Mastercard Incorporated

If you would like to withdraw your question, press star one. Thank you. Mr. Devin Core, Head of Investor Relations, you may begin your conference.

Thank you, Julianne. Good morning, everyone, and thank you for joining us for our fourth quarter 2024 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 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. Both the release and the slide deck include reconciliations of non-GAAP measures to GAAP-reported amounts. 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, Michael Milak.

Thank you, Devin. Good morning, everyone. We finished the year strong. Fourth quarter net revenues were up 16%, and adjusted net income up 19% versus a year ago on a non-GAAP currency neutral basis. Our diverse capabilities in payments and services and solutions, including the acquisition of recorded future this quarter, set us apart. They also position us well for long-term growth, as we outlined at our investor days. And this is what you will see in the new and expanded partnerships we will discuss this morning. The macroeconomic environment continues to perform well, and it is underpinned by healthy consumer spending as we've seen in today's news. The labor market is strong with low unemployment and continued wage growth. Inflation has moderated, but to varying degrees across categories and countries. Consumers remain engaged. Affluent consumers have benefited from the wealth effect, while the mass segment remains supported by the labor market. Our Economics Institute expects a year of global economic expansion in 2025, defined by shifts in monetary and fiscal policy, albeit geopolitical concerns remain. Overall, we remain positive about our growth outlook. We will continue to monitor the external environment and stand ready to adjust if needed. We remain hyper-focused on successfully executing on what we can control. Our strategic priorities fuel our growth algorithm. As we laid out in detail at our investor day, those three strategic priority areas include consumer payments, commercial and new payment flows, and services and solutions. A clear proof point on how we're executing is our steady drumbeat of share wins across products and geographies. Now, I often highlight our larger wins on these calls with you, but it's important to note that our local teams are competing for and winning deals of all sizes based on the differentiated value that we provide. Having a diverse portfolio with customers of all types is essential. It allows us to further expand our customer base and enables us to break into new areas where we can partner and grow together. In 2024, we flipped or expanded hundreds of relationships globally. Let's first focus on the U.S., where we have won several large flips over the last few years. That momentum continued this quarter. ICBA payments, which serve thousands of community banks, will significantly expand its partnership with MasterCard. This includes card issuance across their partner banks' credit and debit portfolios. In mid-Florida, a large credit union will migrate their credit and debit portfolios to us. Both partners highlighted our differentiated product suite, analytics capabilities, and the expertise of our people as a key in their decision to expand their relationship with MasterCard. In the public sector space, we renewed our long-standing relationships supporting the Direct Express program, one of the largest social benefit card programs in the world. Direct Express disperses benefits, including social security, veterans, and disability, onto MasterCards held by over 3 million Americans. And the momentum also continues in the travel and retail verticals. Porter Airlines and Bank of Montreal will launch a new co-brand program with us in Canada. In the US, we renewed our consumer and small business co-brand credit card partnership with IHG and Chase. They will leverage our data analytics and loyalty assets to enhance their value proposition. And we renewed our co-brand partnership with Sam's Club, who will continue to leverage our products and services. Our success extends across all regions with several significant renewals and expansions. We secured long-term exclusivity on debit with Saudi National Bank. We renewed and strengthened our partnership with NewBank. We've extended our relationship with Banco Santander in the UK. And we successfully renewed our global premier credit card agreement with HSBC in over 20 countries. All these wins are a result of the successful execution of the strategic priorities we discussed at Investor Day. I will share a few highlights on each area, starting with consumer payments. Now, these flows represent a long runway of opportunity for sustained growth. Today, there's over $11 trillion and $1.5 trillion transactions in cash and check around the world. We are capitalizing on the significant secular opportunity by expanding acceptance, reimagining checkout, opening closed-loop systems, and enabling new verticals. First up, we're positioned to be the most accepted payments network in the world with around 150 million acceptance locations globally today. Second, we are reimagining checkout, and that with our 2030 global plan to phase out manual card and password entry online in favor of smiles and fingerprints. Not only is that a better experience, but it's also more secure, and it's fully aligned with our data privacy principles. And the online space needs that. Fraud rates are seven times higher online than in-store. And approximately 25% of online shopping carts are abandoned because checkout is just too slow. Our tokenization biometric capabilities sit at the heart of these solutions. The proof? Well, in 2024, we tokenized about 4 billion transactions per month, which is up 40 times over the past six years. And as we have said in the past, there are many use cases for token. Take, for example, the next click of our multi-option payment solutions. We're rolling out the MasterCard One credential, which allows consumers the flexibility and control to set their payment preferences in their banking app for each transaction, if they so choose to, be it credit, debit, prepaid, or buy now, pay later, all behind one credential, one token. And the merchant accepts that through the same simple and secure digital connections as always. No added work. Tokens provide tremendous value, and we offer a set of services on and around those tokens, such as lifecycle management and authentication, which enhance that value. Now, while the growth of token makes the ecosystem safer and more secure, we also benefit on the natural tailwind associated with the growth of token usage. Shifting gears. We're also driving incremental volume and transactions in our network by opening up closed-loop systems. Beyond the transit opportunities we talked about many times, we're also partnering with local wallet providers to create greater simplicity and access for the end consumer. In Sweden, we're working with Swish so that users can tap to pay and store both domestically and abroad by adding their MasterCard to the Swish app. In Latin America, we collaborated with David Yenda to co-create a digital first debit product aimed at driving financial inclusion. we signed an exclusive partnership with them to launch the product on the DaviPlata digital app. And our PayLocal service seamlessly connects with local digital wallets, enabling consumers who use MasterCard to make card payments across a broader set of local merchants. At the same time, merchants benefit from access to more consumers and the protections we provide. The solution supports local tourism, that market that we traveled to where we couldn't pay, provides a seamless consumer experience, and helps drive cross-border volumes. Building on partnerships with leading wallet providers like Alipay and GrabPay, several additional players in Asia-Pacific will now open their wallets to cards. This includes Dana in Indonesia, Touch & Go in Malaysia, Bakong in Cambodia, and LankaPay in Sri Lanka. We're also capturing new verticals like consumer bill payments. This quarter we partnered with bMobi in Brazil Bmobi will integrate click-to-pay into their bill payment platform, enabling fast and secure payments for recurring services like telecoms and utilities. Now, as a network company, we're focused on enabling the broader ecosystem. That's exactly what we have been doing in the crypto sector. We have a well-planned, balanced strategy that serves financial institutions, crypto players, and, of course, consumers to drive growth and provide choice in this space. We're partnering with a wide range of crypto players to enable consumers to buy cryptocurrencies on card and spend their crypto balances anywhere that MasterCard is accepted. I'm very excited about new partnerships with Crypto.com and MetaMask, just a few of the many new players we have added in 2024. And we're enthusiastic about the future of blockchain technology, but to reach its full potential, we believe there's a need for sound governance, interoperability, and real-world use cases. All this is a core competency of ours built over decades. To meet these needs, we developed the multi-token network MTN. This quarter, we partnered with Connexus by JPMorgan, the firm's blockchain-based unit, to integrate MTN as a payment settlement solution. By bringing together the power and connectivity of MasterCard's MTN with Connexus digital payments, we aim to unlock greater speed, transparency, and faster settlement capabilities for cross-border B2B payments. Now, while it's early days, we're excited about the opportunities which digital assets can bring to the world of payments as the space evolves, complementing our existing solutions. Now, while consumer payments offer a significant runway for growth, commercial flows represent an even larger $80 trillion serviceable, addressable market. Only about $3 trillion is carded today. In 2024, our commercial credit and debit volumes represented 13% of our total GDP and grew at 11% year-over-year on a local currency basis, just to give you the latest stats. On top of that, disbursements and remittances represent an additional $20 trillion in addressable market. We're pursuing that opportunity with MasterCard Move, where transactions were up over 40% year-over-year in the fourth quarter. But let's dig into commercial. We're expanding our global leadership in virtual cards by expanding across use cases, geographies, and verticals. For example, partnering with NetNOS to distribute our new mobile VCN to UK companies and their employees. We're deploying virtual cards with Citi in Argentina, the first deployment of VCN in that market. And in the travel vertical, we've established new partnerships with WorldPay and Emirates NBD to offer virtual cards to their customers. We're also leaning into our success in travel and applying it to new high-potential verticals. For example, trade and logistics. Building on our previous announcement of Dubai First World, we're driving continued growth in this sector. Global FinTech Invoice Bazaar will distribute new co-branded MasterCards to help digitize payments across the trade ecosystem. And similar in consumer packaged goods, we partner with Deem Finance and PrimeDash to enable small business in the Middle East to automate payments to Coca-Cola distributors. This builds on partnerships with leading beverage distributors in Latin America that I spoke about in previous calls. We have good momentum on connecting small business in this space. We're also driving small business growth through expanded issuer partnerships. We've signed an exclusive commercial deal with B&A, the state-owned bank in Argentina. AMP Bank in Australia will launch MasterCard debit cards for the new digital SME and consumer banks. And Ant International's World First will expand our partnership to now issue virtual cards for SMEs and new markets, including Singapore and Australia. Now, let me turn to our third strategic priority, services and solutions. As we outlined at our investor day, services represent a serviceable, addressable market of at least $165 billion. We delivered almost $11 billion in service and solutions revenue in 2024, 11 billion. That's exciting, but it's equally exciting that we're less than 7% penetrated. That's a significant runway for growth. We have a clear plan to execute against it. First, we're developing and launching differentiated products. This quarter, we launch new services to support customer acquisition, provide unique market insights, manage subscriptions, and identify threats. This includes closing on the acquisitions of both Minna technology and Recorded Future. Let's stay right there. Cybercriminals have been around for decades, but attacks and fraud attempts are increasing at high levels as commerce increasingly moves online and as AI becomes more prevalent. Our investments, both organic and inorganic, are key to fighting fraud and protecting the ecosystem. They also drive revenue growth. And add Recorded Future to this list. It is now part of MasterCard. Recorded Future is the world's largest threat-intelligent company with more than 1,900 customers across 75 countries. Customers include over 50% of the Fortune 100 and government agencies in 45 countries, including more than half of the G20. We've been deploying AI at scale for well over a decade. So has Recorded Future. They leverage AI-powered insights to analyze threat data from every corner of the Internet, and customers gain real-time visibility and actionable insights to proactively reduce risks. We now have an even more robust set of powerful intelligence, identity, dispute, fraud, and scam prevention solutions. Together, these uniquely differentiated technologies will enable us to create smarter models, distribute these capabilities more broadly, and help our customers anticipate threats before cyber attacks can take place. That means better protection for governments, businesses, banks, consumers, the entire ecosystem, and well beyond the payment transactions. We're also leveraging our distribution at scale to deepen market penetration of our services and solutions. For example, we provide a fraud solution that facilitates real-time information sharing between merchants, issuers, and consumers to streamline disputes and reduce chargebacks. This quarter, we announced a new partnership with Stripe, who will offer these capabilities to their millions of users. In Latin America, Itaú Unibanco will make them available across its digital channels to support millions of cardholders. In loyalty, we partnered with Nordea to consolidate their loyalty offering with MasterCard and launch new cashback offers across Norway and Sweden. And we're also selling it to new buying centers with traditional customers, opening up a larger share of wallet, for example, We partnered with the CISO at Webster Bank to deploy risk recon and cyber quant solutions. And finally, we're seeing strong demand for our services and solutions across a more diverse customer base, including online delivery services, gaming companies, and travel partners. For example, we expanded our partnership with DoorDash, who will use our insights and analytics to optimize business performance globally. Sony PlayStation, We leverage our capabilities to showcase digital receipt to cardholders and banking apps and provide purchase information to banks' call center agents. And currency will incorporate our open banking capabilities to support Hilton's new debit co-brand offering. Services and solutions are a large and growing revenue opportunity. They are essential, powerful virtual cycle without payments. We laser focus on executing capitalized on the significant runway in services in front of us. So in summary, we delivered another strong quarter, close out another strong year. There's significant opportunity ahead. The fundamentals of our business are strong. So I'm very optimistic about the future for us, for us here at MasterCard. A proven growth algorithm and differentiated solutions position us to deliver and to win as we've demonstrated time and time again. And with that, I'm going to hand it over to Sachin.