Mastercard Incorporated (MA) Q2 2010 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to MasterCard's Second Quarter Earnings Conference Call. My name is Jeremy, and I will be your coordinator for today. [Operator Instructions] At this time, I would like to turn the presentation over to your host for today's call, Ms. Barbara Gasper, Head of Investor Relations. Ma'am, you may proceed.

Thank you, Jeremy. Good morning, and thank you, all, for joining us today, either by phone or webcast, for a discussion about our second quarter 2010 financial results. With me on the call today are Ajay Banga, our President and Chief Executive Officer; as well as Martina Hund-Mejean, our Chief Financial Officer. Following comments from Ajay and Martina, highlighting some key points about the business environment and our second quarter results, we will open up the call for your questions. This morning's earnings release and the slide deck that will be referenced on this call can be found in the Investor Relations section of our website at mastercard.com. The earnings release and slide deck have also been attached to an 8-K that we filed with the SEC earlier this morning. A replay of this call will be posted on our website for one week through August 10. Finally, as set forth in more detail in today's earnings release, I need to remind everyone that today’s call may include some forward-looking statements about MasterCard’s future performance. Actual performance could differ materially from what is suggested by our comments today. Information about the factors that could affect future performance are summarized at the end of our press release, as well as contained in our recent SEC filings. With that, I will now turn the call over to our CEO, Ajay Banga. Ajay?

Thank you, Barbara. Good morning, everybody. I'm pleased that we've got yet another good quarter to report this morning that highlights the solid fundamentals of our business. Before Martina gets into the details of the results, I'll try to comment on some of the contributing drivers of the quarter, as well as some recent business highlights. So the second quarter, we saw net revenue growth of 6.7% as reported and 7.9% on a constant-currency basis. Gross dollar volume grew 8.5% on a local-currency basis and cross-border volume grew 15.2%, both actually continuing their momentum from the first quarter. Process transaction growth was basically, essentially flat for the quarter, due to the continued roll-off of several U.S. and U.K. debit portfolios that we have spoken of on past earnings calls with you. But if you exclude reconversions, underlying transaction growth was around 10%. Our expense control efforts over the past year have allowed us to deliver an operating margin of 52.6% this quarter, a nine-percentage point expansion over last year's second quarter. We've put all this together, and it helps fuel our net income growth of roughly 31% or 34% on a constant-currency basis. Some of the progress we saw in the quarter can obviously be attributed to global macroeconomic improvements. And as a global company, we continue to see the non-U.S. markets becoming a bigger contributor to our businesses. Today, in fact, the international markets, the markets outside of the United States, account for 55% of our total revenue, up from about 50% just two or three years ago. As in the recent quarters, our volume growth outside the United States outpaced growth in the United States. The Asia/Pacific and Latin America regions delivered another quarter of strong double-digit growth, spurred on by, I think, the continued buoyancy in most…

Thanks, Ajay, and good morning, everyone. Let me begin on Page 3 of the deck, which shows our reported results. As Ajay said, we are very pleased to deliver another good quarter of solid financials. Net revenue grew 6.7% over last year's second quarter to $1.4 billion. On a constant-currency basis, net revenue grew 7.9%. This revenue growth was primarily driven by a 15.2% increase in cross-border volume and an 8.5% increase in gross dollar volume on a local-currency basis. Additionally, pricing contributed approximately four percentage points to net revenue growth, including the effect of cross-border rebates. All of these positive factors on net revenue was somewhat offset by additional rebates and incentives, primarily due to new and renewed customer agreements as well as rebates related to higher volumes. Operating expenses declined 10.4% versus last year's second quarter, primarily as a result of lower severance as well as savings due to reduced headcount. Our operating income was $717 million for the quarter and resulted in an operating margin of 52.6%, a 9.1 percentage point improvement over the year-ago quarter. We delivered net income of $458 million or $3.49 per diluted share, up roughly 31% over the second quarter of 2009 and 34% on an FX-adjusted basis. Turning to Page 4. We are seeing stronger performance across a number of business drivers, including continued strong volume growth similar to what we saw in the first quarter. Cross-border volume growth year-over-year was the strongest it had been since the third quarter of 2008. Worldwide gross dollar volume, or GDV, was up 8.5% on a local-currency basis in the second quarter and grew 9.8% on a U.S. dollar-converted basis to $656 billion. U.S. GDV was down 0.5%. While not yet a return to positive growth, this is another quarter of sequential improvement compared…

Thank you, Martina. We're now ready to begin the question-and-answer period. In order to get to more people in our allotted time frame, we are asking that this morning, you limit yourself to a single question and then queue back in for additional questions. Operator?

[Operator Instructions] And ladies and gentlemen, your first question comes from the line of Adam Frisch with Morgan Stanley.

I guess the one place I'd like to go, just given it's the most topical, is the mobile opportunity. Yesterday's reaction in the stocks from the Bloomberg article suggested a pretty negative outcome for you and your largest competitor. So it's hard not to imagine you working with the largest wireless networks at some point, but can you talk about maybe, Ajay, what you're doing here? Why maybe we should feel little less concerned that you're not going to be successful in the mobile opportunity? And then maybe expand on a couple of other growth opportunities that you're excited about that we might see impacting the P&L in the next 12 months or so?

The first part, the mobile part. I'm not going to comment on whether that pilot is actually happening or not because none of the actual players in the pilot are confirming what they're doing, so that's what I'm going to go down the path of. But I would tell you this, MasterCard has been partnering with mobile carriers, with handset manufacturers and with banks for many years now, globally, to launch a bunch of NFC. These contactless came on trials, with PayPass, mobile payment tags, person-to-person money transfer services, high phone-smartphone apps, that kind of all helping to get this mobile promise opportunity to come true. In fact, I kind of counted off and brought close to 20 pilot and commercial rollouts around the globe as we speak, and I'll give you a few examples so you would understand where I'm coming from. In the U.K., Barclay's and Orange and MasterCard are the ones working on a similar contactless mobile payments NFC-based technology to pay for goods and services at retailers. There is the PayPass terminal that's been used. In Tokyo, on the other hand, we partnered with Guarantee Bank and with Aviya [ph], which is a leading local mobile operator, to pioneer this mobile NFC payments, and there -- in that case it was using an antenna attached to the sim card. In June, in the U.S., Citi has announced the launch of MasterCard PayPass tags, available for the majority of their credit cards. You can stick that sticker at the back of your mobile device and use it at any of the PayPass-enabled merchants that exist. They've also announced a partnership with Bank of Montréal and Rim, Research In Motion, to bring mobile payments to Blackberry smartphones through a similar MasterCard PayPass technology. We've got programs in Brazil,…

And your next question will be from the line of Bryan Keane with Crédit Suisse. Bryan Keane - Crédit Suisse AG: I just would be interested in getting a little color on some of your conversations with the Fed. We've heard BofA come out with some thoughts. There were some pretty significant cuts in interchange. So we'd be interested in just kind of what you been hearing from the Fed? And then secondly on timing, when do you think we'll get some idea on what the Fed's thinking for sure?

Well, look, we've been talking to the Fed, as I said, so have the others. And our talks with them, our meetings with them are very constructive. They're trying to make sure that they get all the information they need, all the facts they need to be able to actually assess what they've been asked to do nine months from date of the signing of the bill, which is the actual setting of what should be this new debit interchange levels. And they have 12 months to actually come out with clarity around the exclusivity angle of the debit card branding. Every expectation, they're going to meet that date. And frankly, what we're discussing with them is not something I'm going to discuss openly on a conference call because that will be an inappropriate thing to do, but it's a very practical open conversation with full data and full information that we plan to give them.

And your next question will be from the line of Sanjay Sakhrani with KBW. Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc.: I was just wondering if you could give us a sense of where we are in the process for the roll-off of account losses for each of the customers? And just looking ahead for the next few years, do you guys have any major contract renewals?

Sanjay, in terms of the roll-off, we fairly far through a number of the roll-offs, in particular, the U.K. portfolios, and as we just said on the earnings call, we also relatively far through the WaMu roll-off. We have some more cards left to roll-off in the third quarter. And that's why we're saying that we're actually going to bottom out from a transaction point of view and from a transaction growth point of view or [indiscernible] point of view in the third quarter, and then we'll going to go into a bit of a more normalized fashion into the fourth quarter. So by the end of the year, we will be pretty much done. We don't expect that our results will be impacted in 2011. And in terms of major contracts that are coming on award, really the one that we've been talking about now for a while is the SunTrust contract. And they're -- we said early on the year that we would have think that we have, in fourth quarter, the roll on, we are accelerating. The roll on will be coming on in the third quarter now, and so hopefully, we'll be up and running in the latter part of the fourth quarter with some contribution to our net revenues. In terms of major renewals for the near future, we don't really have any major renewal for the next couple of years. We do know that there is an opportunity in 2011 for another customer, which we will be going after. But besides that, I think we feel fairly comfortable on where we are.

Your next question is from the line of Andrew Jeffrey with SunTrust.

Could you talk a little bit about the cross-border contra revenue, the rebates and incentives? Martina, are we going to effectively lap those pricing adjustments at the end of '10 and then normalized in '11?

Yes, I mean, as you know, we have the cross-border pricing showing up in our gross revenues, as well as in our contra revenues. And we did implement, Andrew, as you know, October 1 of last year, those kinds of changes. So in the fourth quarter, we will be lapping those price movements. Albeit, what I just would like to make sure that you understand, in 2011 and going forward, it really depends on how cross-border volume growth is going to behave. So you might, depending on how much it will grow, you might see some impact still year-over-year on the growth line as well as on the contra's line. And net-net, as we said before, we expect that there will be only a slight contribution to overall net revenue, positive contribution to overall net revenue.

Your next question will be from the line of Craig Maurer with CLSA. Craig Maurer - Credit Agricole Securities (USA) Inc.: I just wanted to ask for, a bit off-topic, an update on SEPA. With all the turmoil in Europe, if there's been any movement on that or if that's been pushed to the back burner for now?

No, actually, SEPA is exactly where it was and it's still on line and they're making steady progress, in fact, in a number of countries. In Germany, we've now got the fourth bank to become a Maestro exclusive issuer, which is Dresdner-Cetelem. We're actually migrating close to 750,000 cards from their local debit cards human processor. We've got -- in France, we've begun processing domestic MasterCard transactions for the first time with the launch of, what I talked about in the last call, the Carrefour retailer card, as well as Allcon [ph]. So there's a bunch of these happening. We've got debit MasterCard is now in all four Nordic countries. They're launching the product in Ireland, Turkey, Greece, U.K., Poland. And in April, we actually have mandated e-commerce support for all 300-plus million Maestro cards in Europe. So I think the enormously help would be utilization of these cards for e-commerce. And on the competitive acquiring front, domestic transactions on these cards issued with the Maestro logo are actually starting to be routed through our network, if an acquirer or merchant chooses to do. So we're seeing an incremental volume from that. It's still small numbers, but it's early days in the game. But all in all, I don't think the so-called macroeconomic scenario in Europe has changed any of the on-the-ground desire and reality to go forward with the thinking behind SEPA.

And your next question will be from the line of James Friedman with Susquehanna.

Martina, I appreciated the more detailed color about the impact of foreign exchange. If you could revisit what you said again and also the band that you had described for the euro, $1.30 to $1.45, I think. If you can repeat that again, I'd appreciate it.

Certainly. So basically what we said in the second quarter, we had about a 1% headwind on foreign exchange, so this is really isolating the euro and the real and the movement of that. And if these were to stay at the euro at around $1.30, and you compare that to the year-ago second half euro rate, which was around $1.45, we do believe that we're going to have a bit of an increased headwind of about three to four percentage points. Again, it depends on which quarter you're going to be. But for the second half in total, it's about three to four percentage points. I just also would like to reiterate the rule of thumb that we really give to everybody in terms of looking at our euro exposure. We really think for every $0.01 cent move that the euro moves versus the dollar, that net revenues is impacted by $9 million to $11 million. And then on the operating expense line, the move impacts about $4 million to $5 million. So you're on the operating income line, you have about a move of $5 million to $6 million. And that should allow you to extrapolate depending on what kind of exchange rate you assume for the rest of the year where our results could be coming in from an as-reported basis.

If I could just follow up with a related international question. One of your competitors on their conference call had referenced long-term targets of generating 50% of their revenue internationally. Since you are already disproportionately international, could you describe your long-term objectives? What percentage and acceleration of your exposure will come from your international portfolio?

So first of all, I don't show the right word would be disproportionately exposed, because I think that's just a reality of the world and what's going on with the economic growth around the world. We have 55% of our revenue comes from markets outside of the United States, and I'm not sure if that's unfortunate or disproportionate part of it. And the second part of the question, where we are going. We've got investor day coming up at September, why don't we wait to have a conversation that day. I'm not sure yet whether I want to necessarily set up a target to go there. I'd much rather go where markets are growing. And if markets happen to grow faster for the next five years overseas, I would love to see faster growth there. If the U.S., on the other hand, comes out of its current cycle into a good economic recovery, I'll celebrate that as well. So I'm not sure that setting up a target for where I want to get my business on is as useful as setting up a target to make sure that I'm present at the forefront of trying to bring business where it grows. I'd rather talk about that.

And your next question will come from the line of Bob Napoli with Piper Jaffray.

And I understand that it's going to take some time to get a handle on any effect from the Durbin Amendment. But it might be helpful to provide us with a little bit of color on kind of the revenue yield of the U.S. Debit business so we can get a feel for the economics a little better. I don't want to expect something exact, but did you have maybe some kind of a ballpark feel for that would be helpful?

Bob, it's Martina. First of all, as we all know, that it's far too early to be really drawing any type of conclusions in terms of what the Durbin Amendment does, given all the interpretation that the Fed has to do. But in a very predominant way, what was featured in the Durbin Amendment was really related to interchange fees. And as you know, while we interchange a transaction, that is not our revenue. So we are basically handling the interchange fee from the acquirer to the issuing community. And again, I can only tell you very, very difficult for us without the interpretations to understand how the payment environment in total will really be impacted, how the banks will specifically be impacted. Of course, we are all seeing the announcements and expecting that there will be some decrease to their interchange revenues. But then to extrapolate what that means for the individual payment network would be too premature to do at this point.

But you could give a feel for what your net revenue yield is off of your debit volumes?

No, Bob, we are not giving that. We don't have those kind of detailed numbers out there in the market.

Your next question will be from the line of Julio Quinteros with Goldman Sachs.

Real quickly, we talked a lot about the numbers that could be at risk related to Durbin and whatnot. But can you just maybe frame, Ajay, for us the mitigation efforts and some of the strategy that you guys are going through right now? As you think about what the Fed could do, what are the levers to potentially offset any moves by the Fed that could impact volumes or your overall business? And I guess just relatedly to that as well, as we look at the credit card accounts on file declining still, how are you guys thinking about that in terms of also mitigating the sort of future lack of growth on the credit card side?

Well, I'm not sure if you can conclude that there'll be a future lack of growth on the credit card side. First of all, given all the change that will happen, one of things that could well happen is that the pattern of spend changes from one kind of card used to another kind depending on what kind of consumer incentives get developed over time by issuers or by merchants as they respond to where the Fed comes out on its thinking around these rules. So I'm not sure I could conclude that credit card spend will necessarily decline over time. I'm not even sure that I could conclude that debit cards spend will decline because it will depend on where the interchange number settles down, how the debit card plays a critical or non-critical role in the strategy of retail banks to get DDA through the door with the need for relatively low-cost funding. So this is -- you're asking me to conjecture on 100 permutations and combinations and we're working our way through those. I'm not going to do that conjecturing. But I would tell you this, if you go about what happened in Australia, then you know that what will happen here is that banks will really look at their economic model, they will look at pricing. We are already seeing motion on the so-called, let's say, the soon to happen demise of free checking that people are speculating. I don't if that's true, but I can see some movement on that. You're going to see efforts by the issuers to drop off costs billable for electronic servicing, they'll probably look at their loss programs. You're going to see efforts to cross sell through the DDA even stronger, more enhanced because that the only way you can for that DDA account. You're going to find every bank and us and Visa and everybody else working with regulators to make sure that the pricing costing of a transaction includes the fair compensation for technology, for fraud, for security, for privacy, plus a margin for the capital investor. And those are the kinds of conversations you're going to see, beyond that, conjecturing how the market will shake out and how we'll respond. We just have to be sensible over the next few months. I firmly believe what I said earlier, there will be challenges, but there will be opportunities. And I said this in a somewhat more joking way, this is one time when I'm probably grateful for not having had the highest market share in debit in the United States.

And your next question will be from the line of James Kissane with Bank of America Merrill Lynch.

Ajay, just following up on your last comment there, what is MasterCard's view on non-exclusivity?

I don't have a view yet because I'm going to see and watch what the Fed does. You know that, that's one of the topics -- that's the one year way decision that they have to explain. So I don't have a clear view yet. I am developing different scenarios for different ways in which they may respond. But that's kind of where I am.

And just given your market share, it seems like it presents opportunity to the extent that it relates to off-line, not just '10, is that right?

So it's really your conclusion, but I'm still waiting to see how the Fed comes to an understanding of what constitutes the amendment they'd like to put in. If you kind of look at the language in the Durbin Amendment, the frame language requires that an issuer's debit card must access at least two unaffiliated debit networks. The Fed kind of interpret really one of those one of the as signature, PIN, whether they've got one of one, one of the other, two of each, two of the other, I have no idea. I don't know how to put that out there yet. So they're going to see how that goes and then I'll have a more considered view for you.

And your next question will be from the line of Jason Kupferberg with UBS.

So Ajay you've inherited a great balance sheet here and your stock is down, along with some others obviously, because of all the regulatory uncertainties that popped up here over the last few months. How do you think about balance sheet deployment options? Do you think more seriously about possibly doing a new share buyback program? Or are we going to have to wait until the September analyst meeting to perhaps get some more from you on that?

Yes.

On prepaid, if you can give us a sense -- I don't know if it can be quantitative at this point, but what kind of growth are you seeing in prepaid, maybe parse out U.S. and non-U.S., at least qualitatively?

I think prepaid's a huge opportunity. And the market size is the largest to date in the United States; largest by far, not just by a small amount. The factors -- it has many things built into it; everything from Social Security Administration is planning to do. I think we talked about in the last earnings call, but what they're planning to do is that by 2013, every single payment from the Social Security Administration will either go by direct deposit to a bank account that that the receiver has or by a direct load on to a prepaid card that the receiver must then have. It so happens that you've got a great program in place to be the supplier of those prepaid cards through Direct Express and Comerica. And so that kind of driving -- one of the things that's driving prepaid as a space. You know the prepaid cards space has got a large component of consumer reloadable, general-purpose cards. A large component of what the government will provide, which is kind of the example I just gave you, a fairly large component dedicated to payroll and corporate payroll and the like. And then a much smaller component dedicated to gift cards. And in fact, gift cards are what everybody talks about. But in fact, the economics of a gift card are very different from the other three because a gift card is a one-time load of an average of $70 to $80 each time in the U.S. whereas a Social Security card, 1 million of which are already in circulation by the way, have a load of somewhere between $700 to $800 a month. And if a person stays on that payment for a year, you're talking about $9,600 of load compared to $70 to $80 of load on a gift card. So the economics are very different and we are very focused on the government, payroll and consumer general-purpose reloadable. There's obviously a lot of growth to happen outside of the U.S. I think the Telefonica deal is an example, is a great way to think about consumers who may possess phones, but may not possess formalized bank accounts and formalized credit cards as a way of entering into a whole new space. There are similar opportunities would be Accor JV that we signed in Europe, where we look at meal vouchers and company benefit payments that come on to prepaid cards. There's opportunities of mobile payments in Latin America that they're exploring and doing a lot of work with. There's similar things in Asia from India to other locations. So I'm very interested and intrigued by what prepaid could do and how it could be a way of getting so many underbanked, not just unbanked, people to participate in the payment systems. And that's kind of where our effort and energy is going, Jason.

And next, you have from the line of Don Fandetti with Citigroup.

Ajay, Visa had mentioned that they have had some recent discussions with the DOJ and were pretty comfortable with where they were going. I was curious if you had any comments. Does that tie in to anything on merchant litigation, if you could just sort of frame that issue from MasterCard's perspective?

The DOJ has been in contact with us for quite a while on this CID. It goes back to October 2008. In fact, if you go back to our Qs from that time onward, you'll find us talking about it consistently, including in the latest Q. The fact is that we are working with them and cooperating with them for all the information they're looking for. As you heard in a different call, this is not directed exclusively at one payments network. It's part of an overall investigation of the merchant rules, not the interchange, the merchant rules, the POS rules of several U.S. payment card network players. It's got to do with all the POS acceptance rules. So I'm not going to comment on communications with a government regulator. As I said that for the Fed, that's kind of not what I do. What I can comment on is in my public filings. All I can tell you is we are actually having a very constructive dialogue with them and that's where we are today.

So as an investor, is there any risk around that to business practices, or would it be the type of thing where it's pretty marginal no matter what comes out?

It's tough for me to conclude until I know what the DOJ is thinking. But I have no reason to believe that the DOJ investigation has anything of any magnitude that I would be so seriously concerned about today. That's today. It's got rules, it's got POS acceptance rules. Tomorrow, if they change the POS acceptance rules in a way that it makes it a different business model and yes, then over a period of time, it will have an impact. But I don't any know way to add any more information to you than where that is today.

And your next question will be from the line of Rod Bourgeois with Bernstein.

Ajay, I like your joke about being glad about your low debit market share. On that note, do you view the Durbin Amendment as opening certain doors to share gain opportunities in the U.S. debit business? And I guess more specifically on that, could you give us any examples of new strategies that you're entertaining in order to respond to whatever your expected case scenario is related to the Durbin Amendment?

So I also said there's not one expected case scenario for the Durbin Amendment. There's actually a series of multiple options that could settle down depending on how the Fed, which has been tasked with starting this actually comes to conclusion over the next nine months in the case of the interchange numbers and 12 months in the case of the other provisions around exclusivity. So there's no way for me to give you one versus the other. And I doubt that even on investor day in September, you're going to know much more by the end about which way the Fed is leaning or thinking. But I would say this to you, does it open up opportunities? I think it opens up both opportunities and challenges depending on which side of the table the Fed comes out on. And my perspective is that when you've got a lower market share, us as well as other players, whatever changes in the game will give us an opportunity to be nimble and respond to it. Having said that, the larger market share players will fight as hard as they can to hold on to their market share. So this is going to be one of those market changing movements that I don't yet know how to predict. But I'm very confident that I will find the opportunities through this for us to keep doing well.

One scenario is that you have an opportunity to get your brand on Visa-branded exclusive cards. And I guess my question is why would that not be a big opportunity from a share-gain perspective, an opportunity that you've not seen in a long time?

Sure, if that scenario were to come true, if the Fed would interpret it exactly as you just said, I would completely agree with you.

And would you be willing to lower price, to attract merchant routing decisions your way in order to gain that share?

Hypothetical question, chief. I don't answer hypothetical questions.

Your next question will be from the line of Thomas McCrohan.

Ajay, do you have any thoughts about chip and PIN technology coming to United States and any thoughts about what you view to be the total fraud cost in the system including issuers, merchants and consumers?

I'm not sure that chip and PIN technology in the United States is a definite in the next foreseeable period of time; unless it gets legislated, that's a different thing. But where it is today, the cost of actually rolling out the acceptance network, as well as reissuing all those cards, is so many multiples of any fraud cost benefit that I think the economic rationale for doing that would become very challenging. And in this current environment where so many other revenue lines for a bank are under; pressure given the moving target of the financial reform bill from what's going on with capital to what's going on with the revenue streams, in the trading book, in the investment banking book, in the consumer banking book, I don't know that a lot of our clients would consider that to be priority number one today. That's just the reality of where it is. So that's kind of where it is today. I'm not sure that you'll see a great deal of movement on that in the foreseeable future in the U.S.

Your final question will be from the line of Tien-Tsin Huang with JPMorgan. Tien-Tsin Huang - JP Morgan Chase & Co: But did you give an update on the merchant litigation case? And Ajay, I heard you mention charge cards in your prepared remarks on Durbin as an option for issuers, and I'm curious if you see a revival on growth for charge cards in the U.S.?

I'm not sure yet, but I can comment definitively about charge cards revival. That's just one of the options that I think that if I were an issuer today, which I'm not, but I was a little while ago, I would be thinking very carefully through different ways of finding relatively low-risk methodologies of making sure that I can help give my consumers the right kind of tool and yet protect my revenue stream. So that's one of the ways that people would look at it. But I don't know for sure that I can tell you that a lot of people are going to come and jump at it tomorrow. As far as the merchant interchange litigation is concerned, nothing new. The court heard all our arguments on the plaintiff's motion for certification and the defendant's motion to dismiss in November '09. That decision is still awaiting. The parties are participating in a confidential mediation. I have no idea if it will be successful or not, and no trial date has been set up. So there's nothing new on that merchant litigation from what we discussed last time we spoke.

And at this time, I would like to hand the call back to Ajay Banga for his closing comments.

First of all, thank you for all the questions and let me leave you with just a few closing thoughts. Over the shorter term, both the economy, as we discussed in the U.S. in particular and the regulatory front, represents some challenges. However, MasterCard, I think, has demonstrated over the years that it can find its way through these challenges. On the business front, Martina and I both talked about the fact that we've lost a few debit contracts over the last couple of years that are only now beginning to work their way through our financials. We've also won a few great deals in debit and the emerging payment space, but I think will begin to contribute later this year, but will contribute much more in the next couple of years. We also work very hard to control expenses to manage through the impact of the recent global economic slowdown and I'm still trying to put money into investing in future growth. Again, as Martina mentioned, we're putting some of the savings into e-commerce, mobile, prepaid, that kind of space. I'm kind of still very optimistic about our future growth prospects. We do business in 210 countries today. And the majority of our revenues come from outside of the United States, which, as of now, showing faster growth. At any given time, I'm going to have challenges in some markets and opportunities in many more. Our global structure, our global construct, I think, contributes to our resilience through cycles and, frankly, to my expectation for long-term growth of our business. As I firmly believe that payment is and will remain a growth industry due to the continued secular trend through electronic payments, the underlying fundamentals of our business remain intact and we are also innovating in order to be best positioned to take advantage of these growth opportunities. That's why I'm very excited to be here. I'm very excited to be leading this company and this team. And once again, thank you for your time today. I'll look forward to seeing many of you at our Investor Day on September 15, and we'll continue the discussion about our business and the strategy for our future. Thanks again.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the presentation, and you may now disconnect. Have yourselves a wonderful day.