Mastercard Incorporated

good morning my name is Heidi and I will be your conference operator today at this time I would like to welcome everyone to the MasterCard Q4 full year 2018 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 star then the number one on your telephone keypad If you would like to withdraw your question, press the pound key. Thank you. Warren Nishaw, Head of Investor Relations. You may begin your conference.

Thank you, Heidi. Good morning, everyone, and thank you for joining us for our fourth quarter 2018 earnings call. With me today are Ajay Banga, our President and Chief Executive Officer, and Martina Hunmejan, our Chief Financial Officer. Following comments from Ajay and Martina, 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 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 currency neutral basis and exclude special items unless otherwise noted. Both the release and the slide deck include reconciliations of non-GAAP measures to their GAAP equivalents. Please note that due to our decision to deconsolidate our Venezuelan entities starting at the beginning of 2018, we have been providing additional information regarding our switch transaction and card growth rates. The adjusted growth rates eliminate Venezuelan switch transactions and card counts from prior periods. In addition, starting this quarter, We are providing further adjusted growth rates for switch transactions and adjusted growth rates for cross-border volume to normalize for the effects of differing switching days between periods. These adjustments have been made to current and prior quarters. This information is being provided so that you can better understand the underlying growth rates of our operating metrics. Our comments on the call today will be on the basis of these adjusted growth rates. A couple of other comments. As many of you are aware, we recently announced an agreement on the terms of a recommended offer to buy Ertport. You'll not be at liberty to further comment on this potential transaction as it is regulated by the takeover panel in the UK. I would also like to announce that we are planning to hold our next investment community meeting on September 12th, 2019. It initially planned to hold this event in Q2, but have settled on a September date as a result of some scheduling issues. 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 by-links. A replay of this call will be posted on our website for 30 days. With that, I'll now turn the call over to our President and Chief Executive Officer, Rajay Vaka.

Thank you, Warren, and good morning, everybody. So we had a very strong end to the year, bringing 2018 to a record close. For the year, revenue was up 20%, EPS up 41%, and these are both on a currency-neutral basis and excluding special items. If you exclude the impact of accounting changes, acquisitions, and the $100 million contribution to what we are now referring to as the MasterCard Impact Fund, that affect year-over-year growth comparisons. So basically, apples to apples, our underlying net revenue growth was up 15%, and operating income was up 21%. These results essentially reflect broad-based growth across each of our regions, and I think are a clear reflection of our focus on execution. We continue to invest in the business for the long term. I believe that we are very well positioned to drive strong growth in the future, And Martina will describe this in much more detail when she lays out our new multi-year performance objectives. Turning to the macroeconomic environment, we continue to see solid overall growth and expect this to continue in 2019, although with some moderation. Having said this, like others, we're keeping a close eye on a number of items, increased trade tensions, rising interest rates, and other economic and political factors that could slow growth over the longer term. In the US, economic growth remains positive, with low unemployment and overall still healthy consumer confidence. Our spending pulse estimates for Q4 show retail sales remain strong, up 4.8% versus a year ago same period, ex-auto, ex-gas. In Europe, We continue to see moderate growth, with UK spending holding up reasonably well, again according to our spending pulse estimates, with year-over-year retail sales up 3.5% in Q4, ex-autogas and restaurants, despite the debate around Brexit. We have, however, seen some recent declines in consumer confidence in countries such as France, Spain and the Netherlands. In Latin America, we're watching to see how the economic and fiscal policies develop in both Brazil and Mexico now that the elections are behind us. We're seeing some positive consumer and business confidence indicators in Brazil in particular. We're monitoring a few potential headwinds in Asia, including trade negotiations and the talked about slowdown in the Chinese economy. As we don't participate domestically in China, This has a limited impact to us directly, but given the size of the Chinese economy, it does impact the global economic picture. Against this backdrop, we just continue to see a strong secular shift to electronic forms of payment, and we are driving healthy double-digit volume and transaction growth for MasterCard across most of our markets. And as I said earlier, these results are a function of us successfully executing against our strategy. We're growing our core products, we're diversifying our customer base, and we're building our new capabilities. And I'm just going to give you a few examples. First, we're driving growth in the core with new wins like Westpac Bank, one of the largest banks in Australia. They will become an exclusive MasterCard issuer for all their Westpac branded consumer credit and business card portfolios. and we retain exclusivity across their debit business. Westpac will also leverage several of our value-added services, such as advisors and loyalty platforms. In addition, we renewed our agreement in New Zealand, securing the majority of Westpac's credit and debit portfolios and flipping their loyalty platform. We've also executed key renewals with leading banks across several markets and So we signed a long-term deal with Crédit Agricole, the largest bank in France, which includes new consumer and commercial issuance beyond our existing base. And as part of that deal, they will also use a range of our data analytics platforms, including applied predictive technologies, APT, to help optimize their customer acquisition and retention efforts. In the Netherlands, we renewed our partnership with Rabobank enabling us to maintain a leading market share position in credit and debit in that country. And in China, we will be the exclusive international scheme partner for ICBC's Global Travel Plus card. On the co-brand front, we signed a long-term extension with WestJet in Canada, won a new co-brand program with Square, which will enable Square's sellers to access their receivables through a MasterCard debit card. We were selected as the partner for JetBlue's programs across 19 Caribbean markets, which, together with our U.S. co-brand, make us the partner on each of JetBlue's co-brands around the world. I'm also pleased to report that our major U.S. co-brand conversions have been successfully launched. L.L. Bean and Kroger are fully converted, and Cabela's, which are all contactless cars, by the way, is scheduled to be completed by the end of this quarter. In addition to building co-brand relationships with merchants, we're also diversifying our customer base through partnerships with governments. One recent example is in Mexico with Bansefi, the commercial banking arm of the Mexican government, where they have just been chosen to help distribute a wide range of social benefit disbursements to citizens across the country. This exclusive program will involve the issuance of approximately 20 million new debit cards that will be used to receive and spend social benefit payments. So now turning to B2B, we continue to see momentum in our core commercial card business. We're developing a new fleet co-brand product with U.S. Bank that enables greater customer choice by combining U.S. Bank's proprietary closed-loop fleet product with our broad open loop acceptance footprint. We're also making progress in the accounts payable space, taking the MasterCard B2B hub model international through a new partnership, which I think is very exciting, with MYOB in Australia and New Zealand. MYOB provides an invoice capture facility, supplier enablement, payments, and payroll solutions for small and big-sized businesses and brings the local market expertise and customer relationships that are critical to success for these kinds of businesses in the B2B space. The initial launch will focus on invoice payments and payroll solutions distributed to MYOB's existing customers. In the U.S., We are expanding virtual card distribution through an exclusive partnership with Bill.com and Comdata. This partnership integrates our virtual cards within Bill.com's automated accounts payable solution, and that should enable us to reach their 60,000 customers, who, by the way, currently make over $60 billion in annual payments. The addition of these virtual cards creates a safe, seamless, and secure way for businesses to be paid and provides the data needed to help merchants easily match payments with receivables. On the digital front, we're driving the adoption of new capabilities to improve the customer experience and enhance safety and security across all transaction types and channels. So a few examples in the U.S., contactless momentum continues to grow on both issuing and acceptance sites, We have received commitments from issuers representing approximately two-thirds of our total U.S. consumer volume to issue contactless cards within the next two years, and this includes Citi, Capital One, KeyBank, Santander, HSBC, and others. We're also working with leading processors like FIS to bring contactless to smaller issuers and to credit unions. On the acceptance side, large retailers like Target and CVS have announced that they will now accept contactless payments. And in total today, over half of U.S. card present transactions are happening at contactless enabled merchant locations. And we continue to scale our merchant tokenization service with partners who have recurring bill pay models, including large telcos like AT&T and insurance companies such as Liberty Mutual. And we are supporting merchants and acquirers via our payment gateway services which provides a white-labeled technology platform for payment processing, for fraud prevention, and for digital payment acceptance. Actually, JPMorgan Chase has selected MasterCard Gateway services to enhance its global connectivity and support of alternative payments as they continue to expand global digital payment solutions for their merchants. And finally, we are partnering with digital players to offer payment capabilities through new devices and channels. And for instance, in Poland, We just recently announced a strategic alliance with Blick, a mobile payment system provider. This integrates a virtual tokenized MasterCard debit card, so Blick users can make contactless payments at any MasterCard acceptance location. In South Africa, Bank Zero, which is a new bank with no physical branches and an app-only value prop, will be issuing debit MasterCard in 2019, And in Taiwan, e.Sun Bank will launch a MasterCard co-brand with Pi Wallet, which is a leading mobile wallet provider in that country. So with all of those updates, let me now turn the call over to Martina for an update on our financial results, operational metrics, and going forward estimations of growth. Martina?