Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mastercard Inc. Q1 2024 Earnings Conference Call.

Thank you, Audra. Good morning, everyone, and thank you for joining us for our first quarter 2024 earnings call. With me today are Michael Miebach, our Chief Executive Officer; and Sachin Mehra, our Chief Financial Officer. Following comments from Michael and Sachin, the operator will announce your opportunity to get into the queue for the Q&A session. There is only then that the queue will 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 will now turn the call over to our Chief Executive Officer, Michael Miebach.

Thank you, Devin. Good morning, everyone. Our momentum continued this quarter as we once again delivered strong revenue and earnings growth. Quarter 1 net revenues were up 11% and adjusted net income was up 16% versus a year ago on a non-GAAP currency-neutral basis. These results were powered by healthy consumer spending and strong cross-border volume growth of 18% year-over-year on a local currency basis. We had new deal wins in every region, and we're driving growth by scaling our innovative technologies. That's why people choose Mastercard, a simple, seamless, and secure way to pay. With these strong results, we are reiterating our full year 2024 outlook for both net revenue and operating expense on a currency-neutral basis, excluding acquisitions and special items. On the macroeconomic front, the picture remains mixed. First, strong labor markets and solid wage growth remain in countries across the globe. This is supportive of healthy consumer spending. Second, inflation has been moderating with a path towards normalization of monetary policy in most countries, although persistent inflation in the United States could delay rate cuts. Third, geopolitical uncertainty remains in several countries. We are closely monitoring the strength of the dollar, commodity prices, and consumer balance sheet health. With both tailwinds and headwinds to economic growth, we remain positive about the growth outlook. With this backdrop, we are focused on our strategic priorities: consumer payments, new flows and services, and new networks. The recent realignment of our organizational structure will help our teams execute on these priorities faster to deliver more value to our partners and customers. In payments, our growth algorithm aims to capture the natural growth of economies, accelerate the shift to electronic payments, further penetrate new flows, grow market share, and optimize our customer portfolios. Starting with the shift to digital for person-to-merchant payments, this opportunity has been a critical component of our growth strategy. We are confident this will continue over the long term. Our acceptance network is a key competitive advantage, and we continue to expand globally while enhancing the user experience for digital transactions through our technologies. Our fast and secure Contactless technology has been instrumental in replacing cash, representing more than two-thirds of in-person purchase transactions, up from one-third before the pandemic. Our Tap on Phone capabilities allow merchants to accept digital card payments cost-effectively. We are now live in over 100 markets, with over 1.5 million active devices in Brazil alone. Apple continues to expand Tap to Pay on iPhone in markets like Brazil, where several fintechs have recently adopted the solution. As payments become more digital, consumers and merchants increasingly demand simpler and more secure payment experiences. Our tokens deliver a high level of security, improving clients' portfolio performance and supporting new payment methods. This differentiation creates a positive cycle—lower fraud, higher approval rates, and better consumer experiences lead to more transactions and volume for Mastercard, which in turn boosts our revenue and data. Tokenization grew over 50% year-over-year in the first quarter, with significant room for growth, as only about one in four transactions on the Mastercard network are currently tokenized. Further opportunities exist in traditional sectors where we can enhance checkout experiences and drive engagement, such as housing and health care. We are working with aggregators to enable digital rent payments and partnering with providers to grow acceptance in key markets like Germany. In the gaming sector, we are collaborating with Xsolla to improve payment experiences. The potential for increasing transactions on the Mastercard network is significant; we now switch approximately two-thirds of our total transactions globally, up from about 55% in 2018, with improvements seen in markets like Japan, Mexico, Colombia, and Chile. In the first quarter, we secured new deals and retained key partnerships across all regions. In Brazil, we solidified our position with Banco Bradesco, one of the largest banks in the market. We are progressing on previously announced debit wins in the United States, including the launch of the Fiserv Money Network card program. Our exclusive network partnership for the Citi-issued Dillard's co-brand strengthens our leadership position in retail co-brands. In Asia Pacific, Middle East, and Africa, we signed a 10-year exclusive partnership with First Abu Dhabi Bank, encompassing consumer and commercial issuance across multiple countries. We entered into a new co-brand agreement with Global Hotel Alliance across the EMEA region and signed a 10-year consumer credit issuance deal with Axis Bank in India. Additionally, we renewed our payments relationship with one of the largest banks in Europe, which includes comprehensive marketing, consulting, and loyalty solutions. Moving on to the new flows pillar of our growth strategy, we are executing to penetrate the addressable market in commercial payments, disbursements, and remittances. In commercial payments, we have secured key partnerships and made significant progress in converting card portfolios to the Mastercard network. This quarter, we won our first commercial credit issuance deal with SBI Card in India. We are also focusing on providing easy and secure payment experiences for our commercial clients through innovative solutions like our mobile virtual card app. In disbursements and remittances, we achieved over 40% growth in transactions, consolidating our offerings under Mastercard Move, which combines domestic and international money movement capabilities. Shifting to services and new networks, we are driving growth with a diverse set of solutions that help us differentiate our payments offerings. Our best-in-class fraud capabilities and data analytics are essential in expanding our customer base. We are innovating new solutions, such as smart subscriptions for managing digital services, and Scam Protect to enhance cybersecurity against internet scams. Overall, there is strong demand for our services and new networks across a diverse customer base. They continue to grow faster than our core business, and we are optimistic about the opportunities ahead. In summary, we have delivered another strong quarter of revenue and earnings growth, successfully executing our growth strategy. Our differentiated capabilities and focused strategy position us well to capitalize on the significant opportunities in front of us. Sachin, over to you.

Well, thank you, Michael. Turning to Page 3, which shows our financial performance for the first quarter on a currency-neutral basis, excluding where applicable, special items and the impact of gains and losses on our equity investments. In line with our outlook, net revenue was up 11%, reflecting continued growth in our payment network and value-added services and solutions. Operating expenses increased 9%, including a minimal impact from acquisitions. And operating income was up 12%, including a minimal impact from acquisitions. Net income and EPS increased 16% and 19%, respectively, both reflecting the strong operating income growth as well as a lower tax rate, primarily due to a change in geographic mix of earnings and discrete tax benefits related to share-based payments. EPS was $3.31, which includes a $0.07 contribution from share repurchases. During the quarter, we repurchased $2 billion worth of stock and an additional $815 million through April 26, 2024. Let's turn to Page 4, where I'll speak to the growth rates of some of our key drivers for the first quarter on a local currency basis. Worldwide gross dollar volume or GDV increased by 10% year-over-year. In the U.S., GDP increased by 6% with credit growth of 6% and debit growth of 6%. Outside of the U.S., volume increased 13% with credit growth of 12% and debit growth of 13%. Overall, cross-border volume increased 18% globally for the quarter, reflecting continued strong growth in both travel and non-travel related cross-border spending. Turning now to Page 5. Switched transactions grew 13% year-over-year in Q1. Both card-present and card-not-present growth rates remained strong. Card-present growth was aided in part by increases in contactless penetration as Contactless now represents approximately 67% of all in-person Switched Purchase Transactions. In addition, card growth was 8%. Globally, there are 3.4 billion Mastercard and Maestro-branded cards issued. Turning to Slide 6 for a look into our net revenue growth rates for the first quarter discussed on a currency-neutral basis. Payment network net revenue increased 8%, primarily driven by domestic and cross-border transaction and volume growth and also includes growth in rebates and incentives. Value-Added Services & Solutions net revenue increased 15% despite tougher comps in Q1 2023. This growth was primarily driven by strong growth in our underlying drivers and continued demand for our Consulting and Marketing Services, Loyalty Solutions and Fraud and Security capabilities. This was partially tempered by slower relative growth in our other solutions. Now let's turn to Page 7 to discuss key metrics related to the payment network. Again, all growth rates are described on a currency-neutral basis unless otherwise noted. Looking quickly at each key metric. Domestic Assessments were up 10%, while Worldwide GDV also grew 10%. Cross-border Assessments increased 22%, while Cross-Border volumes increased 18%. The 4 percentage point difference is primarily driven by favorable mix and pricing. Transaction Processing Assessments were up 12%, while Switched Transactions grew 13%. The 1 percentage point difference is primarily due to lower revenues related to FX volatility versus the prior year, partially offset by favorable mix. Other Network Assessments were $226 million this quarter. As a reminder, these assessments primarily relate to licensing, implementation and other franchise fees and may fluctuate from period to period. Moving on to Page 8. You can see that on a non-GAAP currency-neutral basis, excluding special items, total adjusted operating expenses increased 9%, which includes a minimal impact from acquisitions. The growth in operating expenses was primarily due to increased spending to support the continued execution of our strategic initiatives as well as an increase in indirect taxes as discussed on our Q4 earnings call. This was partially offset by the timing of advertising and marketing spend. Turning to Page 9, let me comment on the operating metric trends in the first quarter and through the first 4 weeks of April. As a reminder, our Q1 Switched metrics include the impact of the leap year in 2024, which added just over 1 percentage point of growth across each of Switched volumes, Switched Transactions and Cross-Border volumes. In addition, our Switched metrics in Q1 and in the first 4 weeks of April were impacted by the timing of Easter, which occurred at the end of Q1 this year as compared to in April in 2023. After removing the impact of those 2 items, our operating metric trends were generally stable for the quarter as well as when looking at the first 4 weeks of April. A few items to note. U.S. Switched volume and transaction growth benefited from the commencement of the conversion of the Citizens debit portfolio to Mastercard. Outside of the U.S., growth was negatively impacted primarily by the lapping of the conversion of the NatWest debit portfolio to Mastercard. Cross-border card-not-present, excluding travel continues to show strength and cross-border travel growth was impacted by tougher comps as we continue to lap the recovery of travel, particularly in Asia Pacific, which opened up later from COVID restrictions than the rest of the world. Turning to Page 10. I wanted to share our thoughts for the remainder of the year. Our business fundamentals remain strong and our diversified business model and momentum with customers position us well for the opportunities ahead. This is all underpinned by healthy consumer spending, the secular shift to digital forms of payment and strong demand across our value-added services and solutions offerings. As Michael said, there are a number of headwinds and tailwinds that we are monitoring, and we stand ready to manage investment levels as appropriate, while maintaining focus on the execution of our strategy. Overall, we remain positive about the growth outlook. As it relates to the full year 2024, our thoughts for net revenue and operating expenses remain unchanged on a currency-neutral basis, excluding acquisitions and special items. We expect net revenue to grow at the high end of a low double-digit range on a currency-neutral basis, excluding acquisitions. This reflects continued healthy consumer spending and higher value-added services and solutions growth in all quarters for the balance of the year as compared to Q1. Acquisitions are forecasted to have a minimal impact for the year. And foreign exchange is now expected to be a headwind of 1 to 2 percentage points for the year, primarily driven by the recent appreciation of the U.S. dollar. In terms of operating expenses, our expectations for the full year are to grow at the low end of a low double-digit range on a currency-neutral basis, excluding acquisitions and special items. Acquisitions are forecasted to have a minimal impact to this growth rate for the year, while we expect a 0 to 1 percentage point benefit from foreign exchange. Now turning to Q2 2024. Year-over-year net revenue growth is expected to be at the low double-digit range on a currency-neutral basis, excluding acquisitions. Acquisitions are forecasted to have a minimal impact to this growth rate, while we expect an approximately 2 percentage point headwind from foreign exchange for the quarter. From an operating expense standpoint, we expect Q2 operating expense growth to be at the low end of a low double-digit range versus a year ago, again, on a currency-neutral basis, excluding acquisitions and special items. Acquisitions are forecasted to add 0 to 1 percentage point to this OpEx growth and foreign exchange is expected to be a tailwind of approximately 1 percentage point for the quarter. Other items to keep in mind, on other income and expenses in Q2, we expect an expense of approximately $85 million. This expense is higher than what we had in Q1, driven by lower forecasted net average cash balances in Q2, primarily due to higher working capital requirements as well as the geographic mix of cash. This assumes prevailing interest rates and debt levels continue and excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics. Finally, we expect a non-GAAP tax rate of approximately 17% for both Q2 and on a full year basis, all based on the current geographic mix of our business. And with that, I will turn the call back over to Devin.

Thank you, you may open up the line for Q&A now.

And we'll take our first question from Sanjay Sakhrani at KBW.

Yes. Sachin, just a question on the guide. I mean, it seems like a lot of the guide lower on revenues is just FX, but I'm just confirming when we look at the volume and yield trends, those seem to be doing fairly well, if not slightly better than expectations. And you mentioned the conversion beginning, just trying to think through as we look ahead, it seems like those trends seem constructive. I just want to make sure that's the way you're looking at it.

Sanjay, I think you said it exactly right. First of all, just to be very clear, like I said, our guide for the full year on a currency-neutral basis, excluding acquisitions, is unchanged relative to what we shared at the last earnings call. what we're seeing, generally speaking, is healthy consumer spending. These trends are very much in line with what we expected when we put the guide out in the first place. So nothing unusual to report from an overall spending trend standpoint. Obviously, the U.S. dollar has appreciated quarter-over-quarter. What you're seeing is really our best reflection of what we think the impact of the strengthening U.S. dollar is going to be on our as-reported numbers, which is what we shared with you. That's the only real update. Our guide otherwise is very much unchanged. And as it relates to your question on conversions, the conversions which are taking place are very much things which we had contemplated in our original guide. So that's very much part and parcel of what we had contemplated. So business as usual; I want to be very clear, there's nothing that has really changed from a guide standpoint when you look at it on a currency-neutral basis, excluding acquisitions.

We'll move next to Craig Maurer at FT Partners.

Two questions. First, it looks in the April trends as if the most material slowdown was intra-Europe cross-border. Could you just confirm if that's the case and if that was really predominantly Easter like you suggested? Secondly, we should be coming up on the 6-month anniversary of your announcement of Chinese domestic market approval. When should we expect the first transaction to be processed? And have you been able to work out whether you'll be able to use existing issued cards in the domestic market after a workaround on the EMV code or will you have to reissue?

Craig, I'll take the first question. Your observation on intra-Europe is exactly right. What you're seeing in the first 4 weeks of April is exactly what you said. It's related to the timing of Easter. Easter has actually a more pronounced impact in intra-Europe, and that's why you're seeing a more exaggerated number out there. And then on your second question, as it relates to China, Michael is going to just take that right now.

So on China, we got the license in November, and we shared our excitement about that. So the excitement continues. The teams have been busy building out issuance relationships with our banking partners in China and building out the acceptance footprint. We're obviously not starting from zero here. We had a strong cross-border business. So we have relationships in place that give us a heads up. There was a timeline associated with the license, and we're expecting to go live with the first transactions to a very specific question here in the month of May. As far as using existing cards in China, I think the key question here behind that is: how can you use existing acceptance in China and start to generate volume. Our approach is through the partnership with the digital wallets to have cards put into the digital wallet so they can be used at the wide range of merchants in China. So I do want to say we are excited. At the same time, it's clear we're going to start processing transactions domestically; this is a medium- to long-term opportunity. In the short term, there's more work that we need to do to build out more acceptance and continue to get more card programs out, but we feel very encouraged about that. Our teams are very busy with that activity.

And Craig, I'll just add a couple of points as it relates to China. One, I think you might have seen in the press that the Chinese government is pushing hard to increase inbound cross-border travel by expanding acceptance of international cards. That's their way of making sure that they're encouraging tourism inbound into the country. And we're actively working on expanding our footprint there, just expanding on what Michael said. That's point number one, as it relates to how we're seeing China play out. The second point I'll make on China is it's kind of interesting when you think about a Mastercard card issued in China going forward; that will probably be one of the few networks which is most widely accepted across the globe, just by virtue of the fact that those cards are now going to be accepted in China, and they're already accepted across the globe, different from our competitors in many ways. So we like what we're doing in terms of pursuing our strategy down there. I just wanted to ensure I highlighted those two points as well.

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

Michael, how do you view the penetration rate of existing customers regarding value-added services? This aspect is crucial to our growth strategy; how do you assess the long-term potential for cross-selling these services to your customer base?

Ramsey, you are hitting on a really important point. Value-added services are a key differentiator for our payment solutions. The link is pretty clear: more volume, more data, and I talked about the whole growth algorithm earlier in the call. Now this doesn't just automatically happen; it requires really focused execution. To your point, we are at any point in time, very clear about what our cross-sell ratios are, what value we can offer to our customers, and who we have offered it to and who we haven't offered it to. I give you a stat earlier that mentioned that you have 2 to 3 times more services with our top 50 customers. So there is tremendous potential in that area. Our teams are very focused on that. Across the company, we have our existing relationship manager, sales force out there across the whole world, but we're also having a set of very specific, more hunter-oriented sales teams that drive very specific new products with deep value that we drive into separate selling centers within these customers. So it's a pretty broad approach. At any point in time, we see that data, and we drive that because, as you said, this is a near-term growth opportunity that we should leverage, and we will.

We'll go next to Harshita Rawat at Bernstein.

Michael, can you talk about the U.S. merchant class action settlement? I know this still needs to be approved by the courts, but how should we think about the implications from the changes proposed on surcharging for specific brands? And how do you think you'll stay down?

Right. Thanks, Harshita. So the first word I would say is relief. This has been long-standing, and we are happy that there was an agreement found with the merchant community as well as with Visa, and this is behind us. What this was about is the U.S. merchant rules class. What was focused on was the business rules that make up the Mastercard promise. The conversation was about how we can provide opportunities for merchants to manage their cost of acceptance on one hand, and at the same time, how do we keep the major promise of the Mastercard brand, which is that you can pay anywhere, and you will not be discriminated against with your payment. So that was the balancing act over the years, and an agreement was reached. Basically, what happens is we're going to have a mild reduction of interchange rates, number one, and we're providing more clarity and simplification around surcharging rules and discounting rules. At the same time, we retain the promise to honor all card rules out there. So that is what is on the table. We don't expect any dramatic impact on the business from the interchange changes. And for merchants, we'll see what choices they make on surcharging and discounting. We've seen in the past that surcharging is not always clear to consumers, and it's not always well-received, so we'll see what choices come forward. So broadly speaking, I don't expect a major impact on our business. In terms of financial impact, we have accounted for the legal fees associated with that. Otherwise, there is no direct impact on Mastercard. So overall, a very good outcome, and it proves one point: There is a lot of momentum and competition in the payments market, and yet again, another moving item agreed to by merchants, which is a good step forward for everybody.

We'll take our next question from Dan Dolev at Mizuho.

So rebates and incentives were a little bit higher than what we had expected in the first quarter. How should we think about the remainder of the year? And do we expect it to cool off a little bit?

So on rebates and incentives, very much in line with what I shared regarding our thoughts at the last earnings call, and they are indeed aligned with our expectations as how we ended up in the first quarter. As it relates to the second quarter, as we see it right now, we expect rebates and incentives as a percentage of our payment network assessments to be roughly similar to slightly down from what we saw in the first quarter. So to put it in perspective, we do these rebates and incentives to bring more volume onto our network. When we bring more volume onto our network, it gives us the opportunity to optimize those portfolios to grow them at a faster pace, helping us deliver more services, which aids in driving net revenue accretion from a yield standpoint. It's very much in line with our strategy, and that's what I've got in terms of thoughts for the second quarter.

Yes. It's a competitive marketplace. So we have to be competitive on the financial side. We clearly see the flywheel effect that Sachin just talked about between payments and services; more volume leads to more ability to sell our services. But it's also clear that we are very focused on which deals we want to win. So we don't want to win every deal, and we're very targeted here regarding whatever meets our financial criteria and our strategic focus in certain markets and verticals.

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

Maybe we just hit on some specific travel trends. I mean, and really more broadly, consumer trends. If you could just give us a little more on what you're seeing from a travel dynamics standpoint. It did decelerate a bit into April. And I know Easter timing was a factor, but it seems like it could be a little more than that. So is there anything you're seeing behavior-wise that's impacting that? Do you expect that to rebound? And then maybe just, Michael, if you can give us a sense of your view of where we are in the conversion to electronic payments for the consumer payment side. Any changes in patterns we're seeing in the U.S. growth rate in particular and then more broadly?

Sure. I'll take the first part of your question. As it relates to cross-border travel, what we are seeing is exactly what we said, which is the lower growth rate that you're seeing in the first 4 weeks of April is primarily driven by the timing of Easter. There's nothing unusual to call out. The only thing I will say is when you think about cross-border travel, you should think about it in the context of tougher comps, particularly regarding Asia, because Asia was late to come out of the restrictions of COVID. So last year, you saw a strong recovery in cross-border travel in Asia, which leads to tougher comps this year. But fundamentally, the value proposition is very sound. We've got great portfolios, and we continue to win portfolios that lean towards travel, cross-border travel leaning, and we're executing on this portfolio. So nothing unusual that I'm seeing; travel growth rates are very healthy, and they're actually running comparable to pre-COVID days—when adjusted for the timing of Easter and the comp impact.

Right, just a last comment on travel and tourism in general. Sachin earlier mentioned that the Chinese government is really focused on driving inbound tourism. I just came back from several trips to Indonesia, one of them, and you see yet another government that is driving inbound tourism. We see it in India, we see it in Spain, and so forth. In order to work with governments and how to actually do that, there's a whole practice around our public sector business to build out, using the data we have, to create pathways to aid the portfolios we have and create approaches with governments to promote their respective destinations. All this comes hand in hand with a much more holistic approach that we're now seeing around travel vis-a-vis competitors out there. On the conversion piece and the shift to digital payments, you asked specifically about the United States. I want to expand it a little bit broader. There is a tremendous secular opportunity from a geographic perspective. There remains opportunity left here in the United States, but if you look around the world, you see some other countries—G7 economies like Italy have 45% cash. So tremendous opportunity even in developed countries. I just mentioned Indonesia, where you have over 70% cash. So this is a country where the President has stated that by 2045, they will be the fourth-largest economy in the world with 280 million people. So there's a wide range of opportunity across developed and developing economies for us to push into. You heard us talk about changing behaviors post-COVID. People are ordering more takeout foods and doing more things online in general. This tends to be favorable for card transactions. Going into these verticals is important. We have provided several examples of takeout food. That's one transaction in the restaurant, but multiple transactions as you pay your platform, and the platform pays the restaurant, and so forth. Public transport is another example—here, we're talking about real scale around the globe. We're talking about multiple transactions as consumers tap into open-loop systems multiple times a day, and when they get out of the station, they use that same tapping behavior as they buy a coffee, and so forth. So there's tremendous transactional opportunity driven by shifts in consumer behavior. We are focused on each of these layers, as I mentioned earlier, and we have a lasting opportunity.

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

Just wanted to ask about value-added services. The outlook here; can you elaborate on the visibility for faster growth beyond the first quarter? I know comps are a significant part of it. Just curious about visibility beyond the comps. And then is there potential to catalyze growth in the other categories within value-added services?

Sure. Tien-Tsin, I'll take that. Our overall outlook and the demand we're seeing for our value-added services and solutions continue to be quite compelling and strong. We're actively driving and pushing harder across the various sectors, which we've talked about. As it relates to the thoughts I shared regarding growth rates for value-added services and solutions for the remaining quarters of the year, I indicated that the growth rates would be higher in each of the quarters compared to Q1. This is based on the nature of the pipeline and how we see things shaping up in terms of the cadence of delivering value-added services and solutions. We feel pretty good about the outlook there, which is why we're communicating our expectations for higher growth in comparison to Q1. The only other comment I'll make is a reminder that as we deliver these value-added services and solutions, we're generating revenue from them, but that's also driving compelling cases for us to accelerate our payments growth, right? So that's part and parcel of the strategy; it's all interconnected. Regarding your other question about growth in other solutions, we continue to focus on growing the other solutions, primarily comprised of our real-time infrastructure assets and bill payment assets. That inherently grows at a slower rate compared to what we have on our safety and security solutions, consulting and marketing, and loyalty solutions. These markets show a much larger total addressable market, and they grow at a faster pace, which we're executing against. The good news is that safety and security fees, as well as consulting and marketing and data analytics and insights, comprise the lion's share of our value-added services and solutions.

Back to the earlier point about existing customers and cross-sell. That's an opportunity we have laid out, and we drive into new customer segments. For example, in the area of personalization, our Dynamic Yield acquisitions dating back to 2020 have provided a lot of high-end retail and commerce brands with high engagement. Everybody is aiming to cut through the clutter, and a client like Saks Fifth Avenue is utilizing our personalization services. These are all opportunities for us to get into verticals where we weren't deeply embedded before. That's why we have high confidence in the demand for our services as we look ahead, and that's why we're saying we're expecting growth to be higher than the first quarter.

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

Are you seeing any change in competitive intensity in Europe, primarily for your payment network? Your primary competitor called out share gains from local payment networks in the quarter which has long been a source of growth for Mastercard. So, are you seeing either changing competitive intensity from your key competitor in Europe or any initiatives by local payment schemes to become more competitive themselves?

Europe represents an incredible growth opportunity for Mastercard. We've observed significant changes in debit operations in the U.K. and have achieved impressive success across the continent. Earlier, I mentioned the renewal of an important agreement, and we still have numerous substantial deals underway regarding conversion, particularly with UniCredit, which operates in 13 markets across Europe. We believe we are well positioned in this region. While local players and their initiatives remain a focus, we've consistently found ways to collaborate with them, as they offer compelling credit and debit solutions that can effectively compete. Moreover, the service partnerships we establish are crucial as traditional competitors are also targeting Europe. This region is too significant a growth opportunity for anyone to overlook. As I previously mentioned, we aim to develop these relationships into mutually beneficial partnerships. Ultimately, UniCredit chose to partner with us because we have demonstrated a stronger ability to meet their customer needs. Looking across Europe, I am quite optimistic. It remains a promising growth avenue, aligning with the larger trend of opportunity in the market. Europe has a great deal to contribute, and we are equipped with a comprehensive array of solutions to pursue.

Just one more point I'll add, David. We've had this long-standing focus on conversion of Maestro to Debit Mastercard, and that's very much the case in Europe as well. We're continuing to execute on that. I feel like that's going to be a natural tailwind as we keep executing on that capability. For example, in this quarter, we migrated or converted approximately 7 million consumers from Maestro to Debit Mastercard. That's a global number—not just a Europe number—but I just wanted to share that with you as another piece of how we're executing in Europe.

We'll move next to James Faucette at Morgan Stanley.

I'm wondering, you talked about strong cross-border and travel trends, etc. We've seen more indications of uneven consumer spending development in other parts of the economy generally. I'm wondering if you can call out whether it be in the U.S. or in other markets if there's anything discernible at your level in terms of consumer shifting, spending preferences or categories that are noteworthy, and if we should be aware of anything that could impact Mastercard?

Let me start off on this and then Sachin can comment further. You've seen the 18% growth, which is strong. There is a travel component to that, and there is an ex-travel component to that. Ex-travel continues to be particularly strong; it's cross-border e-commerce and similar trends. On the travel side, if you break that down, we talked about the trends. I want to lift it up a little bit to the broader angle of your question. What are the various things that consumers think about as they make spending decisions, and how do they make ends meet? Travel has been strong ever since COVID, particularly strong from a recovery perspective. People are seeking experiences, and that fundamental trend hasn't gone away. So it's not just a cyclical thing; this is a secular trend that we see. People are seeking services and experiences, with travel being at the top of the list. Now as you break this down into different countries, you will see different stages of inflation and different monetary policies affecting consumers in different ways. If you're seeing inflation in non-carded verticals, that could impact payment decisions or spending decisions in carded verticals and so forth. So it's not a uniform story around the world. That's why I come back to the fundamental trend: travel is winning, and people want to go out and make that trip. Hence, we remain pretty optimistic about that.

While we're on the topic of cross-border travel, I wanted to share where we see potential for recovery, particularly in Asia Pacific, which still has room to grow. China, for instance, had cross-border travel inbound and outbound stand at approximately 80% of pre-COVID levels in Q1. Thus, there remains medium- to long-term opportunity for recovery regarding travel from that area.

We'll take our next question from Tim Chiodo at UBS.

I want to talk a little about U.S. debit trends. You mentioned the Citizens Bank beginning—portfolio beginning to come through. But also on Reg II, more specifically, we've discussed it in the past as a small portion of your overall net revenue for U.S. online debit. And often, we talk about the risk or the threat to that small portion. However, could you also talk about the flip side of that—the opportunity for Mastercard to gain ground on the back of card for some of the Visa debit cards in the U.S.?

Tim, great point. We love to talk about debit. You saw the 6% growth rate—this is good. We're doing well, and the impact of the conversions is felt. As far as the routing and Reg II, this question has surfaced for a couple of calls now. I must say, we're seeing some impact, but it's not material. That gives us even more reason to look at the opportunity side of this, and we're fighting for the back of the card. Ultimately, it comes down to the routing mandates distorting the market. What's happening here is ignoring the fact that in the end, a merchant will make decisions based on the net economic outcome. The net economic outcome is not merely the cost of operating related to routing costs, but includes fraud costs, etc., the holistic package altogether. This is where we score well because of our superior proposition. In the last five years, we've invested $7 billion into Safety and Security Solutions, providing us a competitive edge. Therefore, I see opportunities, and our teams are actively communicating to merchants our net proposition.

Our next question comes from Bryan Bergin at TD Cowen.

I wanted to just ask about the change in the organizational structure. Are there any financial implications we should be aware of from that? Just how you're feeling about those early changes as you pursue the growth opportunities across the business?

Right. What we're doing here is you heard us talk about the growth algorithm and our strategic priorities. Ultimately, we're realigning our portfolio of activities, always recognizing that they're all interdependent—payments and services, all together making up our competitive advantage position. We aim to focus on core payments, new payment flows, and an integrated services set of offerings. This is part of this announcement. Additionally, we see tremendous opportunity on the AI side, particularly regarding generative AI, and we've created a central role for that. Four very seasoned leaders within the company have tremendous experience on these topics and they will take this mission on. The primary goal is to move faster and drive more value to our customers. In terms of financial impact, what I hope to see is that we deliver the growth potential we believe is out there. That is the impact we're looking for. There's not much else to say beyond that. I'm regularly talking to Craig, who is going to lead the services team, about our product roadmap moving forward and how we can drive more services growth.

Next, we'll move to Bryan Keane at Deutsche Bank.

Just want to ask about the continued positive yields you're seeing in cross-border. Your major peer isn't seeing the same kind of positive yield, and they talk about low currency volatility as part of the reason. You mentioned Sachin about pricing and mix, so can you help us understand how much is sustainable of those changes for yield in cross-border and the differences maybe between your closest peer?

Sure. First, I want to remind you that regarding the impact of FX volatility in our case, that shows up in transaction processing assessments, not in cross-border assessment. The drag associated with FX volatility shows up in transaction processing, not in our cross-border line. Second, you're correct about the yields; our portfolios continue to perform well. It goes back to what Michael mentioned previously: We want to win not every portfolio but the right portfolios. We have focused on winning the right portfolios for cross-border, and that has allowed us to see favorable mix and grow inter cross-border at a more rapid pace than intra-Europe cross-border. Also, you know that yields on inter cross-border side are higher than yields for intra cross-border and intra-Europe cross-border. That helps in terms of yield. Regarding your question on pricing, we've always priced for the value we deliver; when we provide value to our customers on the issuing or acquiring side, we price for it. We experienced a slight lift on the pricing side in the cross-border assessments line this quarter, and you will see that continue into the ensuing quarters as the year moves along.

We'll take our next question from Dave Koning at Baird.

Nice job. I guess advertising is my question. It was the lowest in a long time by quite a bit, too. I'm wondering if there's some correlation between how much you have to advertise, and even rebates that if you're giving back some dollars to your clients, you don't have to advertise quite as much? Is there a correlation there? And perhaps just why is it down so much?

Yes. The A&M spend typically reflects a cadence of the promotions we want to execute. Let me step back and address the reasoning behind our A&M spending. You could allocate it at the brand level, but you can also utilize it towards activation of sponsorships. Depending on when your sponsorship assets are in play, you want to do the activation around those sponsorship assets. That influences the cadence of how much we spend on A&M. You're correct that we saw lower A&M in the first quarter. I mentioned earlier how it is about the timing of A&M. What I alluded to is that as the year progresses, we plan to increase our spending on advertising and marketing. Regarding your second question about how marketing might toggle with rebates and incentives, there is an element of marketing we do give as rebates and incentives to drive portfolio spend. We closely collaborate with our issuing partners on that. Thus, it's across both marketing and rebates/incentives where we seek to optimize our strategy.

The last comment I want to make on this. We are a massive fintech, but we are not just a fintech. We have a huge consumer brand that is dynamic. It's a fast-moving brand; we are among the top ten brands on Brand Z, so investing in marketing is absolutely critical. This is not just a trade-off we make quarter-over-quarter; it fluctuates based on the timing of events. What drives these fluctuations depends on the timing of sponsorships, etc. We pride ourselves on our brand. I want to point out that for the fifth consecutive year, we have been the #1 Sonic brand in the world. So lots of initiatives are underway on the marketing side, and this is something we value significantly. Thank you all for an insightful call today, and I want to extend gratitude to our colleagues on this Labor Day. It makes even more sense to thank our 33,000 employees at Mastercard, and thank you to you and our shareholders for your ongoing support. Thank you very much. Speak to you next quarter. Bye-bye.

Thank you.

And this concludes today's conference call. Again, thank you for your participation. You may now disconnect.