Earnings Transcript for MA - Q2 Fiscal Year 2023

Operator: 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. Q2 2023 Earnings Conference Call. [Operator Instructions]. Mr. Devin Corr, Head of Investor Relations, you may begin your conference.

Devin Corr: Thank you, Audra. Good morning, everyone, and thank you for joining us for our first quarter 2023 earnings call. With me today are Michael Miebach, 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. Finally, as set forth in more detail in 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 will now turn the call over to our Chief Executive Officer, Michael Miebach.

Michael Miebach: Thank you, Devin. Good morning, everyone. So starting with the big picture. Our momentum continued into the second quarter with net revenue up 15% and operating income up 16%, both versus a year ago on a non-GAAP currency-neutral basis, once again demonstrating the strong fundamentals of our business. Consumer spending has remained resilient with spend on experiences and travel remaining a focus. On the macroeconomic front, we continue to monitor a number of factors. First, the overall labor market remains strong, including wage growth, and consumers continue to be supported by credit and savings. These are key factors of consumer spending. Second, the efforts of central banks to curb inflation are showing signs of progress. Despite this, inflation remains elevated, and we are in a period of tight monetary policy across many countries. Economic growth will continue to vary country by country and sector by sector. Looking at our switched volume trends. Domestic volume growth remains healthy. We continue to see strength in T&E with some recent moderation in both inflation and spend in select international markets. Cross-border travel continues to show strength, reaching 154% of 2019 levels in the second quarter. We remain well positioned to capitalize on this trend with our travel-oriented portfolios and our initiatives in areas like loyalty and marketing. Cross-border card-not-present ex travel continues to hold up well. We're monitoring the environment closely and are ready to adjust investment levels as appropriate while maintaining focus on our key strategic priorities. As a reminder, these priorities are

Sachin Mehra: Thanks, Michael. So turning to Page 3, which shows our financial performance for the quarter on a currency-neutral basis, excluding special items and the impact of gains and losses on our equity investments. Net revenue was up 15%, reflecting resilient consumer spending and the continued recovery of cross-border travel as well as the continued growth in our value-added services and solutions. Operating expenses increased 13%, including a minimal impact from acquisitions. And operating income was up 16%, including a minimal impact from acquisitions. Net income and EPS increased 11% and 14%, respectively, both reflecting a sizable discrete tax expense this quarter related to foreign tax legislation enacted in Brazil. EPS of $2.89 includes a $0.22 reduction due to the discrete tax expense I just mentioned and an $0.08 contribution from share repurchases. During the quarter, we repurchased $2.4 billion worth of stock and an additional $497 million through July 24, 2023. So let's turn to Page 4, where you can see the operational metrics for the second quarter. Worldwide gross dollar volume, or GDV, increased by 12% year-over-year on a local currency basis. In the U.S., GDV increased by 6% with credit growth of 8% and debit growth of 3%. Outside of the U.S., volume increased 16% with credit growth of 14% and debit growth of 17%. Of note, we have now completed the NatWest debit migration in the U.K. Overall, cross-border volume increased 24% globally for the quarter on a local currency basis, reflecting continued improvement in travel-related cross-border spending. While this is sequentially lower versus Q1, this is due to tougher comps as we opened up post-Omicron last year. When you look at the trend versus 2019, you see continued strength. For example, cross-border travel is at 154% of 2019 levels in Q2, which is up 6 ppt from the prior quarter. On the same basis, cross-border card-not-present excluding travel continues to hold up well in relation to 2019 levels, up 2 ppt from the prior quarter to 210%. Turning to Page 5. Switched transactions grew 17% year-over-year in Q2. Both card-present and card-not-present growth rates remained strong. Card-present growth was aided in part by increases in contactless penetration as contactless now represents over 60% of all in-person switched purchase transactions. In addition, card growth was 8%. Globally, there are 3.2 billion Mastercard and Maestro-branded cards issued. Turning to Slide 6 for a look into our net revenues for the second quarter, which came in above our expectations. As a reminder, earlier this year, we revised our disaggregated revenue disclosure. Net revenues are now broken down into 2 new categories

Devin Corr: Thank you, Sachin. Audra, we are now ready to begin the question-and-answer session.

Operator: [Operator Instructions]. We'll take our first question from Tien-Tsin Huang at JPMorgan.

Tien-Tsin Huang: Just want to ask on the UniCredit win there. That was a nice one just outside of the top 10, it looks like, in Europe. So you mentioned a multi-market strategies what they're going after, and I heard sustainability also as a reason for the win. I'm just curious, thinking about this as a case study, is this a new trend? Why are they employing the strategy now in the wake of a lot of the macro uncertainty, open banking, and there was a lot of talk about pan-European schemes and whatnot. So I'm -- just wanted to study this a little bit and if there's any comments on timing pricing as well.

Michael Miebach: Right. Tien-Tsin, thanks for the question. So this is a fantastic win. We're excited about that. As I laid out, it's very unique. This is a pan-European bank, so cutting across 13 banks in 12 markets. It's a wide strategy. Therefore, it's single card, multi-market and it cuts across a lot of our digital capabilities. So I think the breadth of our offering on the digital-first side as well as our services are a key aspect of us winning this particular portfolio. The sustainability part, we see this across a whole range of customers who are all looking at climate as the question of the century to solve, what can be done, the consumption question in the context of payments. There's so many angles to it. Our Priceless Planet Coalition on tree planting itself plays into that. So that is particularly important to UniCredit. So here again, we had a meeting of the minds. In the end, it comes down to as part of the migration, and you alluded to this in your question, do we stand ready to serve their needs from day 1 as the migration starts. We have proven this with Deutsche Bank, we've proven it with NatWest and so forth. So this is something that is not new to us. So we're excited to see this unfold over the near future.

Operator: We'll go next to Harshita Rawat at Bernstein.

Harshita Rawat: Michael, I want to ask about FedNow, which is now finally launched. I know you've commented on this before, and it's very early days and far from any sort of ubiquity or potential retail payment use cases. But you've had also a lot of experience working alongside real-time payments rails owning some TAM. So how are you thinking about FedNow and the risk [indiscernible] involved.

Michael Miebach: Thanks, Harshita. Yes, we're all monitoring what FedNow is doing. They are now going live. So this is clearly a milestone, a good opportunity to look at this topic again. Yes, our view on this really hasn't changed. So in the end, it comes down to what problem you are trying to solve. What are merchants looking for? Merchants are looking for reach to consumers. So scale matters. What are consumers looking for? Consumers are looking for safe ways to pay in a predictable fashion, ubiquity available. So those are all factors that haven't changed with this launch. We built that acceptance. We have a brand, the 2 interlocking circles that represent trust so that addresses a lot of what merchants and consumers are looking for. And we strengthened the position -- the proposition over years, contactless, Tap on Phone, buy now, pay later, Mastercard Installments, Click to Pay and so forth. So that's good. The Mastercard debit proposition is strong, and we keep evolving that. So it's well understood now. FedNow is launching. So as we look at that, we will obviously continue to compete and offer our services to our banking and issuing partners. At the same time, in our experience, to your question, we have stayed close to these systems in various other countries in the end, ending up partnering with most of them. So here, we'll have to see where it goes live. Going live doesn't mean that it is broadly available yet. It is early days, as you said. It doesn't have features. It doesn't have a consumer platform as such. You can't access it through your mobile banking app. All of that is what our solution today provides. So we have to see where it goes. Head-on competition by the mindset of partnership where and when it makes sense for us and where this goes. It is important to say that we do have solutions for these systems. If you look at the Chase Pay by Bank solution that we put into the market, so that's exactly leveraging these kind of flows that would run across these systems, generally B2B-focused. Some noncard penetration verticals run across these particular systems. So we see that as an opportunity. And Chase Pay by Bank app will be one of those ways to going after that. We've done similar kind of solutions in the U.K., in Europe and so forth. So more to come. We'll stay very close. At this point in time, I think we have a better solution in the market.

Operator: We'll go next to Sanjay Sakhrani at KBW.

Sanjay Sakhrani: I had a question on the Fed routing rules on debit. I guess the card-not-present transactions went through in July. I'm just curious sort of how you see the opportunity there. It would seem like you're in a good position to take some share.

Michael Miebach: Right. So the clarification came to networks available as of 1st of July. So we put that in place and we said we would, and we're ready to do that. It's still early days. We have to see where that goes. But as you rightly said, Sanjay, we stand ready to compete. And that is certainly we will look for the opportunity, and I'm sure we will find it.

Operator: Next, we'll go to Lisa Ellis at MoffettNathason.

Lisa Ellis: Michael, in the prepared remarks, you highlighted that with Mastercard's real-time ACH strategy, you're sort of in the phase of transitioning from building out infrastructure to focusing more on building applications and services. Just kind of taking a step back, it's always been a big differentiator for Mastercard that you own infrastructure in fast ACH with Vocalink and Nets' Corporate Services. Can you just kind of comment a bit on the movie over the last 6 or 7 years? Like how has that helped differentiate Mastercard in the -- in terms of being able to capture account-to-account network payments, new flows, et cetera?

Michael Miebach: Thanks, Lisa. So real-time payments -- when the rise of real-time payments started 2016, '17 and so forth and we invested into Vocalink, it was clear at the time that we wanted to be in the infrastructure application services. That was a bit of the logic. At the time, we needed the street cred and we needed the talent so we can participate in this trend from day 1. That was the first season of the movie, so to say, to stick with your analogy. Where we are today, we've built out an enviable and unique position in real-time payments, having a footprint in 13 of the top 50 GDP countries where we run and partially operate real-time payment infrastructure. Our strategy was we will be in the markets that matter and we don't win to be in the markets that don't matter. So we feel we've reached that point. And now it's really to drive up scale and use that infrastructure position. The business in itself of running these systems in these markets is attractive enough. As we pointed out, we're going to focus on building out a set of applications and services on top of that. If you recall from the prepared remarks where I talked about the scam -- the anti-scam solution in the U.K. with these non-U.K. banks, it's a fantastic example of how our expertise in these markets has positioned us to rally 9 banks around the table to come up with a market-wide solution. Now not everything that we will do will be market-wide solutions. There will be individual customer solutions, but we feel we have muscle in this space. It's not going to go away. All these government payment systems out there, more and more real-time payment solutions will come up, and I think we will be in demand. And because we've done it for a long time, we'll have a seat at the table.

Operator: We'll move next to Darrin Peller at Wolfe Research.

Darrin Peller: Could we touch on value-added services for a moment? I mean it's been a good tailwind for some time. I think it grew just about 1 point below transactions this time around. And you mentioned strength in cyber and some other categories, offset by -- that were offsetting others. So I'd be curious to get a little more detail as to what were the strengths and weaknesses of value-added services now, including the other. And then more importantly, just how much room do you think you have across those different categories to keep that growth alive and cross-sell well into your meaningful payments business?

Michael Miebach: Right. So let me start, and then Sachin can add a bit around the various dynamics around growth rates and so forth. So as I said in prepared remarks, payments and services complement each other. The strategy is the combination of both and we extend that into new networks. So that's the starting point. We remain convinced that, that is a key reason that all those wins I just talked about earlier are happening, so central to our strategy. Our services in aggregate continue to grow faster than the core. So we continue to diversify our revenue base. We like that. We want to continue to do that. There's a whole range of services to choose from. We could do lots of things. We have pruned our strategy when it comes to processing because we didn't feel that was such a differentiator. But we felt that cybersecurity in a world that is rapidly digitizing is just going to drive the biggest demand, and we're seeing that coming through in the numbers when I look into our C&I business, which grow at a very healthy clip. If you think about our D&S and data analytics business, here, we keep on building out the value chain. It's a vertically integrated value chain we have -- where we have Test & Learn, we have loyalty and you go all the way into personalization that is before, after, during the transaction, helping our customers run a better business. I don't see an end to the demand. In fact, that is key to our segment diversification strategy. So running at a healthy clip. I don't see any moderation here. This is -- will continue to grow. And you should see us continue to build out across the key aspects of services in cybersecurity and data analytics insight. So we love this business, and we'll continue to nourish it.

Sachin Mehra: Darrin, it's Sachin. A couple of additional thoughts. So Michael kind of covered off the strength we continue to see in our value-added services and solutions. And that's indeed the case. But you got to remember that growth rates move around quarter-to-quarter on this area. And so we should all focus on the longer-term trends out here. As it relates specifically to Q2, when you look at growth rates for value-added services and solutions in Q2 of 16%, I assume you're looking at the sequential trend out there. One point to keep in mind is that there was a 1 ppt drop in Q2 on account of acquisitions. So Q1 had the impact of acquisitions. Q2 doesn't have it because it kind of lapped that acquisition period. So that's one piece. And then specifically in my comments, I talked about that the strength in Cyber & Intelligence as well as in some of our Data & Services capabilities was offset by other solutions. And it's really all about what the growth rate trends are for Cyber & Intelligence and Data & Services relative to growth rates and things like real-time ACH, especially on the infrastructure level. So when we talk about other solutions, think about it in the context of things like real-time ACH, which tend to grow at a lower pace there. So historically, what we had spoken about was just services. Now we are talking about value-added services and solutions. When we think about services in the historical context, in Q2, that services growth rate was more like 18%. So just for a reference point beyond that.

Operator: We'll move next to Timothy Chiodo at Credit Suisse.

Timothy Chiodo: I want to dig in a little bit on another business that is important to your -- both your volume and your revenue growth algorithm over the medium term, which will be Mastercard Send. You touched a little bit on some of the cross-border use cases. I believe many of the initial use cases were much more domestic, but it's evolving over time. Maybe you could just dig in a little bit more to some of the cross-border use cases that are really gaining traction.

Michael Miebach: Right. So Timothy, let me start off with that. So our Send business domestic and cross-border together, that's how we look at it. There's a big chunk in there, which is cross-border disbursement remittances, as you rightly said. The way that we go after that is by adding new geographies. I gave you 3 markets that we've added this year, Chile Bahrain and Slovakia. So there is tremendous reach -- unparalleled reach in what we have in our cross-border proposition, 100 countries around the world. Then there's new ways to go after it, and that is the use cases. So earlier when I was talking about gaming payout, some of that is domestic, some of that is international. The whole workers' remittances piece, Al Fardan in Qatar, those are important corridors. We very specifically go after these corridors, Middle East into South Asia and so forth. So it's pretty methodological. But there's another way that -- which I haven't talked about on how to accelerate this business, and this is how we make it easier for customers to onboard with us. So cross-border service express, which is kind of prepackaged solution around cross-border payments is another way for us to accelerate this business. So new geographies, new use cases, corridor-specific, great methodology. I think we have the right kind of assets here across our HomeSend integration, across our Transfast acquisition, the Mastercard proprietary system and our card reach. So all in, this is growing at a very healthy pace, and we like that business a lot. We are experts in cross-border, as you know, on the card side, and we're building that out here -- over here in cross-remittances and disbursements.

Operator: We'll go to our next question from Rayna Kumar at UBS.

Rayna Kumar: Both of you in the past have discussed how B2B remains a large opportunity for Mastercard. Can you talk about what trends you're seeing in B2B payments in this macro environment, how you're progressing against capturing the TAM and if you're seeing any slowdown in corporate spending as companies potentially tighten their budgets?

Michael Miebach: Thank you, Rayna. I'm noticing a lot of questions coming from me means that there isn't a lot of questions in the numbers, which is fantastic. And I love to talk about B2B. Let me take the lens, Rayna, that's a little bit broader here on commercial overall. So I feel like I'm repeating myself here, but we're choosing priorities because they are growing at a healthy clip, so is the story for commercial growing at a healthy clip. So this is -- we're seeing a quarter-over-quarter, year on -- quarter 2 year-over-year growth above the consumer side. There's particular strength in our international markets business. And we've sustained elevated levels of growth when we compare this back to 2019, all the noise of COVID out of it. We have two main focuses in this area. One is commercial point of sale, and the other one is our B2B accounts payable business. Commercial point of sale, now this is a tremendous total market opportunity, massive TAM out there, and it's likely penetrated by cards today. The way we look at this is, this isn't really about building new systems. This is about penetrating with the tools that we have today, targeting SMEs and corporate T&E, purchasing fleet, all of that with our existing capabilities that we have plus our complementary solutions like smart data and easy savings and so forth. So a lot of cash and checks out there, a lot of opportunity with cards that we have today. So we leverage that. We built out a separate vertical in the company. We're focusing hard, and we're seeing the growth rewarding us for that. On the B2B side, this is accounts payable, trusted relationships, this is invoice payments and so forth. This is an even larger TAM with a lot of clear pain points. Companies are looking to automate these processes, digitize these processes, get rid of the paper. And virtual cards is a solution that works tremendously well. We -- as I called it earlier, we are the leaders in virtual cards. But the solution isn't perfect. So we invest a lot of energy through our product teams to make it better and better. What I was saying earlier on Receivables Manager, this is a way to automate the acceptance of virtual card payments, build it into the accounts receivable system, automate it to get the benefits of virtual cards without some of the manual processes that we have to go through over the past year. So this is a real breakthrough. This business is going to be hugely important for us going forward. We called it out in November 2021 at our Strategy Day. It's one of our biggest growth opportunities. We feel we're ahead in the market, and we're seeing the healthy growth. And that will be remaining a focus for us.

Operator: We'll go next to Ashwin Shirvaikar at Citi.

Ashwin Shirvaikar: Good quarter guys. Michael, since you said Sachin's not getting enough questions, maybe I'll ask a numbers question.

Michael Miebach: Yes, please.

Ashwin Shirvaikar: So I wanted to figure out sort of the cadence of operating expense. 3Q versus 4Q, it sort of looks like -- it looks like you're kind of exiting the year a little bit higher than the 3Q levels in terms of growth. So what's causing that as well as -- I know your cadence of spending tends to be longer term in nature, but are there product or service call-outs in terms of the types of investments that you're making that's most pertinent now?

Sachin Mehra: So look, what we shared with you is our thoughts around what we think operating expenses look like in the third quarter. And I've given you what the full year numbers -- or what our expectations for the full year numbers are. So I think you can kind of back into what our operating expense growth rate is going to be or is expected to be in the fourth quarter. There's nothing unusual going on from an OpEx standpoint in Q4. Honestly, I would tell you, if you look at it on a year-over-year basis growth rates, when you back into those numbers, you'll see there's nothing really unusual going on there. Broadly speaking, on OpEx, here's what I would say. We continue to remain focused on driving our operating expenses in what matters. It's the strategic priorities. It's making sure we're channeling our capital in the appropriate manner to drive growth both in the short, medium and long term. And that's what we'll continue to do. As you know, we are a people business, to a large extent, because a lot of what we do from a tech development standpoint is around people. A lot of what we do from a sales standpoint is around people. So that's what we invest in. So when you see growth rates in terms of operating expenses, I tend to call out personnel as one of the line items essentially for that reason alone, which is the growth comes from people and people are the ones who actually bring the assets that are there for -- which allow us to deliver that revenue. But really nothing unusual going on from an OpEx standpoint as we exit the year.

Michael Miebach: Yes. So we keep top and bottom line growth in mind. But there is a tremendous opportunity ahead of us right now. So we are using this tailwind that we're currently seeing to continue to invest. You see the list of wins, the growth momentum in B2B, the growth momentum in services. So this is the time to continue to nourish that business and invest, and you will see us do that in a very prudent and disciplined fashion.

Operator: We'll go next to Dan Dolev at Mizuho.

Dan Dolev: Just a quick question on the guidance. Like obviously, results were very strong. You exceeded your second quarter guidance on revenue. Like what was the thought process of not boosting the guidance for the year?

Sachin Mehra: So Dan, a couple of thoughts here. One, again, remember, we shared guidance in terms of ranges, and that's what we've shared out here as well, right? And when you think about ranges, it -- that's what they are in essence. Point number two is some of the beat, which we had in Q2, as I mentioned in my prepared remarks, was driven by what we call timing of deal activity. We still expect to be active in the markets. We still expect to vigorously compete in these markets. And so I kind of intentionally mentioned that as timing only because we do expect that as the year progresses, we will continue to be active in the market. So I think you should take that into consideration as well. And then my only other comment I'd make is, in Q1, we had modestly increased our thoughts relative to what we had shared right at the start of the year. So when you bring all of that together, right, that's kind of our thinking behind what we shared from a full year guidance standpoint.

Operator: We'll go next to Bob Napoli at William Blair.

Robert Napoli: On open banking, Mastercard has been pretty aggressive in investing in open banking. But I just like some additional thoughts on maybe on how that's progressing and then how open banking maybe fits into other strategies like embedded finance and Banking as a Service.

Michael Miebach: All right. So open banking, as you know, we specifically called that out as 1 of 2 opportunities in new networks. The trend is here to stay. That's pretty clear. This whole notion of people got to use their data footprint to avail better financial services. There's a lot more regulation coming around that. PSD3 in Europe is coming out. So this train is -- has left the station. That's good. We're on it. The way we look at it is we have to move beyond connectivity. We had a good start. We are well connected here in the U.S. through our Finicity asset and in Europe through our Aiia assets. And we're very busy now building use cases on top of that, and this is where we think the future is going. Initial demand of Finicity was very clearly in lending-oriented use cases and asset verification use cases. That feels that is where the demand is today. To Sachin's earlier point, where do we invest, we invest where we see the demand in the near-term event. So that is where we're optimizing. But you're already starting to see as we're going beyond these lending use cases with our solutions like our Chase Pay by Bank solution here in the U.S. This is using a payment success indicator, which is using open banking data to tell a biller this is a good time when there is balance on an account, please now bill. That is what the payment success indicator does. That is powered by Mastercard's open banking technology. So near-term use case is clear. That's working. Connectivity, we're well positioned with our 2 assets, and we're very busy building out use cases. And obviously, we're excited to see Pay by Bank with Chase launch in the third quarter as we said to you.

Operator: We'll take our next question from David Togut with Evercore ISI.

David Togut: Cross-border volume growth remains very strong, but on Slide 9, clearly, there's a deceleration from April growth through June, especially in cross-border travel. So my question is for the second half, what growth rate in cross-border volume is embedded in your guidance? And then if you could go a little bit under the hood, what do you see in cross-border travel volumes? Maybe a little more texture on what you're seeing by country in Europe. You gave kind of overall data and some thoughts on China.

Sachin Mehra: Sure, David. So a couple of thoughts first. Let's start at the highest level, which is the value prop of cross-border travel still remains incredibly strong. So we've got a strong value prop. We have a strong presence in the market. As you'll remember, as we were going through COVID, when everybody had stopped traveling, we used that as an opportunity to continue to bolster our position in cross-border. And that's paying dividends right now. The fact that we were building portfolios and winning portfolios at that point in time is helping us actually drive strong growth in cross-border, broadly speaking, but also in travel. Now specifically to your question around trends, I think you're looking at year-over-year growth rates when you are looking at what the cross-border travel trajectory is month-over-month, the declines you were talking about. I'd encourage you to look at the right-hand side of Slide 9, which talks about the numbers indexed to 2019. And there, you could see actually there's an accelerating trend in cross-border travel. So said differently, you can see that in Q1, our cross-border travel as a percentage of 2019 was 148%. In Q2, that was 154%. In the first 3 weeks of July, that's 157%. The reason that's important is because the year-over-year growth rates are getting impacted by tougher comps from last year. And I think that's important to actually keep in mind. In terms of regional color, I would say that regions are performing well. Look, I mean the beauty of what we've got at Mastercard is a diversified business model. It's diversified across multiple dimensions, across payments and services, across products, across channels of sale, across regions. And the fact that we've got this presence -- strong presence across various regions helps us in the cross-border side as well. And really, what we're seeing is good, sustained growth in cross-border, both on travel as well as nontravel, across the globe. We're seeing accelerating trends in Asia Pacific, which we had very much expected and spoken about. That's what you're seeing coming through in the nature of the numbers here. We still think there are pockets of opportunity on a going-forward basis, in particular going into China and coming out of China. Just as a reference point, Michael talked about how cross-border travel inbound into China stood at approximately 50% of 2019 levels in Q2. That just goes to show what the opportunity remaining there is. Conversely, cross-border travel outbound from China was approximately 70% in Q2. And so that -- both those numbers will give you an indication of where the opportunities lie on a going-forward basis. And as we continue to do what we're doing in terms of winning more portfolios, enriching our proposition, luring services such as our loyalty programs, that just helps us position us well on a going-forward basis. So that's the kind of color I'd like to share with you on this. Broadly speaking, I think we're in a very good place as it relates to cross-border.

Michael Miebach: Maybe one thing to add here that is the current imbalance in the market between demand and supply. So there's still an unlock there as in airline capacity, airport capacity and all of that will unlock. So the combination of the underlying desire to travel, how that trend is coming through our position -- strong position in the travel industry with our portfolios, Expedia and Lufthansa, just to add, too, here, and this unlock of capacity over time will be a very good mix. This is an exciting space. People just want to be out there.

Operator: We'll go next to Dan Perlin at RBC.

Daniel Perlin: I just wanted to maybe dig a little deeper on the commentary around this moderation in inflation and spending, Sachin, that you called out. Particularly, what can you tell us about kind of the downdraft in average tickets during the current quarter? And then maybe more specifically, are you seeing any discernible signs or indications of trade-downs from the consumer that would be high corollaries to slightly weaker consumer spending as opposed to this resiliency that it sounds like you guys are continuing to talk about?

Sachin Mehra: Sure, Dan. So a couple of thoughts. I mean it's no surprise. I think you guys are all seeing that inflation, while still remaining at high levels, has started to moderate, right? So you're seeing that come through in terms of the nature of spend, right? We're a nominal value business. And at the end of the day, right, inflation -- declining inflation quarter-over-quarter will have an impact. So that was important to actually call out. And then I also talked about how there's a moderation in select markets -- international markets. The reality is when you look at markets -- and this is not broad-based, right? There are select markets where -- let's take a market like the U.K. At the end of the day, rising interest rates and high inflation levels, ultimately, will put a squeeze on people's ability to spend. That doesn't mean that the consumer isn't necessarily resilient. The consumer remains resilient on a more holistic basis. But at the margin, right, what you start to see is as, say, for example, mortgages get reset, when mortgages get reset, they're getting reset at high interest rates. What it's doing is it's squeezing the wallet -- or share of wallet, which would be available for other discretionary categories of spend. So you're going to see a little bit of that trend come through, which is what we were kind of calling out. But all of that is factored into our thinking as we think about the rest of the year and in my full year guidance. So that's really, in essence, what we were kind of thinking about. So again, I'll summarize it by saying there's recent reductions in inflation. There's a little bit of moderation in select international markets. And really, we haven't seen this as being broad-based. We haven't seen this as something which is causing concerns for us. It's very much in line with what we've been thinking about from a guidance standpoint. And I'll remind you that at the end of the day, cross-border continues to be strong, back to the question which David just asked. So to kind of bring that all together, right, we feel good about what the strength of the consumer is.

Devin Corr: I think we have time for one more question.

Operator: And we'll take that question from Bryan Keane at Deutsche Bank.

Bryan Keane: Sachin, just want to ask about FX volatility and how it impacts the model. I know cross-border assessment revenue growth was above volume, so it had a positive yield. I think in your peers -- one of your peers' reports, it was actually negative, and they called out the lack of FX volatility. So just trying to understand how it impacts Mastercard's model.

Sachin Mehra: Sure, Bryan. So first, the -- what -- when we talk about FX volatility, you see that in our numbers in transaction processing assessments, not in cross-border assessments. It is tied to the activity about clear and settle, which is why it sits in transaction processing assessments. And what I called out was the higher growth rate in cross-border assessments relative to volume was driven by what we call favorable mix, which is the fact that our inter volumes, which is everything ex intra-Europe, right, are growing at a faster pace than intra-Europe. Inter volumes tend to be high yielding than -- as compared to intra. And that's the reason you had that positive kind of gap between where revenues were on cross-border assessments and where volumes were. And again, the volatility comment I made was tied to transaction processing assessments, which is where it sits.

Devin Corr: Thank you. Michael, any closing comments?

Michael Miebach: All right. Thanks, Devin. The first thing I want to say, you should all know that Warren sits in the other room and is listening to us. So this is the first time soloed by Devin, and we're delighted to -- with this next chapter now. As always, I want to make a comment about all the people at Mastercard who make this happen, the 30,000 of us. I sent them a note earlier today with the results that, this is the value that you guys deliver every day. So I just wanted to share that with you. And with that, thank you for your support, your questions today, and we'll talk to you soon. Take care. Bye-bye.

Sachin Mehra: Thanks, everyone.

Operator: And this concludes today's conference call. Again, thank you for your participation. You may now disconnect.