Mastercard Incorporated

hey ladies and gentlemen thank you for standing by and welcome to the q1 2021 mastercard inc earnings conference call at this time all participants are in a list and only mode after the speaker's presentation there will be a question and answer session to ask a question during the session you will need to press star one in your telephone please be advised that today's conference is being recorded if you require any further assistance please press star zero I would now like to turn the call over to Oren Misha, Head of Investor Relations. Thank you. Please go ahead.

Oren Misha, Head of Investor Relations Thank you, Denise, and good morning, everyone, and thank you for joining us for our first quarter 2021 earnings call. We hope you are all safe and sound. 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. 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. With the release and the slide deck, both 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, Mike Levi.

Thank you, Warren, and good morning, everyone. So here are the headlines. We started the year with good momentum, delivering positive net revenue growth this quarter. We're encouraged by the return of domestic spending levels to pre-pandemic trends. We continue to execute against our strategic objectives as we sign notable new deals and advanced our multi-rail strategy by closing our transaction with nets, and extended our digital identity capabilities with the planned acquisition of Ecato. So let's dive in, looking at the broader economy first. Domestic spending levels showed continued improvement with very strong e-commerce sales. According to our quarter one spending pulse report, which is based on all tender types, U.S. retail sales were up 11.8% versus a year ago ex-auto, ex-gas. This reflects the impact of physical stimulus and the laughing of the start of the pandemic. Spending costs also indicated an overall European retail sales got close to flat in quarter one versus a year ago. The vaccine rollout has become scaled in the US, UK, and several other countries. And broadening this critical effort is underway, but will take time. Let's turn to our business specifically. and the four-phase framework we established for managing through the COVID environment. At this time last year, markets were going through the containment and stabilization phases. We now believe many markets are transitioning from the normalization phase to the growth phase domestically. Cross-border travel spending continues to be in the stabilization phase where spending is restricted due to closed borders. Looking at Mastercard spending trends, volumes continue to improve quarter over quarter with strength across products. We saw particular strength in debit, primarily driven by fiscal stimulus and share gains. In terms of how people are spending, e-commerce continues to be strong, and we're seeing improvements in card presence spending. On the travel front, we've seen some recent improvement in domestic travel, primarily personal travel, cross-border travel, remains limited as border restrictions remain in place for most markets. Cross-border card not present spending, excluding online travel spend, continues to hold up well. As we have observed in many markets, progress is not always linear, and we believe there is significant pent-up demand for travel, as we've just seen in domestic travel. We expect domestic travel to improve progressively throughout the year in countries with strong vaccination programs. International travel should start to open on a select basis in the second half of the year between countries with strong vaccination programs and or low case rates. In the meantime, we remain focused on building on our already strong position in travel, engaging travelers early through our loyalty programs, and expanding relationships with our partners in travel. As a result, we are well positioned to capitalize on this opportunity when it occurs. As we look forward and see positive momentum in the drivers that impact our top line growth, we will increase the investment we put toward our strategic priorities. One, growing our share of core payments. Two, deploying a broader set of services. Three, enabling digital solutions. And four, providing choice with multi-rail capabilities. As always, we will do this with an eye towards driving top and bottom line growth over the long term, along with expense discipline. Let me illustrate how we're executing against each of these strategic priorities. I will begin by sharing how we're driving growth in the core. Always support about differentiated services capabilities. Here are a few key examples. Building on our strength in U.S. retail co-brand, we're excited that MasterCard was chosen as the exclusive network for Gapping's co-branded credit cards across the Old Navy, Gap, Banana Republic, and Aflata brands. This partnership will include a reimagined rewards program to drive increased customer engagement with the migration of existing card members planned for 2022. We've had a long-term services relationship with GAAP, which led to additional opportunities to support both their co-brand programs and their broader business. We're also leveraging our differentiated services to expand relationships with key global partners, like Santander. This quarter, we signed a new deal with Santander Brazil and executed a long-term exclusive partnership with Superdigital, Santander's fintech arm, to provide digital prepaid accounts across seven Latin American markets. Also, we're happy to announce that the financial arm of one of the largest retailers in Europe, El Porte Ingles, is migrating its entire closed-loop consumer credit portfolio to Mastercard exclusively for 10 years. This strategic partnership includes our processing capabilities, and will contribute to growing MasterCard's overall credit share in the region. Talking about share, I'd also like to point out that the migration of Santander's UK debit portfolio is progressing well, and we're preparing for the other conversions that we previously announced. Finally, we've secured several strategic renewals and expansions. As many of you know, Huntington Bank announced its anticipated acquisition of TCF at the end of last year, which will make them a top 10 U.S. regional bank. I'm happy that they have decided to both renew their existing business with us and convert the TCF business to MasterCard. This brings significant new debit volume to our brand. We've also expanded our relationship with Synchrony Bank, the exclusive partner for their general purpose consumer credit portfolio. Turning to the next strategic priority, we continue to enable digital solutions to drive the secular shift to electronic payments. A great example of this can be seen through the partnerships we have established with several leading mobile telecom providers across Africa and other regions. In Africa, there are more mobile money accounts than bank accounts, and consumers increasingly expect digital financial services to be provided through their mobile phones. Now, we signed a multi-year partnership with the MTN Group to enable millions of their MTN mobile money wallet customers with a MasterCard virtual payment solution. We've also expanded our partnership with the Airtel Group to equip their Airtel money customers with virtual cards and QR solutions. And we've extended our partnership with the Airtel Payments Bank in India, along with a recent investment in Airtel Mobile Commerce. While our digital capabilities are enabling us to penetrate new geographies, our multi-rail strategies are allowing us to provide greater choice and capture new payment flows. We're happy that we have now completed the acquisition of the majority of the corporate services division of NETS, which reinforces our leadership position in providing real-time payments, infrastructure, and applications. This transaction significantly enhances our application capabilities, inclusive of a robust set of bill payment solutions which are operating at scale across several markets. Furthermore, this is an integral component of our regional strategy in Europe, enabling us to operate as a local partner. We see significant opportunity to expand these capabilities into additional markets around the world. Speaking of bill pay, in the US, we continue to scale our bill pay exchange solution through new billers and bank partners. We're excited to announce that Verizon will connect with the most recent national bidder on the platform. Turning to cross-border applications, we have now fully integrated our acquisition of TransFast and can now provide unsurpassed reach via a single point of access that allows banks and digital partners to send and receive money through bank accounts, mobile wallets, cards, and cash payouts to over 90% of the world's population in more than 100 countries. We're expanding our relationships with the United Nations Federal Credit Union, Saudi British Bank, to expand their reach into additional markets, and both Bancorp and IDT payment services will now leverage our capabilities for cross-border amenities. And in addition, we have extended our partnership with Western Union, who will be using our capabilities to allow customers in 18 European countries to transfer funds directly to debit cards in near real time. Our multi-rail capabilities are critically important to our efforts in open banking as well. They enable us to provide our customers across banks and fintechs with greater flexibility in how they manage both payment and data flow. We're off to a strong start with Tenacity as we've integrated our sales teams and already signed several new connectivity partners and application users. For example, we've gone live with our state-of-the-art API-based data access with several large banks, including US Bank, as well as with a leading payroll processor representing millions of employees. Finicity was also selected by companies like Upgrade, SWBC, Mocafi, Moneyline, and Tomo Credit to provide permission-based access to financial data to support a variety of use cases, including mortgage, lending, and, of course, payments. We're expanding our open banking capabilities in Europe as well. We're now allowing for their Open Banking Connect solution with Lloyds Bank in the UK for consumers to make payments to their credit card. We continue to see a great deal of interest and activity in digital currencies, and we're innovating in this space through new crypto and CPC partnerships, enabling digital currencies on our network, and continuing our investments in underlying blockchain technology as part of our multi-rail strategy. We have several new crypto partnerships approved for launch this quarter, including a partnership with Gemini, a leading crypto platform here in the US, to launch a first-of-its-kind cryptocurrency rewards credit card that allows consumers to receive crypto rewards on everyday purchases. And over in Spain, Krypton, a crypto exchange, is launching a MasterCard crypto card. On central bank digital currencies, we continue to engage with central banks around the world, and our virtual testing platform is helping them design features, simulate issuance, and evaluate interoperability with existing payment systems. In partnership with the Central Bank of Bahamas and IslandPay, we launched the world's first CBDC-linked payment card, enabling people to pay for goods and services using fiat currency anywhere MasterCard is accessible. Digital identity. Digital identity is critically important as the shift to a digital economy continues. It is a foundational component of our multilayered approach to security. And it allows us to help consumers and businesses safely and easily prove their identity while enabling them to maintain control over their information. Last week, we announced the planned acquisition of Ikata, which advances the digital identity efforts we have underway. Ikata has access to validated identity information on a global basis and leverages artificial intelligence to produce highly accurate identity scores. Because of insights support multiple payment and non-payment use cases, including new account openings, instant issuance, and transaction risk checks. To use by a broad range of customers, including leading digital merchants, financial institutions, travel companies, and digital currency platforms. This is an example of how we are entering into adjacent areas and innovating beyond the core payment transaction. And now back to the bigger picture. We're leveraging our business to have a broader impact on society by executing our commitment to bring 1 billion people into the digital economy by 2025. Specifically on the environmental front, we have pledged to achieve net zero emissions by 2050 and issued a sustainability bond in the last quarter to support these efforts. Furthermore, our MasterCard carbon calculator, developed in collaboration with the economy, is enabled on our network to provide consumers with a snapshot of carbon emissions generated by their purchases. We've worked with customers to issue over 10 million cards using sustainable materials. And to tie all of this together, we're now linking Executive Comp to MasterCard's sustainability priorities. With all of that in mind, I continue to be excited about the opportunity ahead, and I'm happy with the progress we're making against our objectives. And with that, Sachin, over to you.