Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mastercard Inc. conference call to discuss changes in the presentation of net revenues. 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 followed by one on your telephone keypad. Please only press star one once to queue up for a question, as pressing star 1 multiple times may affect your position in the queue. If you would like to withdraw your question, press star one again. Mr. Warren Kneeshaw, Head of Investor Relations, you may begin your conference. Thank you, Audra. Good morning, everyone, and thank you for joining us for this call to discuss our updated revenue-related disclosures. With me today are Sachin Mehra, our Chief Financial Officer, and representatives from our accounting and FP&A teams. Following some brief comments from Sachin, we will open up the call for your questions. I would like to emphasize that the purpose of this call is to address any questions you may have regarding the updated disclosures. We would ask that you limit your questions to this matter. You can access the 8-K that outlines these changes, as well as our 10-K that reflects these changes in the investor relations section of our website, mastercard.com, as well as through the SEC portal. Finally, as set forth in more detail in our SEC filings, I'd like to remind everyone that today's call may 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 in our recent SEC filings. With that, I'll now turn the call over to our Chief Financial Officer, Sachin Mehra. Hi, everyone, and thank you for joining us on such short notice. Last night, concurrent with the filing of our 10-K, we issued an 8-K describing changes that we are making to our revenue-related footnote disclosures and key metrics in our MD&A disclosures in our 2022 annual report on Form 10-K. It is important to note that these modifications pertain to the presentation of our disclosures and have no impact on total net revenue presented in either historical or future periods. We regularly review our disclosures, and these changes provide greater transparency, align with our strategic priorities, and are consistent with recent interpretations related to revenue disclosures. We have also implemented these changes in connection with the customary review of our public filings. The 8-K outlines these changes and provides supplemental information for certain historical periods under this new approach, and we have set up this call to explain the changes and answer any questions that you may have. What is changing? In addition to the geographical disaggregation of net revenues we provide in the footnotes, starting with the 10-K we filed last night and on a go-forward basis, we will revise our disclosure of disaggregated net revenue broken down into two new categories, payment network and value-added services and solutions, both of which are presented net of rebates and incentives. Payment network related revenues relate to our card network and are primarily generated by charging fees to our customers based on the gross dollar volume of activity on the products that carry the company's brands and for providing switching and other network related services. Value-added services and solutions is comprised of revenues primarily related to Cyber & Intelligence, Data & Services, Processing & Gateway, ACH batch, and real-time account-based payments and solutions, Open Banking and Digital Identity solutions. It is also important to note that this revised presentation does not change the way we view or manage our business, nor the interdependencies between our payment, service, and new network capabilities. Going forward, we will be providing a holistic view of our company and will separately disclose payment network related revenues, excluding revenues related to our various services lines and certain other solutions revenues. For value-added services and solutions, we have consolidated all our service line related revenues in one place along with certain other solutions revenues. With this new presentation, rebates and incentives have been allocated to the category of revenue to which they pertain. The bulk of rebates and incentives relate to the payment network. In addition to these changes, and to, one, aid in your understanding of trends related to the performance of our payment network capabilities, and two, to allow for comparability to the key driver metrics, we will now be providing supplementary key metrics related to payment network related revenues. These key metrics are domestic assessments, cross-border assessments, transaction processing assessments, and other network assessments. These assessments represent agreed upon standard pricing provided to our customers based on the various forms of payment-related activity. We use these assessments to monitor operating performance as it facilitates comparability and provides visibility into cardholder trends. Let me describe these four key metrics further. Domestic assessments are charges based on activity related to cards that carry the company's brands, where the merchant country and the country of issuance are the same. These assessments are primarily driven by the dollar volume of activity on cards or the number of cards issued. Cross-border assessments are charges primarily driven by cross-border dollar volume of activity. Transaction processing assessments are charges primarily driven by the number of transactions switched, that is, authorized, cleared, and settled on our payment network. Other network assessments are charges for licensing, implementation, and other franchise fees. These assessments do not include rebates and incentives and should not be mistaken for net revenue. In addition to these key metrics, going forward, we will discuss the amount of rebates and incentives related to the payment network in our MD&A. The 8-K lays out the new disaggregation on net revenues and the key metrics. It outlines the changes from the historical presentation. This is intended to help you bridge between the historical and revised presentation. To sum it up, we have made the following changes to aid with your understanding of our business and to better align to guidance related to revenue disclosures. One, our net revenues will now be disaggregated into two categories: payment network and value-added services and solutions, in addition to the geographic detail we provide. Two, we will be providing supplemental key metrics to help with the understanding of the performance of our payment network-related revenues. Finally, we will discuss rebates and incentives associated with the payment network going forward in our MD&A. Thanks. We will now open it up for questions. Warren? Thanks, Sachin. Andrea, we're ready to take questions. Thank you. At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Please only press star one once to queue up for a question, as pressing star one multiple times may affect your position in the queue. We'll take our first question from Lisa Ellis at MoffettNathanson. Hey, good morning, guys. Thanks for doing this. Sorry, just a little bit of a mechanics question. Apologies if I missed it. Can you just summarize what will be disclosed quarterly and in as part of the quarterly earnings releases versus what will be annual as part of the 10-K? Sorry. Thanks a lot. Yes. Lisa, good morning. The quarterly and the annual will show our disaggregation of revenue by payment network and value-added services and solutions. Just like I said, that will be true for quarterly, that will be true for annual. We will be discussing in our MD&A the rebates and incentives associated with our payment network, again, in the quarterlies as well as in the annuals. Basically everything I kinda talked about in the context of, you know, today's new presentation will be true for quarterly as well as annual. Yeah. You'll get the visibility, on, you know, the rebates incentives, the key metrics, you know, on a quarterly basis. You won't have to wait for the year-end to pick up on anything. Okay, great. Thanks. Sorry, just more broadly, you know, I guess just more the strategic level, what kind of prompted you guys to decide to make this decision? I know you started to disclose some of the value-added services at a kind of aggregated level, at growth level. What kind of prompted it, and what's the objective, I guess, from an investor perspective? Yeah. Look, I mean, Lisa, that's a really good question. At the end of the day, let me just start off by saying nothing fundamentally is changing the way we operate our business. We just thought to provide better transparency, which better aligns with the way we're executing on the strategy of the company. It would be appropriate for us to actually show how we're performing in payment networks, how we're performing in value-added services and solutions. You know, also, when we look at it, and we constantly look at this, we look at what recent interpretive guidance is, which has been which has been put out there. The new disaggregation, which we're showing in terms of our revenue, better aligns with this recent interpretive guidance. That's kinda the couple of reasons why we went down this path. Mm-hmm. Mm-hmm. Then maybe just one last one, if you don't mind, and then I'll drop, which is just can you clarify with the... You know, you guys have made a very extensive, like, initiatives around getting into B2B as well as into, you know, with VocaLink and Nets Corporate Services. Can you just clarify all of that related revenue in that space and, going to be now in Value-Added Services? That's all. Yes. I just wanna confirm that. Okay. Let me just kind of clarify and define what sits where, right? At the end of the day, I think the base principle one should assume is card network-related stuff will sit in payment network. We'll have all our value-added services and solutions, which sit in value-added services and solutions. Specific to your question, batch, you know, our ACH-related revenues will sit in value-added services and solutions. Digital Identity will sit in value-added services and solutions. Open Banking will sit there. When I kind of think about this, that's kind of what sits in value-added services and solutions. Just a point of note right here, because we do talk about new payment flows, and remember, we've broken up our new payment flows in terms of how we talk about them into four areas. We talk about them as remittances and disbursements, commercial point of sale, you know, what we're doing on B2B accounts payable with virtual cards and then bill payments. Let me give you some clarity around that. Bill payments will sit in value-added services and solutions. Our commercial point of sale will sit in payment network because it's on the card rails. Mm-hmm. Our virtual cards will sit in payment network. In terms of remittances and disbursements, you know, if we're doing domestic send-related activity, that will sit in payment network. Anything which is in the cross-border account-to-account space will sit in our value-added service and solutions. The principle is things which leverage our card network will be sitting in payment network and then, you know, the rest of it sits in value-added services. Just to be a little more specific, the bill payment activity that relates to, you know, through the acquisition of the corporate, a piece of the corporate services business of Nets is what we're talking about within the value-added services and solutions. Got it. Okay. Thank you very much. Thanks, Lisa. We'll move next to Sanjay Sakhrani at KBW. Hi, Sanjay. We can't hear you. Sorry. I was on mute. My apologies. Question, Sachin, is just how should we drive value-added services revenues on a go-forward basis? Related to that, rebates. You know, we've always looked at rebates to gross revenues, understanding you guys don't drive the revenue line that way, you look at net revenues. You know, the rate of growth in that gross revenue, sorry, rebates to gross revenue lines by the different segments now with payment network revenues and value-added services revenues, how should we think about the rate of change? Because that rate of change X cross-border revenues, you know, it's been growing quite fast. Maybe you can just help us think through that. Thanks. Sure. First thing I want to just say, these are not two segments. We are a one-segment company. We've been a one-segment company. We'll continue to be a one-segment company. All we are doing here is we are reflecting for you what the nature of revenues we generate from different activities is. For example, payment network versus VAS. On your specific question, Sanjay, in terms of how to assess the performance, really the reality is you will have visibility. Let's take payment network first, then I'll come to value-added services and solutions. You will have visibility as to what our net revenue is in payment network, what the net revenue growth trends are, as also in the MD&A, you will have visibility as to rebates and incentives associated with the payment network are. You'll see from the information we put out last night that the vast majority of our rebates and incentives relate to the payment network. It's approximately 95% relate to the payment network. You will have visibility to your exact point as to making assessment as to how we're seeing the rebates and incentives come through. In terms of how you would assess or how we assess the business, you know, we look at the business on a composite basis. We look at it and say, how are we driving net revenue growth? Because at the end of the day, our value-added services drive payments, our payments drive value-added services. It's all kinda, you know, very interdependent on one another. That being said, you will get to see what the net revenue growth rate on value-added services is. For just for clarity, I mean, for the purposes of that, you will get to see that. The point really is, I guess the bottom line is nothing fundamentally changes in terms of how we're managing the business. We're just giving you better transparency in terms of the nature of the revenues and how those growth trends are shaping up there. I just, you know, we're not providing incremental information around our forward expectations around rebates and incentives. You know, as we've said, you know, in the past, you know, the winning of new business and the driving of additional volumes and transactions across the payment network and the ability therefore to offer services to those customers is the objective. I think you've heard us on the earnings calls, you know, talk regularly about some of the key wins, you know, notably recently the Citizens win, for instance, in the United States and the number elsewhere around the globe. I mean, it's all within that context that when you think about the rebates and incentives. Just one quick follow-up. Just on that, payments network revenue rebates and incentives, is it still half and half issuer merchant or has that mix changed? We've never discussed our mix on what component of rebates and incentives goes towards the issuer or versus the merchant. I will tell you, the vast majority of our rebates and incentives are towards the issuer side of the equation. We never really put out a percentage on that. Okay. Great. Thank you. Thanks, Sanjay. We'll move next to Tien-Tsin Huang at JP Morgan. Hey, good morning, Sachin and Warren. Hey, Tien-Tsin. I just, always helps me to get examples, so if you don't mind me asking. The Domestic Assessment fee, I think the headline retail pricing includes a per tran fee as well as a percent fee. I'm assuming both of those are still included in the Payment Network line, correct? The only processing fee would be when you do issuer processing, stand-in Processing & Gateway. Is that? Am I reading that correctly? Yeah. Tien-Tsin, let me clarify. Anything related to issuer processing related activities sits in value-added services and solutions, likewise for gateway, sits in value-added services and solutions. You're right about stand-in as well, which is part of our services lines, which is where it sits. You know, the domestic assessment question you had is what you exactly expect it to be, which is it's the basis points on the gross dollar volume of, you know, which runs over our network, as well as, you know, the standard pricing which we have from our customers on, you know, the number of cards issued, so on and so forth, things like that. Nothing's changed as it relates to that in terms of what we've been kinda talking about in domestic assessments. Yeah. That's probably a good point to just emphasize here, is that the, you know, the way that we're determining domestic assessments is unchanged from our previous approach. There has been some, you know, small pieces, for instance, that have been moved into value-added services and solutions, but otherwise it's directly, you know, relatable to where we were historically. In that sense, there really is, you know, not much change. We're just bringing the value-added, the service lines together in value-added services and then giving you the, you know, more direct view into the payment network side of things. Okay. No, that helps me understand it. One more example on just the Mastercard Send, where would that fit? Would that be- Yeah. To the extent it leverages the card network, it sits in payment network related revenue. For example, domestic, send for the most part leverages the card network. That will sit in payment network related revenue. If we're doing account to account cross-border, which we also call as our Cross-Border Services under the same umbrella, that will sit in value-added services and solutions. Thank you. It's clear. One more last one from me. Just Value Added. Is the order of how you listed, the items here, Sachin, is that representative of what the biggest contributors are to Value-Added Services? I think you led with the security stuff. Yeah. Since you've got kind of some level of color on that from our 2021 Investor Day, we kind of gave you a little bit of indication as to what the breakdown is. You should have a good direction on that. By and large the answer is yes to your question. Yeah. I would just add that we kind of grouped the line items that related to our previous disclosures related to the service lines together and then the other pieces kind of after that. Perfect. Thanks for doing this. Thank you. Thanks, Tien-Tsin. Our next question comes from Dave Koning at Baird. Yeah. Hey guys. Thank you. I guess my question, first of all, is on margin mix. I would imagine the payment network is much higher margin. I guess one of the main questions here is employees have grown tremendously over the last several years since you're investing. Has that dampened the value-added service line in particular and maybe has a lot of incremental margin still to come as you leverage kinda the growth in that? Is that a good way to think about that? Yeah. Dave, let me kinda just address this issue around margins. We look at margins for Mastercard as a whole, right? Because that's how we run the business. We're running across both our value-added services and as well as our payment network. You know, these things are often sold together. They differentiate one another. At the end of the day, the way we deliver, whether it's the payment network or the value-added services from a cost standpoint actually leverages one another quite immensely. The point really is we've got to think about margins for the company as a whole. On your question around, you know, the increase in headcount, look, we continue to invest in our strategic priorities. Yes, value-added services and solutions is a big part of our priorities, but we also continue to invest in our payment network capability. It's kinda a little bit of what is the right balance of making investments to drive revenues in the short, medium, and long term, which is where we are making those investments, from a personnel standpoint, as well as broadly speaking as a company. I just wanna kinda emphasize that this is not about talking about there's a separate margin for payment networks and a separate margin for value-added services and solutions. It's a composite at the end of the day because that's how we run and manage the business. Gotcha. Yeah, that's clear. Thank you. Just to follow up on the geographical mix. I know, I think in total about a third of your revenue is U.S. I would imagine value-added might be higher and there might be more room for growth internationally in value-added. Is that a fair way to think about it? Hey, Dave. We think there's, you know, very good potential for value-added services across the board, right? I mean, you know, think about how we're executing on value-added services and solutions. We are doing it by calling for deeper penetration of our existing value-added services with our existing customer base. True in the U.S., there's still room to grow there as well as in EEMEA. Beyond that, we are expanding our suite of value-added services, which by the way is brand new territory both for customers in the U.S. as well as overseas. The reality is that potential still continues to exist. Yeah. The U.S. and Canada have been very good at, you know, the introduction of new services. It's not uncommon that we would start maybe in those markets. You know, certainly there's applicability in a broad base. Also you maybe think about the geographic footprint of where some of the acquisitions have been placed. Often they've been, you know, centered in those geographies, but the whole value proposition is to extend that to a broader set of customers. Gotcha. Thank you, guys. Thanks, Dave. We'll go next to Jason Kupferberg at Bank of America. Hey, thanks, guys. For quite a while we've been accustomed to getting that great slide in your earnings deck every quarter with operating metrics by month, the quarter to date data, cross-border travel, card present versus card not present. Are we gonna continue to get those types of metrics even if it's in the form of assessments rather than volumes? That's right. The idea is to share both, the, you know, disaggregated revenues and net revenue, but also these key metrics. In that way, allow you to continue to have visibility into those important trends. It facilitates comparison to some of our operating metrics. You know, you should think of that as being very consistent. It may, the form may change a little bit, and that's fine, but I think you'll see that you'll be able to interpret things, you know, much the way that you've been accustomed to. Okay. Yeah, no, good to hear. I know obviously there's a lot of focus on the cross-border travel piece in particular, so that's helpful. Can you just spend a minute maybe on a little more on just the difference between assessments and revenue just for our edification? I mean, it looks like just matching off the numbers. I mean, the assessments are, you know, bigger than net revenue but smaller than gross revenue. Just any other color there might just be helpful for our knowledge. Thanks guys. Yes. Yeah. Again, net revenue by its very definition is what happens, or what we generate as a company net of rebates and incentives. That would be one big fundamental difference between what you're seeing. Again, remember the assessment is an operating metric. It is not a measure of revenue. At the end of the day, what we're trying to show you is, you know, we generate assessments, which is the standard pricing we charge our customers. It's what we call the P times Q, this price times the quantity depending on what the driver is, right? Then, you know, to drive more volume and more transactions of our network, we actually give rebates and incentives. All of that is factored into when we show our disaggregated net revenue by payment network and Value-Added Services solutions. Thanks, Jason. We'll go on We'll go next to Darrin Peller at Wolfe Research. Guys, thanks for this clarity. I guess when you look at the value-added services, just to be 100% clear, I mean, I imagine that the majority or a lot of the transactionally driven revenue stream is going to be coming from the lines that you show it coming from, transaction processing, et cetera. Looking at the biggest piece coming from other, just maybe you can help us just clearly understand what% of that is actually driven by a transaction versus by, for example, consulting fees, or is most of it not? I mean, maybe just if you can help clarify. Darrin, I'll take a cut at that. In 2021 at the Investor Day, we talked about the within our service lines, approximately half of that related either directly or indirectly to transactions, the balance not. All of that is now together within the value-added services and solutions category. You know, we've not updated that, but I think that that's a, you know, good historical reference to consider there. The other pieces that are within value-added services and solutions are not directed, you know, related to the card transactions. You know, there's ACH related, there's Digital Identity, Open Banking, that sort of thing. I was wondering whether you also had a question around the residual other network fees or Other Network Assessments, which is within Payment Networks. Those are, you know, licensing fees and various other fees associated with operating the card network. That's a kind of a residual piece of what we used to call other. When I look at the total value-added services line, I guess we could start off with that 50% number, and then we can determine what's transaction processing. I think that's helpful. Just one quick follow-up is the thought process around not including the rebates and incentives broken down in the releases versus the Qs. I think you're saying it's gonna be in the MD&A of your 10-Qs, but why not just keep it all together? Yeah, I mean, look, I mean, the reality is we wanna provide transparency and, you know, as we look at interpretive guidance and as we look at, you know, aligning to that, it's more appropriately reflected in the MD&A, which is where we're actually reflecting it going forward. The operative thing, Darrin, just to be clear, is we are very focused on making sure we are not taking away from a transparency standpoint for our investors, which is why we were very deliberate about making sure that you got to see that number today, and you get to see that number going forward for payment networks. It just happens to be in MD&A. Okay. Okay. Well, no, it's all additive, so appreciate it. Thanks. Thanks, Darrin. We'll go next to Trevor Williams at Jefferies. Great. Thanks. Good morning, guys. Sachin, any way you could clarify the M&A contribution to the value-added services lines both for 2022 and 2021? I know you've given M&A contribution to other revenue by quarter. We were backing into about three points of growth in 2022 from M&A. If you'd be able to clarify that would be great. Then the second part to that would be on the 20% medium-term outlook you've given for value-added services growth, if we should think of that as an organic rate or on more of a reported basis. Yeah. On your first question, let's just take 2022, right? You're seeing value-added services growth rate of 18% on a currency neutral basis there. You know, acquisitions represented roughly 4 points of that 18%. That's what I think that's the question you're asking. Of the delta between... Yeah, of the delta between. Yeah ... the prior and the current year. What was 27% in the, in the prior 2021, which was 18% in 2022, four points of that differential is from acquisitions. Okay. Got it. The other thing to remember there. Yeah. The other thing to remember is that, in 2022, we only had Russia for one quarter. Right. Okay. Understood. Just to clarify on the way that rebates and incentives are gonna be disclosed in the Q, are they just gonna be disclosed for the payment network segment in the MD&A? I know that's 95% of RNI is tied to that segment, so are we not gonna get the remaining piece that's tied to value-added services, or do I have that wrong? Thanks. No. Our intent is to actually provide rebates and incentives for the payment network, just given the fact that they're 95% of total incentives. That being said, when we talk about our performance for value-added service and solutions, to the extent that trends are impacted to a material amount by rebates and incentives, we will obviously provide that kind of color as well. That's gotta be important in terms of explaining what's going on from a growth rate standpoint. Okay. Got it. Thank you, guys. The other thing I'd just add, the growth rate in 2021 for Value-Added Services is also benefits from the low base in 2020. That's another, you know, thing to keep in mind when you're looking at that. We'll take our final question from Bob Napoli at William Blair. Thank you. Thank you again for doing this. Just most of my questions have been asked and answered. Is there anything that you're that's different in these numbers from how you've talked about it in the past? The $6.9 billion number in 2021 that seem to recall a $6.5 billion number disclosed previously. Is there anything different in the mix from what you have discussed in the past versus what's in these numbers? Yeah. You know, the business is completely unchanged underneath. The $6.5, approximate $6.5 number that we talked about for 2021 did not include the same level of rebates incentives as the number that you're kind of backing into for, you know, the value-added services and solutions. It's just, we've introduced this approach with the new disaggregation. There's a slight, you know, the approach in splitting rebates incentives is reflective of this particular disaggregation. That's different. The business is unchanged. Okay. Just a last question on the mix of all the different businesses that are in value-added services. Is there any, like in the Qs or Ks, Will we get any update on some really interesting businesses in there on, or will just be kind of discussed on the conference call? Or, any plans to give further disclosure on that breakout on any consistent basis? Yeah. Bob, just as we're doing right now, we will always take a look at, you know, what we're doing from a disclosure standpoint, and we will make sure that we provide appropriate disclosure to allow you to do what you need to do from evaluating the performance of the business. You know, I would hate to tell you that the static view forever and ever, you know, we will make those evaluations on going forward basis and try and share the best information possible to give you the best transparency on a move forward basis. Thanks, Sachin. Appreciate it. Yeah, sure. Great. All right. Well, thanks everyone for your time. Appreciate calling in on the short notice. If there are any follow-up questions, we'd be happy to take them. Please just reach out. Thank you, everyone. Appreciate it. Thanks. Bye. This concludes today's conference call. You may now disconnect.