Mastercard Incorporated

Good day and thank you for standing by. Welcome to the fourth quarter 2021 and full year MasterCard earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on 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 hand the conference over to your speaker today, Mr. Warren Nishaw, head of investor relations. Please go ahead.

Thank you, Jeremiah. Good morning, everyone, and thank you for joining us for our fourth quarter 2021 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 report amounts. Finally, to set forth in more detail on our earnings release, I'd 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 Chief Executive Officer, Michael Meebach.

Thank you, Warren. Good morning, everyone from New York. I'm starting off with the key highlight for the quarter. We delivered strong revenue in earnings growth as we saw further improvement in our underlying operating metrics. Quarter four net revenues were up 28% and EPS up 46% versus a year ago on a non-GAAP currency neutral basis. On the same basis, quarter four net revenues are 19% above pre-COVID levels in 2019. So with that, let's take a look at the macroeconomic front. The outlook remains positive despite the recent supply chain constraints, geopolitical uncertainties, and inflationary pressures. Although there has been a recent surge in COVID cases, there are signs that these may be peaking. While each of these areas merit monitoring, underlying spending trends remain strong as consumers, businesses, and governments have become more adaptable to a changing environment. In the U.S., Economic growth remains solid with low unemployment and healthy consumer confidence. According to our quarter four spending pulse report, which is always based on all payment types, including cash and check, gas retail sales, ex-auto, ex-gas were up 6.4% versus a year ago and up 10.9% versus 2019. In Europe, GDP growth has been strong. although recently impacted by mobility restrictions. As the impact of the Omicron variant reduces, we expect the economic growth to pick up in the coming quarters, in large part thanks to considerable pent-up demand from the past year. Spending polls show that overall European retail sales in quarter four were up 3.3% versus a year ago and up 1.3% versus 2019. In Asia Pacific, vaccination rates continue to improve, and we expect economic recovery to pick up pace as both governments and businesses ramp up investment. The travel recovery in Asia Pacific has lagged that of the rest of the world and has significant growth potential. The growth in Latin America is expected to moderate a bit following the rebound in 2021. As it relates to COVID specifically, there are early signs that the Omicron surge will be relatively short-lived. The reality is that the tools we have to deal with the pandemic are more advanced than ever. 60% of the world's population is now at least partially vaccinated. Effective therapeutics are becoming available. And governments are using more targeted measures to limit the spread. More borders have opened and have stayed open, despite the recent variant. Although we've always said the path forward will not be linear, there are signs we are moving towards the endemic phase of the disease. Looking at MasterCard spending trends, switched volume growth continued to improve quarter over quarter. Both consumer credit and debit continued to grow well. Turning to cross-border, the recovery has continued with overall quarter four cross-border levels now higher than those in 2019. Cross-border travel continued to show improvement relative to quarter three levels. aided by border openings in the U.S., U.K., and Canada. While Omicron has had some recent impact on cross-border travel, we continue to believe that cross-border travel will return to 2019 levels by the end of this year. Cross-border card not present spending X travel continue to hold up well in the quarter. So overall, the spending trends are moving in the right direction with some near-term travel-related headwinds as a result of the very energy. Now turning to our business highlights. As outlined in our investment community meeting in November, we remain focused on our grow, diversify, build strategy and our three strategic priorities, which are expanding in payments, extending our services, and embracing new networks. Here's an update on how we're progressing against each of those priorities. First, we're expanding in payments by growing person-to-merchant payments, scaling across other payment flows, and leaning into innovation in new payment technologies. In aggregate, these targeted flows represent $115 trillion in opportunity. First up, we're driving growth in person-to-merchant payments through new wins across the globe. In the U.S., I'm excited to announce that we're partnering with Chase and Instacart, the leading online grocery platform in North America, on a new Instacart MasterCard co-brand program. This partnership marks an additional co-brand win with Chase, quickly following the recent launch of the Chase Aeroplan World Elite MasterCard. In addition, with First Interstates Bank's planned acquisition of Great Western Bank, we will flip Great Western's consumer debit, credit, and commercial portfolios to MasterCard. And I'm happy to note that the consumer credit portfolio of Merix Bank, over 3 million customers, will transition to MasterCard beginning in the second quarter. Merix Bank plans to leverage several MasterCard solutions, including our fraud prevention, consulting, open banking, and loyalty services. Over in the Netherlands, we've renewed our partnership with Rabobank, which includes the migration of 8 million Maestro cards to debit MasterCard. We signed an exclusive deal with Westpac in Australia for the new banking as a service platform. This platform will allow new players to leverage Westpac's banking capabilities. Afterpay, the first partner on the platform, will connect debit MasterCards to their Money by Afterpay app. And in the UK, the NetWest debit migration is progressing to plan as in the early stages of consumer rollout. We're also expanding in payments by capturing new payment flows, including commercial, B2B accounts payable, bill pay, and cross-border remittances. For example, in the commercial space, we've expanded our relationship with Bank of America, where we'll be the lead brand for new commercial card issuance. We've also renewed and expanded our relationship with WEX, including the chosen as their strategic partner, in adding open-loop functionality to their millions of closed-loop feed cards. For equity accounts payable, we continue to scale MasterCard Track as WEX, BMO, BOK Financial, Melio, and Deluxe will connect to the platform. We also announced the launch of MasterCard Track Instant Pay, which uses machine learning to analyze and initiate automatic virtual card payments, streamlining processes for buyers and improving cash flow for suppliers. And we're driving new B2B acceptance through a global partnership boost payment solutions with an initial focus on expanding the use of commercial card in seven key markets. We're addressing new payment flows in consumer bill payments as well. We recently announced the acquisition of Arcus to help deliver bill pay solutions and other real-time payment applications in Latin America. Arcus enables digital payments for the majority of household bills in Mexico and its connections with banks, fintechs, and digital wall providers across the region. And finally, we continue to capture new flows in cross-border remittances. This quarter, we established a partnership with Travelex in Brazil, who will use MasterCard's cross-border services to send P2P transfers to the US and Europe. For domestic disbursements in the US, we partnered with fintech processor TabaPay to make MasterCard 10 easily available to fintechs and merchants across multiple use cases. Now, shifting here, we're also expanding in payments by leaning into payment innovation in areas like installments, contactless acceptance, and cryptocurrencies. Here are a few examples. Our open-loop MasterCard installments program that we announced last quarter has been very well received. The U.S. launch is on schedule for quarter one. We're actively bringing new partners into the program as we announced in Middle East Africa earlier this week. Watch this space. Now we're making great progress in expanding contactless acceptance by turning the world's billions of active smartphones into potential acceptance devices, enabling people to buy and sell whenever, wherever they want. We now have 100 deployments of Tap on Phone in over 50 markets with leading partners globally. Contactless penetration increased to one in two of our in-person switch transactions globally this quarter. This is up from approximately one in three prior to the pandemic. And with that, the potential for accelerated acceptance growth, financial inclusion, and consumer convenience is substantial. We're also bringing capabilities, experience, and reach to help enable the crypto ecosystem. Our new collaboration with Coinbase will allow consumers to use their MasterCard to purchase NFTs. Try that myself. Our work with ConsenSys will make it easier for software developers to increase the scale, efficiency, and speed of transactions on Ethereum and permissioned blockchains. And our CBDC sandbox test platform, which we launched in 2020, continues to gain traction. We're helping central banks, financial institutions, and fintechs simulate the issuance and distribution of a CBDC, along with the integration of CBDDs with our card network, our real-time payment modules, and native blockchain wallets. Now, shifting to services. Our services support and differentiate our core products and have played a critical role in aiding many of the movements I just mentioned. We grew services revenue at 25% in 2021 on a currency neutral basis. We will continue to extend our service capabilities to enhance the value of payments. We've been further accelerating our growth by expanding into new areas and new use cases, particularly through our data and services and cyber intelligence propositions. Again, a few examples for you. In December, we announced an agreement to acquire dynamic yield from McDonald's. Dynamic Yield uses enhanced AI to deliver customized product recommendations, offers, and content to consumers. Their customer set includes over 400 global brands, ranging from financial services companies like Synchrony to retailers like LensEnd. When combined with SessionM's loyalty platform and our test and learn experimentation software, we will be able to offer a unified consumer engagement and loyalty hub to our customers. McDonald's is a great example of a company who's using all three of these platforms today with plans to further scale and integrate dynamic yields capabilities globally. In addition, our Ethica platform continues to experience strong traction in preventing unnecessary chargebacks, a real pain point. We added new customers in every region in 2021 for Ethica. Recently, we launched Ethica Consumer Clarity, which gives consumers detailed information about purchases on their mobile banking app. The solution is live with issuers across the U.S., U.K., and several European markets, including OTP Bank, Central Cooperative Bank, and Paybox Bank. Now, beyond expanding in payments and extending in services, our third strategic priority area is embracing new networks. Specifically, we are leveraging our expertise in payments to build out new networks with a current focus on open banking and digital identities. On the open banking front, we have closed the acquisition of AYA in November, which brings strong API connectivity to over 2,700 banks across Europe. And combined with Finicity's North American connection, which covers more than 95% of deposit accounts in the U.S. market, MasterCard has an unparalleled footprint in the key open banking regions, upon which we're building solutions to solve for a wide range of use cases. One example is in the mortgage verification space, where Finicity has signed deals with several new partners, including Lone Beetle. And in the digital identity space, we're helping our customers with fast, frictionless identity verification services. Ikata has performed strongly over the last quarter, expanding through strategic partnerships with companies such as Zip and Equifax, as well as growing its global footprint with leading fraud providers Tongan and Airclick in Asia-Pacific. Combined, open banking and digital identity extend our value before and after the payment transaction. These are large, attractive, and growing opportunities, and we are uniquely positioned to be a leader in both. So in summary, we delivered strong revenue and earnings growth this quarter. The macroeconomic outlook remains positive with a few areas that we're monitoring, and we're executing against our three strategic priorities, expanding in payments, extending our services, and embracing new networks, And all that with substantial progress on the product and deal front this quarter. Now, Sanjit, over to you and the numbers.