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 Incorporated Q1 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. Please only press star 1 once to queue up for a question, as pressing star 1 multiple times may affect your position in the queue. If you would like to withdraw your question, press star 1 again. Thank you. Mr. Devon Kaur, 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 2025 earnings call. With me today are Michael Meebok, 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. It is only then that the queue will open for questions. You can access our earnings release, supplemental performance data, and the slide deck that accompanied 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 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 Miba.

Thank you, Devin. Good morning, everyone. Before I dive into the specifics from the quarter, a few themes stand out for me. First, we delivered a fantastic first quarter. Net revenues were up 17% and adjusted net income up 13% versus a year ago. as always on a non-GAAP currency neutral basis. Second, we are successfully executing against a significant secular opportunity in payments. It's a core part of our growth algorithm and an opportunity in any economic environment. Third, we are at the forefront of digital transformation, delivering a diverse set of solutions that address the evolving needs of our customers, capabilities that make payments simple, smart, and more secure, and services that go beyond our rails and beyond payments now let's get into the details we're operating in an uncertain environment consumer and business sentiment has weakened primarily due to concerns surrounding the impact from tariffs and geopolitical tensions on the other hand so far this year the fundamentals that support consumer spending have been solid and our drivers are generally stable no matter what it remains clear that we have intentionally embedded resiliency we have a well diversified business both from a geographic and product perspective as well as across a wide range of discretionary and non-discretionary span categories we closely manage our expenses and have levers to pull if needed and we remain focused on executing against our short medium and long-term objectives there's a substantial opportunity for us to drive sustainable growth across consumer payments, commercial new payment flows, and value-added services and solutions. That's what I will focus on today. Starting with consumer payments, our innovations including contactless capabilities and tokenization have become a foundation for payments in today's digital economy. Today 73% of all in-person switch transactions are contactless and approximately 35% of all our switch transactions are tokenized these technologies will continue to play an important role as we move forward into the next phase of digital commerce such as agentic ai we announced mastercard agent pay the leverage our agentic tokens as well as franchise rules fraud and cyber security solutions combined these will help partners like microsoft facilitate safe frictionless and programmable transactions across ai platforms we will also work with companies like OpenAI to deliver smarter, more secure, and more personalized agentic payments. The launch of AgentPay is an important step in redefining commerce in the AI era. We're thrilled with these collaborations as we work together to scale and build trust in agentic commerce. We also continue to advance crypto payments with an end-to-end approach. Collaborating with cryptocurrency platforms to allow consumers to spend their cryptocurrencies, including stablecoins, at more than 150 million MasterCard acceptance locations worldwide. Kraken, OKEx, and Bleep are among our newest card issuance partners, helping to connect the crypto economy to everyday spending. And behind the scenes, we have enabled stablecoin settlement on the MasterCard network itself. We're working with fintech acquire a new way to enable the option to settle payments in stablecoins for their merchants. And we help make these payments secure with CryptoSecure, now actively monitoring risks for hundreds of issuers globally. This is in addition to our work on blockchain technology to unlock faster and more transparent cross-border B2B payments with our multi-token network, which we discussed last quarter. Our consumer payment technologies also enable us to further capture the significant secular opportunity and expand into new markets. China, for example. As we approach the one-year anniversary of the first locally switched transaction, we launched domestic on-soil tokenization capabilities. These were developed through our joint venture to make online transactions more safe and secure. Additionally, we're working to scale commercial as well as consumer payments. Over the last year, we have launched 10 new small business programs. We also continue to win and renew partnerships around the globe to drive growth in consumer payments. CIMB Nyaga, Indonesia's second largest private bank, has chosen to transition their international branded consumer card portfolio to MasterCard. We have embarked on this long-term partnership to help enhance customer acquisition and experiences through analytics and technology. We're also expanding our partnership with one of the leading regional financial groups in Latin America, Grupo Pro America, across eight countries. In addition to incremental card issuance, they will utilize our consulting and data analytic capabilities to drive growth. Such strategic partnerships also play an important role unlocking cash and new consumers. There's tremendous secular opportunity in Africa. One way we unlock it is by partnering with the mobile network operators across the continent. For example, we're partnering with MTN Mobile Money in Uganda to give their subscribers the option to pay using card credentials without the need for a physical card or a bank account. And in the UAE we're partnering with Al Etihad Payments to launch co-batch debit and prepaid cards with the domestic scheme Jawan. This gives us access to a new set of consumers and flows in this large high growth market. Travel remains an important vertical and one where we are seeing continued success. Our acceptance footprint and robust service offerings are key to capturing this category of spend this quarter we launched a new debit co-brand card with win them rewards and we renewed our credit co-brand partnership with spirit airlines with an additional agreement to launch a new debit program with them in the future putting it all together we are partnering in creative ways to win share and capture the secular shift our decades-long innovation and payments has placed us at the forefront of today's digital commerce and now we're positioned to lead tomorrow's advancements such as agentic ai in crypto as i mentioned earlier commercial new payment flows represent another large addressable market opportunity this quarter we launched two commercial point of sale solutions each combine our product capabilities in a modular way to meet the specific needs of varied businesses our business builder product combines commercial cards and tools to help entrepreneurial clients launch and scale their ventures b1 bank will be among the first issuers to offer the program we develop mid-market accelerator to address the critical needs of the largest and fastest growing commercial segment mid-market it combines our digital payment technology rewards and security solutions with custom selected features like cash flow and expense management tools we're working with citizens to bring this to market in the united states with plans to scale globally beyond commercial point of sale solutions we are working to unlock the substantial invoice payment opportunity by enhancing our capabilities. We entered into a new partnership with CorPay to enhance our current corporate cross-border payment solutions with industry-leading currency risk management and integrated large ticket capabilities. This will give our financial institution partners a simple connection to a comprehensive suite of cross-border payment offerings regardless of ticket size and geography. fee. At the same time, the partnership expands the distribution reach of MasterCard Move. And this goes to a broader set of small and mid-sized businesses, including the existing CorePay customers. Finally, we extended our agreement for CorePay to exclusively offer MasterCard virtual card programs to its customers. We're extending our leadership in virtual cards by making it easier for businesses to access and deploy. We launched B2B Rate Manager to equip MasterCard virtual card issuers with a faster and more scalable way to implement and use flexible interchange rates. We're also streamlining the onboarding process for issuers to deliver embedded virtual card technology into partner platforms that end corporates use every day, such as HRS and Cvent. To further scale, we continue to embed our virtual card technology into widely used platforms. ERP software company Odoo, in collaboration with Stripe, will exclusively issue MasterCard corporate cards integrated into Odoo's expand module available for their users in more than 20 countries. We're also seeing strong demand for our MasterCard move capabilities with transaction growth up more than 35% year over year this quarter. This solution has extensive reach and broad applicability to meet the ever-growing needs of customers and businesses. Let's look at some of the most interesting use cases here. In the person-to-person space, we now facilitate domestic transfers by simply tapping your phone, partnering with Samsung to power their new wallet P2P offering. And we support near real-time person-to-person cross-border remittances, adding partners like MoneyGram, Instapay Technologies, and Curfex this quarter. MasterCard Move also enables disbursements like gig economy wage payouts to offer more flexibility and speed to businesses and individuals. Checkout.com is using MasterCard Move to help enable disbursement and payment use cases for the gig economy as well as for insurance and healthcare merchants. And our technology can also speed up purchase return payments within minutes rather than days or weeks, which is clearly something we can all benefit from. WorkPay is now using this with multiple UK merchants to deliver faster refunds. Across commercial point of sale, invoice payments and MasterCard move, we are expanding across use cases while making it easier and more attractive to use our solutions. The third pillar of our strategy is services and solutions. We've made targeted investments and diversified solutions in high growth areas. As we said at the investor day last year, approximately 85 percent of our value-added services and solutions revenues are recurring in nature, providing a stable baseline for growth. And we are well positioned for future growth as we continue to scale by further penetrating existing customers and targeting new buying centers and new services. We are leveraging one-to-many distribution with global technology partners who can embed our services as part of their value proposition. Galileo will enable ethical alerts for most of their card portfolios and integrate our open banking powered capabilities onto their platform. Global cyber security company Viking Cloud will distribute our risk scoring and cyber security remediation capabilities to further enable their small business clients to protect against cyber crime and financial crime prevention company fitzay is extending their use of mastercard's consumer fraud risk solution it's already live in the uk with 14 major banks and this partnership streamlines our ability to scale account to account fraud solutions to new markets globally to further penetrate existing customers we bring differentiated solutions that drive impact throughout their value chain this can be across consumer onboarding activation and usage all the while making payments safe and secure our services help balance a positive frictionless consumer onboarding experience with ensuring consumers are who they say they are Tangerine Bank in Canada is using our account opening identity solutions to do just that and bringing our identity the attributes and open banking solutions together, we have helped Experianz enhance their digital checking account offerings within Experianz Smart Money. Once those customers are onboarded, our assets can support their ongoing engagement and loyalty, resulting in improved customer satisfaction. For example, we help power Sam's Club's loyalty rewards program. And we're working with first Abu Dhabi bank to develop an AI-powered concierge integrated into the bank's MasterCard offers platform. This innovative solution will help customers discover and access card offers and benefits in a contextual manner. Additionally, our business and market insight services help our customers with portfolio optimization. We've combined our consulting expertise analytics insights to help customers like Intesa Sao Paulo to optimize the program performance. We also provide tools to protect our customers and the ecosystem more broadly. Last year, we enhanced our AI-powered decision intelligence to supercharge our fraud scoring and detection rates, and it's working, detecting more than 40% more fraud versus quarter one last year. On a cybersecurity front, Recorded Future just unveiled Malware Intelligence. It's a new capability enabling proactive threat prevention for any business using real-time AI-powered intelligent insights. These are just two examples how we deploy AI. Taking a step back, AI is deeply ingrained in our business. We have access to an enormous amount of data and this uniquely positions us to enhance our AI's performance, resulting in greater accuracy and reliability. And we're deploying AI to enable many solutions in market today. In fact, in 2024, AI enabled approximately one in three of our products within value-added services and solutions. Simply put, our services are focused on areas that truly matter to our customers, both in payments and beyond, and we're intentionally investing in areas like AR-powered threat intelligence that are rife with opportunities for growth. Today I've shared numerous wins, new partnerships, and new product innovations. The execution is evident and our momentum continues. So I want to wrap up with some key takeaways for you. We delivered another quarter of very strong results. We're monitoring the macro environment and prepare to adjust as needed. We have a broad set of solutions that drive value for our customers. We have a strong, resilient, and diversified business model. And most importantly, we are focused on delivering our strategy and growth for the long term. Sachin, over to you.

Thanks, Michael. Turning to page three, 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. Net revenue was up 17 percent reflecting continued growth in our payment network and our value-added services and solutions. Acquisitions contributed one PPT to this growth. Operating expenses increased 14 percent including a four 4PPT increase from acquisitions, and operating income was up 19%, which includes a 1PPT headwind from acquisitions. Net income in EPS increased 13% and 16% respectively, driven primarily by the strong operating income growth, partially offset by a higher effective tax rate due to the impact of the global minimum tax rules commencing in the current period. EPS was $3.73, which includes an $0.08 contribution from share repurchases. During the quarter, we repurchased $2.5 billion worth of stock and an additional $884 million through April 28, 2025. Now, turning to page four, let's first look at some of our key volume drivers for the first quarter on a local currency basis. Worldwide gross dollar volume, or GDV, increased by 9% year-over-year. In the U.S., GDV increased by 7 percent with credit growth of 6 percent and debit growth of 8 percent. This growth was impacted by the lapping of the Citizens Debit Portfolio migration to MasterCard, which commenced in Q1 2024. Outside of the U.S., volume increased 10 percent with credit growth of 9 percent and debit growth of 12 percent. Overall, cross-border volume increased 15% globally for the quarter in line with expectations and reflecting continued growth in both travel and non-travel related cross-border spending. Turning now to page 5, let's talk about switch transactions which grew 9% year-over-year in Q1. Both card-present and card-not-present growth rates remained strong. Card-present growth was aided in part by an increase in contactless penetration as contactless now represents approximately 73% of all in-person switched purchase transactions. In addition, card growth was 6%. Globally, there are 3.5 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 net revenue increased 16%, primarily driven by domestic and cross-border transaction and volume growth. It also includes growth in rebates and incentives. Value-added services and solutions net revenue increased 18%, this includes a four percentage point increase from acquisitions. The remaining 15% increase was driven primarily by the scaling of our security and digital and authentication solutions, as well as demand for our consumer acquisition engagement services, It was also driven by growth in our underlying drivers and pricing. 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 12% while worldwide GDP grew 9%. The 2PPT difference is primarily driven by mix and pricing. Cross-border assessments increased 18%, while cross-border volumes increased 15%. The 3PPT difference is primarily driven by pricing in international markets. Transaction processing assessments were up 17%, while switch transactions grew 9%. The 7PPT difference is primarily due to revenue related to FX volatility, favorable cross-border mix and pricing. Other network assessments were $231 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 14%, which includes a 4PPT impact from acquisitions. This growth was primarily driven by increased spending to support the continued execution of our strategic initiatives. Total adjusted operating expenses were lower than expected this quarter, primarily due to the cadence of expenses between the first quarter and the remainder of the year. Turning now to page nine, let me comment on the operating metric trends for the first quarter and the first four weeks of April. Starting with Q1, we saw healthy consumer and business spending. Our operating metrics remain generally stable after adjusting for the following three items. First, the leap year in Q1 2024, which reduced Q1 2025 growth by over 1 PPT across switch volumes, switch transactions, and cross-border volumes. Second, the timing of Easter and other holidays. Easter occurred in April this year as compared to the end of Q1 in 2024. And finally, as it relates to cross-border travel, we saw a pull forward of spend into Q4 2024 from Q1 2025, as we mentioned on our last earnings call. Now, turning to the first four weeks of April, sequentially, switched volumes, switched transactions, and cross-border volumes also remain generally stable after adjusting for the points I just mentioned. Let me double-click on cross-border for a minute. Cross-border travel growth broadly remains strong, but we are seeing some moderation in select markets in the Middle East and Africa as they come off recent periods of extremely high growth. Cross-border card not present X travel growth continued to be very strong. Summing it up, total cross-border continued to grow at a healthy clip with 16% growth year-to-date through April 28th on a local currency basis. Turning now to page 10, I wanted to share our thoughts for the remainder of the year. The headline is that our business remains strong and consumer spending remains healthy. On the macroeconomic front, the fundamentals that support consumer and business spending have been solid to date. Specifically, unemployment rates remain low and for the most part, wage growth continues to outpace the rate of inflation. At the same time, increased economic and geopolitical uncertainty has weakened sentiment and creates risks. But remember, our business is diversified. And that is true across products and services, discretionary and non-discretionary spend categories, domestic and cross-border spend, and countries and corridors. For example, when looking at cross-border corridor pairs, meaning the inbound and outbound flows between two countries, no cross-border corridor pair represented more than 3% of our total cross-border volume in 2024. This diversification brings resilience as does our disciplined approach to capital allocation. We will continue to monitor the external environment and have expense levers to adjust if necessary. Now turning to our expectations for the full year 2025. Our base case assumes consumer spending remains healthy. We continue to expect net revenue to grow at the high end of a low double digits to low teens range on a currency-neutral basis excluding acquisitions. Acquisitions are expected to add 1 to 1.5 PPT to this growth rate for the year. Given recent currency fluctuations, we now estimate a minimal impact from foreign exchange. From an operating expense standpoint, we continue to expect growth to be at the low end of a low double digits range versus a year ago on a currency-neutral basis excluding acquisitions and special items. Acquisitions are forecasted to increase the OPEX growth rate for the year by approximately 5 ppt while we expect a minimal impact from foreign exchange. Now turning to the second quarter of 2025, year-over-year net revenue growth is expected to be at the low teens range on a currency neutral basis excluding acquisitions. Acquisitions are forecasted to have a 1 to 1.5 ppt impact to this growth rate while we expect a a minimal impact from foreign exchange for the quarter. From an operating expense standpoint, we expect Q2 growth to be at the low end of a low double digits range versus a year ago. Again, on a currency neutral basis, excluding acquisitions and special items. Acquisitions are forecasted to have a four to five PPT impact to this OpEx growth, while we expect a minimal impact from foreign exchange for the quarter. Other items to keep in mind. On other income and expenses in Q2, we expect an expense of approximately $135 million given the prevailing interest rates and debt levels. This excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics. This expense is higher than the first quarter, primarily due to three factors. First, Q1 benefited from a one-time interest income impact related to a tax matter. Second, Second, we expect interest income to decrease in the second quarter due to an expected lower average cash balance. And third, we expect incremental interest expense in Q2 related to our recent debt issuance. Finally, we expect our non-GAAP tax rate to be at the 20 to 20.5% range for both Q2 and the full year based on the current geographic mix of our business. As a reminder, the Q1 tax rate was lowered due to discrete tax benefits related to share-based payments in the first quarter. And with that, I will turn the call back over to Devin.

Thank you, Sachin. Thank you, Michael. Audra, you may now open the call for questions.

Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. Please only press star 1 once to queue up for a question, as pressing star 1 multiple times may affect your position in the queue. Your first question comes from Harshita Rawat at Bernstein.

Sachin, can you give us more color on the composition of a cross-border business? I know you said no cross-border corridor is more than 3% of volume. Is it fair to say that travel is about two-thirds e-com remainder? And within e-commerce, is the bulk of it e-retail? just trying to get a sense of like U.S. inbound overall on travel and e-com. Thank you.

Sure, Rashida. So just a little bit of color. One of the reasons why we wanted to kind of share that statistic, which I did, which was around the fact that no cross-border corridor pair is greater than 3% of total cross-border volume in 2024 was essentially to, you know, share with you that we have a very diversified portfolio. There is no over-dependence on any one corridor pair which actually is going to influence our numbers one way or the other. So that's kind of point number one. The second thing I'll mention to you is I think we had shared some statistics back a few years ago as it relates to what our mix of cross-border travel is. This was back I think it was during the COVID time frame where we had mentioned that God not present and God present cross-border was roughly half and a half, and one-third of the card not present was travel-related. So we've kind of given you some general sense on that, and you should assume with a business of our size that things generally tend not to move around big time over, you know, a course of a couple of years as it relates to the mix. So that's generally what we kind of shared with you there. As it relates to, you know, the card not present X travel component, you can see some really solid growth there. You can see that in the metrics that we've got here. And look, I mean, when COVID happened, COVID changed a lot of things, right? I mean, the world went more digital, merchants went more omni-channel, more people were shopping online. And this was true both in the domestic environment as well as in the cross-border environment. And you're kind of seeing that sustained growth come through even now. So net-net, what I tell you is I feel pretty good about how our portfolio is positioned. We continue to stay very focused in growing our portfolio, which is cross-border focused for all the right reasons. Not every portfolio is going to be ones we'll go after, but the ones we do go after, we see good promise for growth. And you're seeing that come through in the metrics, which we've shared with you.

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

Hi, William Blair these days, fortunately. Thanks for taking the question. I appreciate it. I wonder if I could dig in a little bit on the economics of your tokenized offerings. Michael, I think you said they're 35%, I guess, I'm assuming card not present transactions have token or now tokenized. Can you just speak to where you think that number can go and what that means economically for MasterCard over the next several years?

Right. So first of all, this is our approach around tokenization. It's very important technology, drives more security, makes a user experience. And we wanted to scale this. And And I gave you a stat earlier that 35% of our switch transactions are now tokenized. So initially, the strategy was put it out there and get a base level offering across the world. And we said, OK, let's start to build solutions on top of our tokenization platform. And we put in lifecycle management and the likes. And we started to price for that because that is additional value that we put out. And we've seen the benefit of three quarters of that pricing from our international market. So that is where we are today, and we're going to continue to monitor that. There's great demand in tokenization, and I gave you an update that even in China, we build a locally-based developed solution to drive the same kind of impact in China for us. You know, when you start to think about where we are going, as we were talking about agentic commerce, where, again, token technology is at the center of that, you can start to see there's a lot of value created, And you know how our pricing strategy is we always strive to recoup some of our investments and share in the value that we create for our customers. So that's the broad direction.

We'll go next to Tianjin Wong at J.P. Morgan.

Hey, good morning, Michael, Sachin, and Devin. I want great results, of course, especially on the growth side. I just want to dig into the operating expenses and the cadence there. Sachin, I think you said slow start to some spending. I just want to understand the cadence a little bit more and what's discretionary versus non-discretionary growth versus maintenance. And I think there's some one-timers for recorded feature integration. So I just want to better understand that, given it's running double digits overall.

So on OPEX, like I mentioned, operating expense in the first quarter came in slightly lower than what we had originally anticipated, primarily due to the cadence point which you were mentioning out here, which is specifically as it relates to there are several areas in which we were expecting to actually incur expense in the first quarter. For example, in A&M, A&M being advertising and marketing, which I know you know, was expected to be higher. It came in slightly lower. Again, it's not because we're not going to do the spend. It's just a question of timing based on when sponsorships take place, when we have to activate around those sponsorships, when we do the media around those sponsorships. So that's kind of one area. But in addition to that, right, we do expect from a cadence standpoint that as the year continues, that you will see, particularly in the second half, an increase in operating expenses which will take place because we do have plans to make investments. And there are several areas which we will make investments on, such as, you know, investing in the great secular opportunity that Michael was talking about, right? I mean, we've got this opportunity in front of us. We believe it's there in several markets across the globe. We do plan to invest in frontline resources to actually tap into that opportunity, and that would be one area. The second area I would tell you is around hardening of infrastructure, right? This is something as a payment network which is really important. It's important that we continue to invest in our infrastructure in order to deliver to our customers what our customers expect from us. So that will be another area where we focus from an expense standpoint. And finally, I'll mention that we continue to see good growth from a services standpoint, and we'll continue to invest in areas from a services standpoint, from a product development and capabilities perspective. So several areas. The cadence is, like you said, it was a little lower in the first quarter. We expect it to ramp up as we go through the remainder of the year. We've given you guidance on operating expenses for the second quarter, so I think you can back into what we expect in the second half based on what I've given you in full year of guidance and what you kind of now have visibility for the first half of the year. On your question on recorded future, again, we've shared with you what we think the impact of two acquisitions would be, which is recorded future and MENA. And recorded future being the larger of the two. And just as a reference point, at the last earnings call we had shared with you on these acquisitions that roughly two and a half percentage points of the growth we are talking about from acquisitions is run rate expenses. That is the expense to run the business. Approximately 1% relates to the amortization of intangibles, and the remaining relates to one-time integration costs and other expenses, which you have to incur more in a one-time nature standpoint. And nothing's changed from what we shared with you three months ago.

We'll move to our next question from Sanjay Shakhrani at KBW.

Michael, Sachin, this might be a question for both of you. I know you're seeing, we're just curious, if you just peel back the onion a little bit, Is there anything that you're seeing this quarter seem to?

Let me start off, and then Sachin always has plenty of detail to deep dive in. So overall, I mean, first of all, we have a very unique lens on consumer spending. This is across the world, so we have regional data to look at, and I'll give you some highlights around that. The second thing is, for us, we obviously look for trends and see what matters to consumers and some of the fundamental truths that we put out into our 2025 economic outlook that we issued through the MasterCard Economics Institute was that we expect the consumer to remain engaged, that we expect the consumer to appreciate experiences and spend experiences. And the one thing that's, you know, to be said about an engaged consumer, it also means it's a consumer that is leveraging all the tools that the digital economy offers to consumer in terms of finding what's the best deal, looking for the best deal. So it's not so much about spending up and down, but it's also the choices. I don't think we're connected. Audrey, can you hear us?

Yes, we can. Please continue.

Okay. We are connected. Very good. it. So the engaged consumer is using all the tools of the digital economy to make expense decisions and decide between discretionary and non-discretionary spending. So that's overall, none of this has changed. In our data, we don't really see significant up-fronting of spending, so that's not a trend that came through. That was a specific angle of your question. If I look across the board this isn't hasn't shown in any of the regions in the u.s we see generally stable spending europe a bit more of a challenging environment but also generally spending in asia if you look at another big region there you know china came a little bit ahead of what they said or they initially had projected on their economic growth and here we see tremendous spending coming through our data but it's really driven by share gain which is also something always to distinguish. So, overall, nothing particularly concerning at this point in time. The headline of our trends has generally remained stable is very much spot on.

Yeah, Sajid, I'll just add a couple of points here. You know, you kind of talked about the beat in Q1. So, a couple of things which I wanted to share with you. The beat in Q1 was primarily driven by two factors. One was higher levels of FX volatility and lower rebates and incentives than what our expectations were. And so, when I kind of think about that and I think about the implications for the full year. I perfectly will expect that rebates and incentives, because it's a timing issue as far as I'm concerned, will actually occur as the year goes along. We continue to remain very active in the markets. We're going to continue to do the deals we need to do as part of that process. And as you and I both know, the FX volatility is super hard to predict. So, you had the tailwind from FX volatility in Q1, and that's what we've got. Other point I'll mention to you is you asked about what is the impact in addition to what Michael just mentioned. You know, what we are seeing is inbound into the U.S. and in terms of cross-border travel, you are seeing some level of moderation take place there, no question about it. And this has been particularly true in the latter half of Q1 and going into the first four weeks of April. That being said, what you are seeing is what is not coming into the U.S. is going into other regions. So this is where the beauty of the diversified business model comes into play. So you are seeing, actually, better trends in terms of cross-border, for example, in Europe, for example, in the Middle East and Africa, Asia Pacific. And so, again, that's why when you look at the numbers in the macro, it shows you stability, but there are puts and takes which take place as part of the process. And as I mentioned, right, our concentration to any one currency corridor there is less than 3% as it was in 2024. So I feel pretty good about the birthright nature of the business. You know, time will tell where, you know, the world takes us. I mean, obviously, there's a level of uncertainty and risk which is out there, which we stand ready to actually not only monitor but act on as appropriate.

So we will monitor the terrorist side of the equation, but we will continue to monitor job creation. We will monitor employment rates and we will monitor wage growth, which are on the other side of the coin. So that's the approach. Stay close and see where it goes and have the right solutions for our customers.

We'll move next to Adam Frisch at Evercore ISI.

Hey, guys. Good to be back with you. Two questions I had for you this morning. One, the potential impact of the Cap 1 Discover deal. Trying to quantify the potential. Let's just take the worst-case scenario to get that off the table. If their debit portfolio were to leave you guys, how should we think about that impact to your financials? And then the second question, and that was the worst-case scenario. And then the second question is, how does China factor into being a contributor to your revenue projections in the near term? Is that still relatively small and not a major source, or is it growing in importance in your future near-term projections?

Hey, Adam. Welcome back. So on your question around CAP1 and Discover, look, I mean, like I mentioned in the last earnings call, right, The guide we've given you as it relates to our full-year numbers contemplates our best estimate of what we think the impact of that transaction will be. I think Capital One has been fairly clear about their desire to migrate the debit portfolio over to the Discover Network. And, you know, that's very much contemplated in what we're thinking about in terms of our outlook for the year. Again, you know, there's a level of uncertainty associated with the timing. And the reason I say that is because the transaction's been approved, it still needs to, you know, go through a period of, you know, getting into activity to actually make stuff happen there. So we'll keep you updated if there's any meaningful change relative to our expectations as we built into our folio guide on the Capital One Discover transaction.

On your first answer just one point. So, you know, the relationship with Capital One has been a strong one for a number of years. we've grown together in the market but there are areas now in this setup where we'll continue to have a strong relationship you have both organizations talk about that at the same time there might be areas where we compete going forward but that is not unique you know we have many examples you know when you look in the acquiring space for example where we have great strategic partnerships on one hand and there will be certain aspects of our business where we compete so we continue to expect a strong relationship with Discover yeah Sorry, actually, it was Capital One.

And then on your question about China, look, I mean, I think we've shared previously what our exposure to China was as it relates to both inbound and outbound from a cross-border revenue standpoint. The lion's share of our revenue exposure to China is around cross-border. We do generate some amount of assessment revenue on our domestic volumes, which are there. So net-net, what I would tell you is the impact on revenues of the joint venture is still pretty small. I mean, it's still in ramp mode. It's still in invest mode, I would say, where we're investing in building out the programs Michael talked about and the acceptance infrastructure, so on and so forth. But then as it relates to the business we've always had as it relates to China around cross-border and on domestic, you know, it's been fairly small, again, going back to the diversification team we've been talking about. And, you know, we continue to do what we need to do in terms of driving that business. Just one data point I'd share with you. as it relates to cross-border, inbound and outbound from China, because this is something which people can attract, and we follow this closely as well, cross-border travel volume inbound into China is now north of 100 percent of pre-COVID levels, slightly north of 100 percent, and then outbound, the same metric, outbound from China is running in the mid-80s, close to approximately 85% of pre-COVID levels. So just in case you're interested in understanding what the recovery path might look like on a going-forward basis.

Now, finally, to add, we now have a full tool set there. I mentioned tokenization capabilities. Obviously, the force to participate in contactless and online transactions there. Now, earlier, there was a question about new external environment. We've obviously closely monitored U.S.-China relationships and all of this.

We'll move next to Trevor Williams at Jeffries.

Great. Thanks very much. I just wanted to follow up on the full year guide. Sachin, if you could talk to you directionally, at least, what you're building in for the rest of the year across switch volume and cross-border. You've talked about lapping citizens and how that's a dynamic to keep in mind. But if there's any other underlying deceleration assumed relative to the current run rates when we kind of normalize for the holiday timing in March and April. And then just any comment on kind of what you're assuming for FX volatility. Thanks very much. Sure, Patrick.

So, a few thoughts for you on that. One, as I mentioned in my prepared remarks, we continue to assume our base case is that, you know, there's a strong consumer which continues to persist, right? I mean, you know, that's what the fact and the data shows us so far, and, you know, while there's a level of uncertainty which we talked about, but that's what the current data is. So the base case is that the strength in consumer spending continues. In terms of items which are unique to this year as we kind of go through the year, it's one is the fact which you mentioned, which is the lapping of the wins we had last year, which is going to start to come through as the year progresses. You know, it started in Q1, it'll continue at a more accelerated pace in Q2, and then it'll go on for the quarters to come, just because that's kind of, that's the good news. It gives you one portfolio, is you've got the revenue associated with that, but it does actually take down growth rate on a year-over-year basis. The other thing which you'll see is the lapping of certain amounts of pricing which was put in place last year. So that'll also start to come through as the year progresses. And the last point I'd make is around, I mentioned earlier about R&I and about how we had lower R&I in the first quarter and that we expect for that to be something which will play out as the year progresses because we can view that more as timing than than anything else so that should be uh very much part of how you're thinking about you know what we factor into the guide and the last point i'd mention is around fx volatility um on fx volatility you will remember that last year in q4 there were pretty high levels of fx volatility so there's a tougher comp this year um i have no idea what fx volatility is going to look like we do our best estimate in terms of what we think will happen but again you know I am proven wrong every day by my team about where that is going to actually show up both to the upside and the downside so we do our best estimates around that we put that into you know our guide and again our guides a range right so that's why we give you a range and so you should actually think about it in that manner we'll go to our next question from Darren Peller at wolf research hey guys thanks can we just touch for a minute on pricing I know you talked about tough comps into the second half on pricing, given some moves you made last year around, I think it was cross-border into organization.

But when we think about the opportunities you have now into the second half, maybe just give us a sense of the level. Is it something that you see instituting new price opportunities that could be somewhat similar to what you did over the second half last year as the year progresses, even if it's not timed exactly? And then maybe just more holistically, what areas are you providing a value add that you think you can take more price from that you're most excited about on that front? maybe in the backdrop of what the competitive dynamics look like these days. Thanks again, guys.

All right, Darren. So pricing. The first thing to put out there is, you know, it's obviously a competitive market. And we generally price to market. More importantly, we price to the value that we provide. And I believe we provide value across the whole range of our offerings. That's on the payment solutions as well as on the value-added services and solutions range of products that we put out there. So we will all continuously look for ways to recoup some of the investments and price for the value we do. On the payment side, generally, the expectation should be as payments become more efficient and perform better, that that is an indicator of where the value is generated on the value added uh you know value added solutions and services um the approach really is to say let's say on safety and security what is the reduction in fraud that the customer can expect and those are some of the indicators that we use to actually when we sell these products to talk to our customers well here's the value you can expect and hence and the same is for the the customer engagement and insights tools, but again, we say you can engage your customer so much better. Therefore, the ROI on your marketing spend is going to be improved, and that is what we do. So to your question, Aaron, it's across the board. We will continue to look for those opportunities as a matter of course as we run our business. There is no specific spikes or events planned into our outlook on that.

We'll take our next question from Timothy Chiodu at UBS.

Great. Thank you. I want to talk a little bit about wins and migration in general as it relates to unit economics and some of the incentives timing, just because it's topical, given some of the lapping and conversions and whatnot. On the beginning of a contract, so we understand on the beginning end, there's sort of a fixed component of R&I that hits before the portfolio fully ramps. And then on the end of a contract, when something is about to be converted away or migrated away, like in the case of Capital one, we understand that sometimes the incentives can be either turned off or diminished during that time period. I was just hoping you could talk a little bit about the beginning and the end of those contracts in terms of incentives, the fix, the variable component, and add any context there.

Sure. So I think you got it right as it relates to, you know, when we get into a contract, and every contract is different, but when we get into a contract, we typically are incentivizing our customers to bring volume onto the system, right? That's kind of the starting point and that could be a combination of fixed incentives or variable incentives or both and more often than not it's both and there's rebates as well and rebates are you know just a component of when I say incentives just think about it as rebates and incentives in totality you know the way it works is the variable component varies with volume it's as simple as that right as volumes occur you pay the related rebates and incentives there are adjustments which take place to that because you have to make projections as to what you think your volume outlook is going to be, and you actually accrue your incentives on that basis. On the fixed component, the amortization of fixed incentives commences when programs launch. That's kind of when it starts, and they're typically straight-lined over the life of the contract, right? The second part of your question is, at the end of the contract, what happens? And the answer to that is, it depends on the customer, and it depends on the dialogue we're having with the customer. And the reason I bring that up is, you know, to the extent there's an opportunity, let's say there's a contract which is expiring, and we don't end up renewing it. But there are, let's say, three other opportunities which we could have with that customer. You might actually end up in a situation where you're having a negotiation around, we're not going to get what we had in the past, or we're only going to get a portion of what we had in the past, but we're going to get three other things as part of the deal. And so you actually will have a brand new negotiation, which will take into consideration not only the incentives you're going to pay on the new volume you get, but also leverage a portion of what might be coming off in the nature of, you know, incentives you don't have to pay on the contract which you send it. So I'll give you an example. back in, I think it was the middle of, sometime in 2014, 2015, right, when we started to migrate volume off of our network as it relates to Chase, you know, at that point in time, there was a period of time when we went back to rack rates. In other words, we weren't paying incentives on the volumes there, right? There have been other instances where we've lost portfolios on one side, but one other portfolios where you kind of leverage your dialogue with the customer to have the benefit of being able to have a continuity which is there. So you're not always going to see the ramp up take place in terms of going to rack rate. It also depends, by the way, on the timing, right? Depending on what level of readiness the customer has got from a migration standpoint. So the customer at the end of the contract needs, call it a year, year and a half, two years, right? You might have an opportunity to actually work with the customer to try and see if there are opportunities there as well to either win new portfolios and or potentially go to rack rate. So I know I'm not giving you the kind of answer you're looking for, which is giving an answer as to whether it's one or the other. It depends.

And, you know, when you look at our relationships, earlier I was referencing in my prepared remarks the term of strategic partnerships, and that's exactly how we look at it. It's not just a relationship. So, you know, if we grew with somebody in consumer payments, you know we have a real big focus on commercial new payment flows. And, you know, this is how we toggle that. it's a long-term view in all cases. And one other thing I would say is just remind everybody about the virtuous cycle of growth, more payment volume. It's always in focus for us. It's going to power more data, and more data allows us to drive more services. So that is the other lens that we take when we look at all of this.

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

Yeah, hi. Thanks for taking the questions. I wanted to ask, you know, as we look to help investors think about assets that can outperform in a slowing environment, you know, I wanted to ask you guys what you thought were the idiosyncratic pieces of your business that might allow you to perform better than peers or competitors as things slow. What are the unique assets you have that could perform better in a slow environment versus others?

Great question. And I want to anchor it on the nature of our highly diversified business. And that is an answer that I would have given you even if you had asked after growth areas in fast-growing environments and not only in slow-growing environments because the diversification helps us both ways, and I think that's important. Clearly, the economic picture isn't always even across the world. So we keep both of that in mind. Now, another important aspect about our business is, you know, having payments and having a secular trend where payments move from cash and checks into digital is an underlying powerful secular trend that continues. And in ups and downs, economic ups and downs, this will continue. In fact, if you look into the commercial space, more and more firms are right now going and pushing digitized payments, and particularly card payments, because they provide them more data, so they can use that data to better serve their customers, optimize their processes, or improve their working capital usage. So here's an underlying powerful trend that survives, you know, the up and down of the overall economic picture at any given moment. It's a medium to long term trend. And there's other such trends that we have very specifically targeted for our services solutions. Take cybersecurity. We're in a world where, you know, the fraudsters, the scammers, the fishers are using artificial intelligence as much as we do. and this is a constant battle and our customers are seeing that financial institutions seeing that governments are seeing that so if anything the rise of cybersecurity the need for cybersecurity measures has increased so powerful underlying trend and then last thing I should say is all of the pretty much all of our solutions do one thing for our customers they provide more data for them to run their business better and make better decisions now in a world of up and down cycles. You understand your customer better. You want to understand how you put possibly different solutions out there than you otherwise have. You want to understand how you perform against your competitor with even more rigor than before. And that is where we can help. That's another powerful trend. Cybersecurity, data insights, and the underlying secular opportunity. Those are in addition to the fact that we are across discretionary, non-discretionary spend, that we are across literally every part of the world makes us a very, very well-diversified business in challenging economic times, but also in fast-growing times.

We'll go next to Brian Keane at Deutsche Bank.

Yeah, good morning. You know, Sachin, I wanted to ask high level, you know, we were at net revenue growth of 16% in the fourth quarter, and we actually increased a point to 17% in the first quarter, despite, you know, a little bit of a volume slowdown. Part of that is due to leap here, as you said. But the net revenue growth maintains at that high level. And it looks like transaction processing yields in particular jumped a little bit higher. You know, how much can you help us explain, you know, despite volumes going down to make sure we understand the growth that was maintained or even upticked a point into the first quarter. And it doesn't sound like FX vol would be all of it. And then just thinking about going forward into the second quarter, if some of those benefits, volume to revenue and yields will continue.

Sure. So I think you kind of touched upon the answer to the question right there, which is, you know, the lift you saw in Q1 was driven by two factors. One is the FX volatility point, which you just raised. I mean, it was, you know, volatility levels were actually really high in the first quarter, and that certainly contributed. And then the second was the point I made earlier in the call around our rebates and incentives came in lower than expected in the first quarter, which we expect will happen later in the year, but that's what we kind of saw come through. The second part of your question as to, you know, and remember also that 17% number actually has the impact of acquisitions in there. So, you know, you have to actually do it like kind from Q4 to Q1. with and without acquisitions. Then as it relates to your question about, you know, Q1 versus Q2, the things to keep in mind out there are there is a ramp up of the lapping of, you know, various wins we had last year, which again I spoke about. There's lapping of pricing, which is taking place. And the reality is FX vols are really hard to predict, right? And I'll tell you in the early part of April, you know, you had decently high FX vols. We factored that into our thinking, which we've shared with you. And then they started to taper off. Now, I don't know if they're going to go up again or come down again. We put our best estimates together, and that's how we think about it.

It's time for one more question, Audra.

Thank you. And we'll take that question from Paul Golding at Macquarie.

Thanks so much. It seems based on the commentary that there's been added focus on crypto and enabling crypto tools, just wanted to ask how you're thinking about the economics of incorporating those crypto partnerships, if you're seeing acceleration there and how that may or may not be impacting your relationship with traditional issuers as stable coin has become a bigger part of the story here in the last couple of quarters. Thanks so much.

All right, so it's a very interesting space. You heard us talk about digital assets and blockchain-based technology for years. We've been investing, but it's also true that it hasn't been a tremendously big part of our business. We've seen the on-ramp and off-ramp part of facilitating investments into crypto assets and selling those investments for some time now. That was a fast-growing business. But the fundamental technology to put to work to optimize payments, for example, is something that's still relatively nascent. Stablecoins is also relatively nascent. Why is that? Because there isn't yet sufficient regulatory clarity. Now, in the United States, we know there's two bills that are being discussed around the space. In Europe, lawmaking is going on around the space, so we feel the ecosystem is ready. We have been engaging with partners in the financial institution side, to your question, to put out some pilots, particularly in the wholesale space. There is private sector initiatives on stable coins. And one thing that's for sure true is if you look at the role that we play today in the traditional card payment space is we establish safety and security standards, we provide interoperability. If you think about a world of stablecoins, you can start to see there's a natural role emerging yet again for somebody like us who can provide trusted interoperability solutions, safety and security standards, and a need for our services across, you know, identity questions, AML, KYC, you name it, across the board. So it's a space that's still emerging at this point in time. We mentioned our multi-token network. How will the economic model look like at this point in time? early to say. It has to settle. We have to see how it grows once we have the regulatory clarity. Personally, I'm quite excited about it. Payment innovation is something that the U.S. government has in focus, and many others do as well, and we're a trusted partner in that space. Any closing comments, Michael? The closing comment is I'm delighted that Sachin and I are together in one room in New York again. We haven't had that for a long time, so that's fantastic. And, of course, I do want to thank everybody at mastercard for all the hard work that you do to produce a strong such a strong quarter uh we're uh looking into the new year with optimism uh into the rest of the year with optimism we're going to push on and speak to you in a quarter from now thank you very much thank you very much thank you and this concludes today's conference call thank Thank you for your participation.

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