Mastercard Incorporated

Ladies and gentlemen, thank you for standing by and welcome to the MasterCard Incorporated Q4 Full Year 2019 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, press star 0. I would now like to hand the conference over to your speaker today, Warren Nisha, Head of Investor Relations. Please go ahead, sir.

Thank you, Marcella. Good morning, everyone. Thank you for joining us for our fourth quarter 2019 earnings call. With me today are Ajay Banga, our President and Chief Executive Officer, and Sachin Mehra, our Chief Financial Officer. Following comments from Ajay 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. As a reminder, in Q2, we updated our non-GAAP methodology to exclude the impact of gains or losses on our equity investments. We are excluding these items as we believe this will facilitate a better understanding of our operating performance and provide a meaningful comparison of our results between periods. Our non-GAAP measures also exclude the impact of special items, which represent litigation judgments and settlements in certain ones. In addition, we present growth rates adjusted for the impact of foreign currency. Both the release and the slide deck include reconciliations of non-GAAP measures to GAAP reported amounts. Please note that the growth rates we provide for switched volume, switched transactions, and cross-border volume have been adjusted to normalize for the effects of differing switching days between periods. Starting this quarter, we are further adjusting these growth rates to normalize for the effects of differing number of carryover days between periods. Carryover days are those where transactions and volumes from days where we do not clear and settle are processed. Generally, we do not clear and settle dual message transactions on Sundays. 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. We do not normalize GDP growth rates. Finally, to set forth in more detail on our earnings release, I would like to remind everyone that today's call will include forward-looking statements regarding MasterCard's future performance. Actual performance could differ materially from these forward-looking statements. Information about the factors that could affect future performance are summarized at the end of our earnings release and in our recent SEC filings. A replay of this call will be posted on our website for 30 days. With that, I'll now turn the call over to our President and Chief Executive Officer, Ajay Banga.

Thank you, Warren. Good morning, everybody. So we closed out 2019 on a strong note, and for the year, revenue was up and EPS was up 23% on a non-GAAP currency-neutral basis. I think these results reflect broad-based growth across each of our regions and the ongoing execution of our strategy as we continue to invest for the longer term. On the macroeconomic environment, consumer spending remains relatively healthy, and we expect this to continue in 2020. We are, however, monitoring a number of economic and geopolitical factors, as well as the potential effects of the coronavirus that could impact this outlook. In the U.S., we are seeing stable growth with low unemployment and healthy consumer confidence. Our spending pulse estimates for Q4 show retail sales remained solid, up 3.1% versus the year ago ex-auto, ex-gas. In Europe, we see continued modest growth. UK spending actually held up reasonably well, again, according to our spending pulse estimates, with year-over-year retail sales up 3.9% in Q4, ex-autogas and restaurants, despite uncertainty around the potential impact of Brexit. In Asia Pacific, we're seeing modest GDP growth in the region overall, in part due to the support of favorable monetary policies in several markets. We're pleased with the recent trade deal with China, and obviously we'll continue our efforts to pursue a license to participate in that market domestically. The outlook in Latin America is mixed with growth in Brazil and Colombia, partially offset by weakness in Argentina and Mexico. Meanwhile, we're driving healthy double-digit volume and transaction growth for MasterCard across most of our markets. And these results are a function of us growing our core products, of differentiating with our unique services, of expanding our digital solutions and footprint, and of leveraging our multi-rail capabilities to capture new payment flows. So let me start by talking about driving growth in the core. We've done that through new wins as well as key renewals and expansions. Following on the heels of our recently announced extension with Citibank, we're excited to announce a renewal and extension of our relationship with Capital One. We've also signed an agreement with Safra Pay US to launch new debit, credit, and payroll solutions for small and medium-sized businesses later this year. And we've renewed our deal with the Standard Bank Group of South Africa, the largest bank in Africa, which includes new issuance and will help us grow our share in that market and throughout the region. On the co-brand front, the Amazon Rewards MasterCard has launched in Canada. Moneyline, a U.S.-based mobile consumer finance platform, has selected MasterCard as their exclusive partner for a new credit co-brand program, and will flip their existing consumer debit portfolio to us as well. In the travel space, we run a new co-brand deal with Vistara Airlines in India, and have also expanded our long-running co-brand relationship, Norwegian Cruise Line, in the United States. Turning to prepaid, we have renewed our agreement with the Network for Direct Express, which is the largest prepaid program in the world. This card, issued by Comerica Bank, is used by the U.S. government to make fast, convenient, and secure federal benefits disbursements. And in debit, we have expanded our presence in key emerging markets in China and India. In China, we entered a new deal to be the preferred debit partner of China Construction Bank, the second largest bank in China, and are also launching our first debit program with China CITIC Bank. In India, we have maintained our debit leadership through renewed debit deals with both HDFC Bank and State Bank of India, the largest public sector bank in the country. So now to differentiated services and core products wins. such as these I've just talked about, frequently include this component. We continue to grow these services both organically and inorganically and are making good progress in this regard. For example, Briterion's artificial intelligence platform and new data's behavioral biometric capabilities have been broadly integrated into our core security solutions to help customers minimize fraud and manage risk. And since joining MasterCard, Ethica has signed over 350 new deals, including a recent agreement with Microsoft to streamline their dispute process and improve the cardholder experience. And while on the topic of acquisitions, I think we have bolstered our cyber intelligence suite a step further with our recent acquisition of Risk Recon, a leading provider of AI and data analytics solutions. Risk Recon's best-in-class cyber risk assessment capabilities are designed to help financial institutions, merchants, corporations, and governments secure their digital assets. They will continue to build on their current customer base and develop new cybersecurity services. We're very pleased to have the Risk Recon team as part of the MasterCard family, and we look forward to offering these solutions to our customers. So on to digital initiatives and our footprint there. We're expanding our digital solutions by rollout of click-to-pay with new deals on our merchant tokenization solution and real progress on the contactless front. On click-to-pay, we can announce that merchants such as Fresh Product, Fresh.com, and Saks Fifth Avenue are now live, enabling a faster and more secure guest checkout experience for their customers. Further, beginning in mid-2020 this year, Citibank plans to streamline the checkout experience at participating merchants by leveraging push provisioning to make the click-to-pay enrollment process much easier for Citi-branded credit card holders in North America. We've also signed several deals with merchants for our tokenization capabilities, which, as you know, provide security and they the approval rates improve, and a better experience for merchants' customers. Recent partners to sign on to use this tokenized card-on-file solution include Amazon, Stripe, MercadoLibre, PayPal, and several of the largest U.S. wireless and telecom providers. And on to contactless, well, as I said, we're making real progress. This quarter, contactless made up over 30% of global card-present purchase traffic Contactless provides a frictionless and fast payment experience, which is opening new categories of spend, including displacing cash on small ticket purchases. The U.S. poised for growth on this front, and the New York City MTA is a good example of the potential for rapid adoption by consumers. In fact, they've surpassed 5 million taps since the launch in May, and the MTA has plans to roll out contactless acceptance system-wide by the end of 2023. And on to new payment flows and real capabilities, which we're using to penetrate new flows, including recent successes of MasterCard Send. Bank of America will now use MasterCard Send for their business-to-consumer card disbursements in the U.S. on an exclusive basis. In the insurance space, Allstate will expand the use of MasterCard Send across their enterprise to power instant insurance claims payouts. PayPal will utilize MasterCard send in 10 new markets across Asia Pacific to enable users to transfer funds from their PayPal wallets to their eligible cards. We're also leveraging our capabilities to help facilitate more efficient cross-border payments. So here's an example, Swiss bankers A Swiss prepaid card issuer launched a new money transfer service using MasterCard Send that enables consumers to make secure payments to recipients' bank accounts, digital wallets, and eligible cards in 18 countries. We're also partnering with Peka, which is the switch in Russia, and the central bank in Russia to bring cross-border functionality to the Russian domestic faster payment system. Moving on to BillPay, we've gone live in the U.S. with our BillPay Exchange product. We're leveraging technology from our transactors acquisition. BillPay Exchange provides an enhanced BillPay experience for banks, for consumers, and for billers. And our initial launch partners include U.S. Bank, Elias Wire, and Avedia Bank, with Jack and his associates agreeing to participate later this year. We plan to add additional functionality and new partners throughout 2023. We've also entered into a partnership with Pine Labs. They provide a range of point of sale and prepaid solutions to merchants across India, Southeast Asia, and the Middle East. This partnership is focused on offering installment payment solutions to merchants and consumers across both card and real-time payment rails. We're also going to work with Pine Labs to offer a range of prepaid solutions loyalty, and cybersecurity services to customers. And this partnership is consistent with our strategy to deliver greater choice to consumers and be the partner of choice for our customers. Open banking is another area where we've worked for some time to develop the right set of comprehensive solutions and services that work for all the players in the ecosystem, banks, fintechs, merchants, and consumers. Our solutions are live today in Europe, and we are focused on ensuring that the ecosystem can provide for the real-time exchange of information and transactions, but most importantly, protecting the interests and data of all participants, including our fintech and bank customers. We see open banking as an important global trend and a significant opportunity and believe that our leadership in data privacy, as well as our scale in real-time and cross-border payments, are very good key to optimizing open banking solutions for banks, for fintechs, for merchants, and for consumers globally. Beyond payments, we made good progress on our digital identity solution. Here, digital identity is aiming to allow individuals to own, control, and share their identity credentials their way on the devices they use every day. We believe that a commitment to the responsible handling of personal information, letting consumers have ownership of their own data, and giving them control over which data is used and how it is used is critical to a consumer's increasingly digital life. MasterCard's network is able to check a consumer's chosen credentials and confirm them for the intended recipient and purpose, without ever taking possession of the underlying identity data. So Mastercard is uniquely positioned in this field, given our experience in governance and operating networks, our focus on financial inclusion, our announced and clear sensitivity to data privacy, and our commitment to investment in a global interoperable infrastructure. We recently launched pilots in public and private institutions in Australia, which actually is one of the countries at the forefront of digital identification, And this set of pilots enables participants to use their digital identities to access certain government and student services. We also have additional digital identity and pilots that you will see us introducing in more markets throughout 2020. And we look forward to continuing to innovate and grow and embed ourselves on this front. With that, let me turn the call over to Sachin for an update on our financial results and our operational metrics. Sachin?