffin Bay Networks this quarter, we now have a solution to help these customers act on this information. Specifically, Baffin Bay's AI-enabled cloud-based threat protection helps to stop cyber attacks related to malware, ransomware, and DDoS attacks. The acquisition also complements our other cybersecurity offerings, including our simulation and assessment tools, as well as our cybersecurity consulting practice. You all are familiar with our comprehensive set of data analytics, marketing, and loyalty assets. These are about helping our partners make smarter decisions to drive better outcomes. For example, Agoda, one of the world's fastest-growing online travel platforms in Asia, is leveraging our economic insights to inform their strategic planning. To meet among the largest electronics retailer in Europe, is utilizing our test and learn capabilities to support the assessment and optimization of new business initiatives. We also continue to make progress signing deals with retailers and commerce partners, like Hyundai Motors, Europe, and Puma, to utilize our recently acquired personalization platforms Dynamic Yield. We continue to look for ways to combine all these assets to deliver valuable end-to-end solutions. We just announced elements of a suite of applications that brings insights for Mastercard's data analytics to enrich Dynamic Yield's personalization experience. Our third key priority area is embracing new networks where we are making progress in the areas of open banking and digital identity. In open banking, we continue to work with a broad set of banks and fintechs who are interested in its potential across a wide range of use cases. In addition to the Pay-by-Bank solution for JP Morgan that we announced last quarter, we are working with payment risk and identification company GIACT, a member of the London Exchange, to embed a secure account verification solution. Also, Saxo Bank will use our open banking technology for account opening and top-ups in Europe. Furthermore, we're developing capabilities on top of our open banking platform; we have advanced analytics partnerships with fintech innovators to expand access to capital with better data for making lending decisions. This is another great example of how our technology supports small businesses. Moving next to digital identity. We continue to see strong adoption of our intelligent identity solutions powered by machine learning. This quarter, we secured a key partnership with Southwest to embed our intelligent identity solutions from content to reduce fraud and friction in digital interactions. Still early stages with open banking and digital identity, but we are making progress scaling our technology to new markets and use cases with notable partners. So with that, I'll wrap it up and summarize that we delivered another strong quarter of revenue and earnings growth, reflecting a resilient consumer and the continued recovery of cross-border travel. We will continue to watch the environment closely and are prepared to act as circumstances dictate. We see a significant opportunity ahead having now surpassed 100 million acceptance locations worldwide. Our focused strategy, diversified and resilient business model, and strong relationships around the globe position us well through economic cycles. Sachin, over to you.

Thanks, Michael. Turning to Page three, which shows our financial performance for the quarter on a currency-neutral basis, excluding special items and the impact of gains and losses on equity investments. Net revenue was up 15%, reflecting resilient consumer spending and the continued recovery of cross-border travel. Operating expenses increased 12%, including a 2 ppt increase related to acquisitions. Operating income was up 17%, which includes a 1 ppt decrease related to acquisitions. Net income was up 2%, which includes the 1 ppt decrease associated with acquisitions. EPS was up 4% year over year to $2.80, which includes a $0.07 contribution from share repurchases. Of note, the respective growth rates of net income and EPS were negatively impacted by a low tax rate in 2022 as a result of sizable discrete tax benefits last year. During the quarter, we repurchased $2.9 billion worth of stock, and an additional $602 million through April 24, 2023. So now let's turn to Page four, where you can see the operational metrics for the first quarter. Worldwide gross dollar volume (GDV) increased by 15% year over year on a local currency basis. On the same basis, if you exclude Russia from the prior period, GDV increased by 16%. In the U.S., GDV increased by 9%, with credit growth of 15%, reflecting in part the recovery of spending on travel. Debit increased 3%; excluding the impact of the roll-off of a previously discussed customer agreement, debit increased approximately 6%. Outside of the U.S., volume increased 18%, with credit growth of 17% and debit growth of 19%. Cross-border volume was up 35% globally for the quarter on a local currency basis, reflecting continued improvement in travel-related cross-border spending. Turning to Page five, switched transactions grew 12% year over year in Q1. Excluding Russia from the prior year, switched transactions grew 20% year over year in Q1. Both card-present and card-not-present growth rates remain strong. Card-present growth was aided in part by increases in contactless penetration, as contactless now represents over 58% of all in-person switched purchase transactions. In addition, card growth was 9%; globally, there are 3.2 billion Mastercard and Maestro branded cards issued. Turning to Slide six, for a look into our net revenues for the first quarter, which were above our expectations. As a reminder, we recently revised our disaggregated revenue disclosure. Net revenues are now broken down into two new categories: payment network and value-added services and solutions. Now getting into the numbers described on a currency-neutral basis, payment network net revenue increased 10%, which would have been 1 ppt higher if we excluded the Russia-related special item, which benefited Q1 2022. The growth in payment network was primarily driven by domestic and cross-border transaction and volume growth and also includes growth in rebates and incentives. Value-added services and solutions net revenue increased 21%, including a 1 ppt benefit from acquisitions. The growth was primarily driven by the continued strong growth of our cyber and intelligence solutions, driven by underlying driver growth, higher demand for our fraud solutions, as well as the scaling of our identity and authentication solutions. We also saw healthy demand for our data analytics, consulting and marketing services, as well as our loyalty solutions. Now let's turn to Page seven, starting with key metrics related to the payment network, again, described on a currency-neutral basis unless otherwise noted. Looking quickly at each key metric, domestic assessments were up 9%, while worldwide GDV grew 15%. The difference is primarily driven by mix and the underreporting of volumes from sanctioned customers in Russia last year, which accounted for approximately 2 ppt of the variance. Cross-border assessments increased 39%, while cross-border volumes increased 35%. The 4 ppt difference is primarily due to favorable mix as higher-yielding ex intra-Europe cross-border volumes grew faster than intra-Europe cross-border volumes this quarter. Transaction processing assessments were up 14%, while switched transactions grew 12%. The 2 ppt difference is primarily due to foreign exchange-related revenues. Other network assessments related to licensing, implementation and other franchise fees were $212 million this quarter. It's important to note that these other network assessments may fluctuate from period to period. Moving now to Page eight. You can see that on a non-GAAP currency-neutral basis, excluding special items, total adjusted operating expenses increased 12%, including a 2 ppt impact from acquisitions. Excluding acquisitions, the remaining increase was primarily due to increased spending on personnel to support the continued execution of our strategic initiatives. Operating expenses were higher than expected in part due to personnel costs to support higher-than-expected revenue as well as unfavorable foreign exchange related to the remeasurement of monetary assets and liabilities. Turning to Page nine. Let's discuss the operating metrics for the first three weeks of April. As a general comment, our metrics are holding up well in April. As expected, the year-over-year growth rates are being impacted by two opposing factors: one, more difficult comparisons as we began lapping the effects of Omicron; and two, the lapping of the drag created by the suspension of our operations in Russia in March of last year. To aid in your understanding of the underlying spending trends and eliminate some of the noise induced by the lapping effects, we have also included the Index 2019 levels on the slide. Let's discuss each of the metrics in turn. Starting with switched volumes. Through the first three weeks of April, we grew 17% year-over-year, down 1 ppt versus Q1. This reflects more difficult comparisons and some modest slowing in the U.S. due to lower tax refunds. This started in March and continued into April. This is partially offset by a 3 ppt benefit from the lapping of Russia. Switch transactions grew 18% year-over-year through the first 3 weeks of April, up 6 ppt versus Q1. This includes an 8 ppt benefit from the lapping of the suspension of operations in Russia. As a reminder, Russia had a relatively low average ticket size, which results in a larger relative impact on this metric. In terms of cross-border, volumes grew 29% on a year-over-year basis, down 6 ppt from Q1. This reflects the continued recovery in cross-border travel as well as the positive effect of the suspension of our Russian operations, but is more than offset by a tougher year-ago comparison as travel surged after the passage of Omicron last year. Cross-border volume is indexing at 171% of 2019 levels in April, up from 168% in Q1. To further assist your understanding of the trends in the business ex-Russia, where we suspended operations in March 2022, we have included an appendix to show all data points from the schedule if you exclude activity from Russian issued cards from current and prior periods. Turning to Page 10. I wanted to share our thoughts on the remainder of the year. Let me start by saying that our business fundamentals remain strong, and our diversified business model and our momentum with our customers position us well for the opportunities ahead. Consumer spending overall remains healthy, albeit with some recent moderation in domestic spending in the U.S., in part due to lower tax refunds this year. At the same time, as Michael noted, the recovery in cross-border travel continues, with inbound travel to all regions now well above 2019 levels. Within Asia, in Q1, China outbound cross-border travel increased to approximately 65% of Q1 2019 levels, while inbound reached 45% on the same basis. As a reminder, China made up 2% of outbound and 1% of inbound cross-border travel in 2019. We remain well positioned to capitalize on this growth with our travel-oriented portfolios and related service offerings. While we are monitoring a number of macro and geopolitical factors, our base case scenario assumes consumer spending remains resilient, and cross-border travel continues to recover. For the year, our outlook has improved modestly, reflecting our stronger-than-expected performance in Q1. We expect net revenue growth for the full year 2023 to be at a low teens rate on a currency-neutral basis, excluding acquisitions and special items. This growth rate would be higher by approximately 1.5 ppt if you exclude Russia-related revenues from 2022. Foreign exchange is expected to be a tailwind of 1 ppt for the year, and we expect minimal impact from acquisitions. Our expectations for operating expenses for the year are unchanged, with growth expected to be at the high end of a high single-digit rate on a currency-neutral basis, excluding acquisitions and special items. Acquisitions are forecasted to add about 1 ppt to this growth, while foreign exchange is expected to have a minimal impact for the year. Again, we are prepared to proactively adjust our operating expenses if we see meaningful changes to top line growth. With respect to the second quarter, year-over-year net revenue is expected to grow at the high end of a low double-digit rate again on a continual basis, excluding acquisitions and special items. Coming off of a strong Q1, this sequentially reflects a tougher year-ago comparison, lower anticipated FX volatility, partially offset by lapping the suspension of operations in Russia. Foreign exchange and acquisitions are not expected to have much of an impact for the quarter. From an operating expense standpoint, we expect Q2 growth to be at the high end of a low double-digit rate versus a year ago on a currency-neutral basis, excluding acquisitions and special items. This includes costs of approximately 2 ppt associated with the wind-down of our efforts related to the P27 project, given their decision to withdraw their license application in the Nordics. Acquisitions are forecasted to add approximately 0 to 1 ppt to this growth, while foreign exchange is expected to be a tailwind of approximately 0 to 1 ppt. Other items to keep in mind: first, on the other income and expense line, we forecast an expense of approximately $100 million for Q2 given the prevailing interest rates and debt levels, which includes a sequential increase due to our recent debt issuance. This excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics. Second, we expect a non-GAAP tax rate of between 18.5% and 19% for both Q2 and the full year based on the current geographic mix of our business. Before I turn the call back over to Warren to begin the Q&A session, I wanted to express my deep gratitude to Warren for the thought leadership, dedication, and friendship he has demonstrated over his last 6-plus years at Mastercard. As previously announced, Warren will be handing over the head of IR role to Devin Corr effective May 1, and will be with us through your end in an advisory capacity. Thank you, Warren, and over to you for the Q&A session.

Thank you, Sachin. I have to say it's been a distinct pleasure. With that, let's turn it over to questions. Audra, we're ready to go.

We will take our first question from Lisa Ellis at MoffettNathanson.

Hey, good morning. Thanks for taking my question. And Warren, you will be missed, of course. I just had a question about Fed Now coming in July. Of course, VocaLink has been involved in the clearinghouse's RTP network. Can you just kind of give your perspective on how you expect the rollout of Fed Now to affect Mastercard's business in the U.S., positively or with potential pressures? Thank you.

Good morning, Lisa, thanks for your question. And thank you for missing Warren. So on Fed Now – an important development, of course, we've been watching closely. As you know, for years, we've been involved in real-time payments. So it's been our learning over the years that it's really critical that there is a proposition for merchants and a proposition for consumers for these systems to grow. On the merchant side, criticality is reach. And for the consumers, it's got to be a proposition that's an easy experience and has consumer protection in it. So those are all aspects that the card systems have demonstrated over the years, and we'll have to see where these peer-to-peer systems go with that. Fundamentally, we appreciate competition; it makes us a better company as we try to improve our proposition. Now, on FedNow specifically, a technical go-live is different from being available for consumers and merchants, as I just discussed, and we have to see where that goes and what the features will be, what is the user experience, and what consumer protections would be included. We will continue to seek ways to partner with B2B systems, and the same applies here in the United States. For the flows that this might target, which are currently flows on account-to-account, you will recall the announcement that we've made in the last quarter with Chase on pay-by-account. So those are alternative solutions that would be in the market to capture some of these new flows. So opportunity and threats, we’ll have to see how it plays out. I think we're well positioned.

Thank you.

We'll go next to Tien-Tsin Huang at JPMorgan.

And my thanks to Warren as well. I forgot that May first crept up on this. I want to ask a macro question because Michael, I think you asked for more questions last quarter. So I'll ask you one on generative AI, if that's all right. Given that you guys have, and I know you have a data analytics and consulting business within your PAS business. I'm just curious how you’re thinking about generative AI, as ChatGPT gets a lot of attention. So your thoughts on the impact on PAS and maybe on the broader business as well.

Correct. Thank you, Tien-Tsin. This is certainly a topic that has received a lot of attention, particularly since the latest model of ChatGPT was released. There's a whole set of headlines around it daily. I've been using AI for the better part of the last decade, so it's embedded in many of our products. Just now, I mentioned in my prepared remarks about Baffin Bay Networks. Would you all be surprised if I said they're actually not in Canada, but in Sweden? The company is using AI-enabled threat protection solutions. So you'll find it embedded in many of our products, including generative AI. We have utilized generative AI technology particularly in creating datasets that allow us to compare and find threats in the cybersecurity space. You will find AI in our personalization products. So there's a whole range of things that set us apart. We use this as foundational technology. And internally, you'll see increasingly so that generative AI could be a good solution for us when it comes to customer service propositions and so forth. We're actively engaged with it. Fundamentally, though, I think we all have to be aware that applying AI needs to be done in a principled way. We approach data privacy in a principled manner, we approach fintech in a principled way, and the same applies here. So trustworthy AI is clearly the focus. We've encouraged our employees to experiment with the technology, but we've set very clear guardrails and do not allow it in production yet. However, it's something that we cannot ignore; we will not. We will lean in but make sure that we are a trusted party when it comes to scaling it up.

We'll go next to Darrin Peller at Wolfe Research.

Thanks, guys. Maybe you could just give a quick update on business activity. Obviously, incentives and rebates, it's not reported the same way, but I know we have a pickup in the year. And so going back to 2015 and 2016, when you had significant incentive rebates here, it tended to be followed by an acceleration in volume and revenue growth in the years after. So maybe just give us a sense of what's driving the increase this year? What kind of activity levels you're seeing now? And if we can expect a similar follow-through in the years to come?

Right. Darrin, let me start on that. We see very encouraging activity. In fact, it was tough to make choices here on what not to tell you in the 15-minute overview that I gave you. So solid activity in deal wins. And you recall some of the bigger deals that we have announced in 2021 and 2022, which are behind some of the share gains that we're seeing, particularly if you look at the European numbers. So that is having some impact on how the results and incentives play out. But I'll defer to Sachin to say a little bit more, but overall, the activity is very healthy.

Darrin, good morning. Look, it's like Michael said, right? I mean, we compete every day in the market. We are being successful in what we're doing in terms of winning new business and retaining existing business. That's a very important part of the growth algorithm we have laid out to drive growth. Because at the end of the day, we believe very firmly that being in the flow is important. You get the benefit of price compression, you get the benefit of secular shifts, but you also get to deliver additional services by being in the flow. So what we are trying to do is we’re trying to win profitable market share while simultaneously driving an accretion in our overall net revenue yield, which is really about taking it together in the composite because payments, services, and our new networks are very tightly integrated. One relies on the other, and we have to look at this from an overall net revenue yield base. So that's really what's going on. To your specific question about rebates and incentives, look, we've always kind of shared with you about rebates and incentives, including what they are for our payment network even now. The reality is, as deals come up, we will compete for them, and we will do that in a smart manner. For Q2, I can tell you that rebates and incentives as a percentage of total payment network assessments would be roughly similar to what we had in Q1. So based on everything we can see from a line of sight standpoint in terms of deals and activity, that’s what I can share with you at this point in time.

We'll go next to Rayna Kumar at UBS.

Congratulations, Warren and Devin. I want to ask about Europe. You saw a 31% volume gain in the quarter; that's outstanding. Can you talk a little bit about some of the market dynamics you're seeing in that region and whether your growth is more reflective of market share gains or just strength in the overall shift to electronic payments?

Rayna, I think you partially answered your question just now. Deal activity is strong. To the second half of your question, over the last three years, you saw some European markets, some large European markets that have been historically less digitized and more cash-focused really catch up. The stats I gave earlier on contactless penetration include a good number of European markets jumping ahead in the rankings. So there's a strong secular shift; that's an opportunity. You're starting to see some of the payment service providers driving more acceptance into more parts of the economy, and that's also reflected in some of the acceptance growth that we talked about: $100 million. A good chunk of that is coming from Europe. So it's a mix of share wins that we have seen very specifically in the U.K. and the secular shift. So we feel very well positioned in Europe.

And we'll move next to Bryan Keane at Deutsche Bank.

Hi, good morning. Just want to ask about cross-border volume. I know it was up at 29% for the month of April – or through April 21. Just thinking about how that might grow throughout the year. Is that the right number to think about for our models? And just thinking about the Asia recovery and what’s left there. Obviously, we talked about China, and I'm just thinking about that business as we progress through the year.

Sure, Bryan. Look, just what I would tell you, I'd say the things to keep in mind when putting your model together, and this will be no surprise to you is we saw an opening up of economies last year coming out of COVID. As we mentioned, in Q1, we were in the base of Omicron; you're starting to see that recovery take place. So you should expect there will be lapping-related issues, which will be a headwind to year-over-year growth rate on all metrics, including cross-border as well. Now offsetting that to some extent would be the recovery from Asia Pacific, which we saw happen towards the tail end of last year into this year. There are puts and takes. I'm not going to give you a specific forecast, but these important puts and takes need to be considered as you think about cross-border. Most importantly, the value proposition we deliver through our cross-border proposition remains fundamentally sound. This is really important. As you remember, over the last 2 or 3 years, it was being questioned as to whether cross-border would remain challenged over the long term. The reality is it has come back. It has come back strong. We have positioned ourselves really well through the pandemic to be winning good portfolios to ride the wave back up, and you're seeing the results of that come through with some really strong cross-border performance in Q1, with 35% year-over-year growth. Looking at our cross-border volumes for Q1 at 168% of 2019, you can do this math as well. The reality is that reflects approximately a 14% compound annual growth rate from before the pandemic to now in Q1. So make sure that remains part of your process.

We'll move next to Sanjay Sakhrani at KBW.

Thanks, good morning. I guess, I know you're not changing your views on the macro for the rest of the year, but you're monitoring the situation. Maybe you could just give us a little bit more color if we parse underneath the covers. Just what gives you the confidence that things are stable despite the slowing in April and March? And then sort of the forward look on the spending trends in cross-border?

Yes, Sanjay. Look, at the end of the day, what we see is what you see from a consumer standpoint. We have our best estimates as to what we kind of think that looks like on a go-forward basis. Like Michael said, there are positive and negative factors. The health of the consumer remains strong, backed by record low unemployment rates, which gives us a level of confidence. On the flip side, you've got the headwinds that come along with higher interest rates and, more recently, the banking crisis that we're all going through. We have no idea what the implications of the banking crisis will be going forward. So our views on the strength of the consumer remain largely unchanged. There are puts and takes by region. Based on the fact that, at this point in time, there's no real evidence to see that the consumer is showing weakness from a spending standpoint, they're in good shape. The year-over-year growth rates, like I mentioned earlier, will change as the lapping effect from the previous year comes through, which is independent of this year’s spend levels or anything else. That's the basis on which we've modestly increased our full-year guidance, reflecting stronger-than-expected Q1 performance. Our assumptions regarding consumer health remain relatively unchanged since last quarter.

One thing to add here; I'm just looking at my phone during the conference call, but it was the reporting of the quarter 1 GDV numbers. If you look into that, the consumer does stand out positively. So the resilience is reflected in that number. I think the point I mentioned earlier on the impact of stresses on the banking sector is relevant. If you think about what this means in terms of potentially additional regulation and the potential impact on banks' credit appetite – these are not near-term effects that we can judge at this point. Some of the outlook we are taking here is just for the near term, and we will have to see how things develop over time. Again, flexibility and agility are critical. So we are prepared for all of that.

We'll move next to Harshita Rawat at Bernstein.

Hi, good morning. I have a question on value-added services. Can you unpack the competitor set for these different services, including cyber intelligence, data services, and others, and kind of highlight Mastercard's opportunity to increase penetration of these services within the existing client base and continue to get new clients? As a follow-up, Sachin, if you can also remind us of the profitability of value-added services compared to your business and network business, is that a good?

Harshita, let me start with this. First on the competitive landscape. As Sachin mentioned earlier, our services strategy is closely tied into our payment strategy. We’re not your average service competitor, as in a cybersecurity company that competes with a bunch of other cybersecurity firms. We are somewhere in the middle between bolts and being in the flow, which gives us additional data points that creates a unique competitive landscape for us. This is why we like the combination. It's also true for cybersecurity. You have a whole set of specialty players. Baffin Bay is a specialty player, and we're leveraging that for threat protection. We're very aware of the wide competitive landscape. However, our position sets us apart. Now there are also other potential competitors who come closer to the payment space and look at services as well. We are trying to keep our services set differentiated and ahead of the curve. The same goes for data and services. There are many data and SaaS businesses building their models. However, we have a captive set of customers today, and we have captive transactions that these companies want to analyze, and they come to us for an integrated provider to help them in this regard. So that's a unique position for us to look at. Our dynamic yield, and how we're combining that with our data set, as I referred to in my earlier remarks, is an excellent example of that. So that's the competitive landscape we navigate. It moves fast, so we will continue to have that in focus.

Harshita, I'll just add a couple of thoughts to what Michael said, I'll address your question surrounding the financials of services compared to our overall business. One, even adding to what Michael said, if you think about how the world is going more digital, there will likely be an increase in fraud-related incidents resulting from a more digitally-focused world. There are substantial structural tailwinds that we feel good about. As long as we can continue to grow our portfolio to ride these structural tailwinds, that helps us think there is plenty of runway in services. The second point, as Michael mentioned, is the power of data. This is one of the critical ingredients that makes us successful across both Cyber and Intelligence, as well as Data and Services. There are others, too, such as technology capabilities, AI functionalities, and seamless delivery to our clients, all of which, when you assess our network, allow us to do that in a very effective manner, which drives the growth we've experienced. On your question regarding financials, there are a range of what I call incremental costs that arise depending on the nature of the service delivered. Solutions more aligned with the payment network, such as our Cyber and Intelligence solutions and some Data solutions, typically incur lower incremental costs. On the other hand, our consulting abilities and service capabilities tend to have slightly higher incremental costs. The overall mix is very important because they are all interlinked. It's vital for us to offer consulting services and marketing services to act as a full-service provider for our clients. This also impacts how we win market share in payments.

We'll go next to David Togut at Evercore ISI.

Thank you. Good morning. Last summer, London Heathrow Airport put severe capacity limits on airlines. Those limits came off a while back, but I'm curious whether you're getting any indication on advanced cross-border summer travel as things opened up a bit more at Heathrow, and how can we think about the impact on cross-border revenue for the rest of this year?

Sure, David. What I'd say is that you hear what we hear related to airlines' plans from a capacity release perspective. The reality is that I think everybody is trying to find that right balance between increasing capacity and what the implications will be on pricing. We feel good about the prospects of travel. The reality is there's a trend to spend more on experiences, and experiences tend to be related to travel and entertainment. Thus, the trend is going in the right direction. As more capacity comes online, which we expect will occur, there will likely be benefits from that in our cross-border travel metrics. Again, I'd remind you of the strong value proposition that will impact our year-over-year comparisons and the lapping impacts we discussed. Also, the potential for recovery in Asia Pacific will play a crucial role in our entire outlook.

So it's hard to predict. The fact is that capacity isn't fully back. So that's one important aspect as we provided updates to our outlook.

Understood. And just as a quick follow-up on Europe. Just your updated thoughts on the rollout of ACH payments in Europe under open banking would be appreciated.

Right, David. Conversations in Europe have been going on for years regarding ACH systems. As you know, when the U.K. was part of the EU, I don’t even know if its position exists now; however, we invested in Vocalink. Thus, we have a counter account system in Europe for a long time. We have interests in several P2P systems on the continent as well. The most recent development here is the announcement around the European payment initiative, which is yet another effort in account-to-account payments. Europe consists of a multitude of domestic systems and payment solutions, showcasing versatile competitive dynamics. We have found ways to partner effectively. We're prepared to compete, and in the case of EPI, we are collaborating with the owning banks to push our solutions. Concurrently, we’re willing to adapt depending on how EPI develops. As observed earlier, Europe has continued to serve as a source of share and revenue growth for us, so we know how to navigate this environment.

We'll go next to Ramsey El-Assal at Barclays.

Hi, thanks for taking my questions. And best of luck to Warren in his future endeavors. My question is for Sachin. You called out tax refunds a couple of times, and their impact on U.S. volumes more recently. Should we think about that as normalizing into Q2? Does it flip to more of a tailwind? And then, secondarily, how do you see the spread, which is pretty wide between U.S. and worldwide metrics trending this year, excluding Russia? Will it stay pretty wide? Will it tighten as maybe tax refunds normalize? How are you looking at it?

Yes, look, the data we review relative to tax refunds comes primarily from the IRS website, so you can take that for what it's worth. What we've seen historically is that tax refunds tend to happen mostly around March and going into April. So we view this impact of lower tax refunds to be relatively transitory. I say this because as the year progresses, even if there are lower tax refunds, the consequences would be minimal, as the majority of refunds happen in the period we're discussing. So that's why we view them as being transitory. Additionally, due to some states receiving latitude in filing deadlines, there's a possibility for catch-up related to some of these lower tax-free funds. Again, predicting is tricky, but I wanted to highlight those two aspects. On your second question regarding the comparison between U.S. trends and the rest of the world, I’d say I feel positive about the metrics we see overall. These metrics reflect a compelling growth rate. In the U.S., 15% credit growth is being driven largely by consumers' desire to engage in experiences. Our co-branded portfolios and travel-related portfolios are performing notably well. As the year unfolds, we can expect the influence of market share on certain players to diminish due to the lapping stage. So keep that point in mind regarding how the gap between the U.S. and the rest of the world plays out as we progress through the year.

We'll go next to Andrew Jeffrey at Truist Securities.

Hi, good morning. Appreciate you taking the questions. Michael, I'd like to ask you about the India opportunity and specifically the potential inclusion of Mastercard credit products and UPI. I just wonder if you could frame that up. So much talk about rest of world growth in cash-based economies and especially those where account-funded wallets have moved to the forefront. Can you just provide an update on your positioning in India?

Right, India is a hugely important market for us. We have a large number of employees based in India, serving the Indian market as well as other markets in Asia and deep engagements with customers. When you look at the market, considering its growth under the guidance of the Indian government, they have built an impressive digital economy overall. The India tech stack has dramatically opened up the digital economy at a much different scale than before, which is advantageous for us to engage with our customers and many more citizens. We generally see this as a wonderful opportunity. It's also true that, in our stance, everyday solutions around debit and credit are important. We've returned to pre-embargo growth with our customers in India, which is very positive. We’re conducting both sorts of opportunities, with innovation coming from our staff based there. So there is a chance for financial inclusion, a chance for our everyday offerings, and it’s going to be a critical market for the future. We're excited to be involved. As for engagement with the India tech stack, what this means for our cards and how they will link to UPI is yet to be finalized, but we are active in these discussions. I think we have time for one more caller.

And we'll take that from Jason Kupferberg at Bank of America.

Thanks, guys. Maybe just building on that last question a little bit. You just talked about India to some extent. But which emerging geographies are you most excited about over, say, the next five years or so, just in terms of the general cash-to-card opportunity?

Right, Jason. Here, the opportunity, I wouldn't really point to particular geography; instead, I think generally, the set of countries with lower digitization rates presents a tremendous opportunity for us. We have learned how to push digitization effectively. Just look at Latin America—take a country like Mexico—as it presents a significant opportunity for us to drive digitization. Brazil reflects this trend as well. When you aggregate these metrics across the landscape, there are tremendous prospects. In terms of large-scale country opportunities, we just outlined India and, although not in the emerging markets category, China is a market significantly engaged right now, especially for cross-border business. You do know that we have a license application out there to participate in the domestic market, and we stand ready to invest further in Chinese consumers and businesses. We’ll see where that one leads us.

Thanks, Michael. Any final comments?

I do have final comments. I made it a habit to thank the 30,000 people at Mastercard for all they do. And I shall do it once again for this quarter. I thought it was a good quarter, reflective of their hard work. But I want to thank you as well, Warren. It’s been a fun three years for me and previously with Ajay. So thank you for everything that you did. I know we all appreciate it. I also want to acknowledge Devon; Sachin and I are looking forward to working with you. Warren has built tremendous relationships with the folks on the call. I want to thank them for their support and encourage them to extend the same to Devon. Thank you very much, and we will talk with you again next quarter.

And that does conclude today's conference. Again, thank you for your participation. You may now disconnect.