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Mastercard Inc. (NYSE:MA)

Q1 2014 Earnings Conference Call

May 1, 2014 8:30 AM ET

Executives

Barbara Gasper – IR

Ajay Banga – President and CEO

Martina Hund-Mejean – CFO

Analysts

Dave Koning – Baird

Daniel Perlin – RBC Capital Markets, LLC

Tien-tsin Huang – J.P. Morgan

Christopher Donat – Sandler O’Neill

Jason Kupferberg – Jefferies LLC

Smittipon Srethapromote – Morgan Stanley

Craig Maurer – CLSA Limited

David Hochstim – The Buckingham Research Group Incorporated

Kevin McVeigh – Macquarie Research

Sanjay Sakhrani – KBW

James Friedman – Susquehanna Financial Group

Bryan Keane – Deutsche Bank AG

Bob Napoli – William Blair & Company L.L.C.

Darrin Peller – Barclays Capital

Operator

Welcome to the MasterCard First Quarter 2014 Earnings Conference Call. My name is Adrianna [ph] and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Barbara Gasper. Ms. Gasper, you may begin.

Barbara Gasper

Thank you, Adrianna [ph]. Good morning everyone and thank you for joining us for a discussion about our first quarter 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, the operator will announce your opportunity to get into the queue for the Q&A session. Up until then, no one is actually registered for the queue.

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. These documents 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 May 8.

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 here 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 most recent SEC filing.

With that, I will now turn the call over to our Ajay Banga. Ajay.

Ajay Banga

Thanks, Barbara and good morning everybody. For the first quarter, we are very pleased to deliver strong results with net revenue growth of 14%. That’s driven by a healthy growth in gross dollar volume, by process transactions and cross-border volume. And this, combined with our operating expense growth of 12%, is what’s helped us drive EPS growth of 18%.

So as usual, let’s start by the global economic trend starting with the US. Our first quarter SpendingPulse data showed US retail sales ex auto growing at 2.8%, down from the 3.9% growth in the fourth quarter of last year. And I guess that reflects the harsh winter weather conditions that affected parts of the US as well as later Easter. But on a positive note, consumers continue to spend more. And so interesting sectors like airlines, lodging, restaurants, furniture and furnishings and that reflectively increased consumer confidence we saw in the quarter.

And we’ve got to continue to watch these indicators in the coming months. The good news is that despite the headwinds on consumer spending, our US business in the first quarter saw process transactions and gross dollar volume growth higher than the fourth quarter of 2013. In Europe, the environment continues along a path of slow growth with positive PPE projection for the year, although those are slightly down from last quarter’s forecast.

Across the region, consumer sentiment and business sentiment have continued to improve and our MasterCard’s total Europe in volume growth for the first quarter was in the mid-teens and process transaction growth in the low 20s, a bit higher than the fourth quarter, driven by growth in a number of countries including Russia, Sweden and Turkey as well as continued healthy growth in the UK.

In Latin America, the overall consumer confidence is mixed across the region. Brazil’s consumer confidence starting to stabilize in March. And our SpendingPulse showed a 5.9% growth in consumer spending there, up slightly from last year’s fourth quarter.

In Mexico, consumer confidence also showed some signs of stabilizing and I think is expected to improve. Our business in the region continues to do well with GDV and process transaction growth for the first quarter in the mid to high teens.

In Asia Pacific, consumer confidence like in Latin American remain mixed with some evidence of a slight slowdown in consumer spending during the first quarter. But in South Korea, China and Southeast Asia, they actually saw improvement in confidence levels. Interestingly, business sentiment was up across the region.

And our business in the Asia Pacific, Middle East, Africa continues to do well with process transaction growth about 30% and GDV growth in the high teens for the first quarter.

So overall, the US and Western Europe seem to be continuing to move along a slope up through economic recovery. While there has been increasing optimism of our Europe, I think those recent geopolitical tensions could have an impact in consumer and business sentiment. And growth in Asia Pacific and Latin America, as you know, is affected by among other things, the continued global economic uncertainty but also by domestic concerns like labor market conditions and consumer sentiment and spending and elections and all of which we’ll continue to watch.

So before we move on to our recent business highlights, a couple of quick words about legal and regulatory matters. First, at the end of March, the US District Court of Appeals reversed Judge Leon’s July decision on the Federal Reserve implementation of the Durbin Amendment. So absent further appeal, the regulation remains as it was originally implemented by the Fed.

The appeals court decision is good for the industry for a couple of reasons, including because it clears away one of the uncertainties in the market related to EMV adoption. Second, with regards to the proposed European interchange legislation, you’ve heard us say before that this legislation offers us both opportunities and challenges.

A vote by the full parliament occurred in April which added among other things the merchant card interchange to the scope of the legislation. Separately, a battle review of the legislation will start in late Feb by the Council of Ministers and the European Commission will also need to weigh in. Will actively engages all these parties, there is still opportunity for the proposed language to undergo changes and we continue to expect that adoption is probably most likely in the first half of 2015.

So finally, something about Russia and the geopolitical events going on there. Over the past few years, we have made a lot of good progress in Russia, although it represents only a little over 2% of our total revenue. The sanctions have had a significant impact in that market, not as much from an immediate financial standpoint for MasterCard but rather on the ground where the Russian government is working to implement legislation to change their domestic payments market structure.

And we are still assessing all the elements of this new law. I mean there are provisions there that I believe would create serious complications for the way that we can operate in that market. One of those provisions, these are the requirements for on-soil switching capabilities. Now with our distributed network structure as a foundation, we’ve actually moved further towards an environment that can be flexible in terms of on-soil requirements.

In fact, earlier this year, we launched a 24 by 7 operation center in Russia. What we have in place today does not, I believe, meet all of the new Russian requirements, although we’re still studying those, but we believe may actually provide some of the ingredients that will be necessary. We’re also very concerned about the new collateral requirements in the law which we continue to look at.

At the end of the day, we’re going to need to conform to this new Russian law as well as international law when we operate our business in the Russian market just as it is in other markets.

So overall, we expect a small impact from this current Russian situation on our results for 2014. But the situation is fluid and it’s difficult for us to be certain numerically about the impact for 2015 and beyond, at least until the law is clearer and we can work our way through those details which will take some months to happen.

So let’s move on to some of our recent business activities. During the quarter, we signed a number of new agreements that let us support the expansion of our business around the world. And let me run through a few quick examples.

SEB Baltics [ph] which is a division of the SEB group. SEB group is a key MasterCard relationship in the Nordics. And SEB Baltics [ph] is in the process of converting their entire debit and credit card portfolio to MasterCard. So as a result, we expect to be the leading payments brand in the Baltics by the end of this year.

Additionally, Svenska Handelsbanken, the second largest retail bank in Sweden was big in converting all of their consumer credit, debit, co-brand and installment card across all their market including Nordic, Baltics, UK, Netherlands and Poland. This deal actually represents the largest conversion in Europe since we won the business with Swedbank and will make MasterCard both the exclusive partner of Handelsbanken but also the leading debit brand in Sweden which, as you know, is one of the countries with the lowest use of cash in the world.

Kenya Commercial Bank, East Africa’s largest bank, announced that it’ll issue 5 million debit, prepaid and credit MasterCard products over the next five years. That builds in the partnerships we’ve announced over the last couple of years in Kenya in both Nakumatt Supermarket and equity banks and more than doubles the number of our cards in that market.

Now as we said before, over the last several years, we’ve been focused on investing in deepening our merchant relationships as well. And you’ve read that Wal-Mart and Sam’s Club announced recently that they will start converting their co-brand credit cards to MasterCard starting this summer. And starting in early 2015, Target will be converting their Target branded credit cards to MasterCard. Additionally, their entire REDcard portfolio which adds in their private label cards will be enabled with our ENB [ph] solution and will support chip and PIN transactions in their stores.

We are delighted to be chosen, obviously, as Target’s ENB [ph] solution partner and for their faith in MasterCard as quoted from their press release that they will, quote, "aggressively move forward to bring enhanced technology with the most secure payment product available".

In addition, we’re also expanding our relationship with Wal-Mart beyond the US to work with some of their Latin American affiliates. So in Mexico, their Sam’s and Suburbia co-brand cards have been converted to MasterCard, one from a competitor, the other from a private label store card.

In Chile, they’ve recently started to migrate their private label cards to co-branded MasterCard and that Wal-Mart local supermarket brand is called Lider is one of the largest in that country. That’s the one we are migrating.

One additional example of the progress we’ve made in expanding our merchant relationships is in Japan with Amazon.com. We just recently launched a MasterCard co-brand card. That card provides the card holder an opportunity to earn rewards when shopping on Amazon’s website or at any MasterCard accepting merchant as well as free shipping through Amazon Prime.

So moving on to the mobile front, the convergence in the physical and digital world is reflected in the continuing shift in payments to digital form and more interestingly, new payment flows. It represents one of the most significant changes in our space since I think the introduction of plastic payment cards many years ago. And over the last several years, we’ve been developing a foundation to support this shift by establishing products, services and standards to address the needs of this new ecosystem.

So you’ve heard all of us talk about many of these in the past. MasterPass digital wallet is one example. Our efforts around organization, another example. But we’re beginning to build on that, and for example, last quarter, we announced our acquisition of C-SAM, a leading provider of mobile wallet software. The idea is that this would help us increase the base of the deployment of our MasterPass wallet as well as the development of additional services. Customers first take [ph] offers, for example, loyalty and rewards, for example.

So when it comes to mobile, we are technology agnostic. We support implementations based on different market models around the world. One model puts payment credentials on the phone. So for example, we recently announced the collaboration between Trevica which is our European provider of processing services. It’s a business we own. And three mobile operators will represent about 80% of the mobile subscribers in Germany – Deutsche Telekom, Telefonica Deutscheland and Vodafone. Any bank in Germany that connects to Trevica will be able to provision their card to the phones provided by any of these three mobile operators.

A different model is to put payment credentials in the cloud as compared to on the phone. And for that, we will soon publish technical specs supporting what we announced a little while ago which is postcard innovation which will make it easier to roll out contactless NFC based mobile payments in markets that want alternatives to storing payment data on the phone.

For a final note, MasterPass momentum continues. We’re now in seven countries – the US, UK, Canada, Australia, New Zealand, Italy and China with more than 40,000 merchants accepting the wallet. In addition, which I think is really interesting, MasterPass will be available soon as an in app option so that it can be selected within a mobile shopping app, eliminating the need for the consumer to have to enter payment card information of any type to make a purchase.

So with that, I’m going to run it over to Martina for a detailed update on our financial results and on our operational metrics. Martina?

Martina Hund-Mejean

Thanks, Ajay, and good morning everyone. Let me begin on Page 3 of our slide deck where you see the as-reported as well as the FX-adjusted growth rates. All of my comments pertain to the FX-adjusted figures which are essentially the same as the as-reported numbers due to the strength of the euro offsetting the weakness of the Brazilian real.

As Ajay said, we are very pleased with our strong performance this quarter which we were able to deliver in spite of the mixed economic environment. Net revenue growth of 14% combined with operating expenses growth of 11% resulted in net income growth of 14%.

EPS growth was 18% and share repurchases contributed $0.03 per share. During the first quarter, we repurchased just over 21.3 million shares at a cost of approximately $1.7 billion. Through April 24, we purchased a little more than 6.2 million shares at a cost of approximately $450 million and we now have $1.5 billion remaining under the current authorization. We will continue to look to repurchase shares on an opportunistic basis.

Now turning to cash flow. Cash flow from operations was $568 million. Additionally, at the end of the quarter, we completed an inaugural debt offering of $1.5 billion and we ended up the quarter with cash, cash equivalent and other liquid investments of about $6.6 billion.

So let me turn to Page 4. And here you can see the operational metrics for the first quarter. Our worldwide gross dollar volume or GDV was up 14% on a local currency basis. And that’s essentially the same as last quarter. US GDV grew 9% and our US debit growth was also 9%, again, same as last quarter.

On the private side, after some difficult quarters in consumer credit, we are turning the corner with growth of 6%, an increase from last quarter. Also commercial credit growth was in the mid-teens, up from the low-teens last quarter. And outside of the US, volume growth was 16% on a local currency basis. And this continues to be driven by APMEA and Latin America with more than 15% growth and solid mid-teens growth in Europe.

Cross-border volume grew 17% on a local currency basis, just slightly down from the 18% growth that we saw in the fourth quarter. APMEA grew more than 20% with Europe and Latin America in the high-teens. And countries contributing to good cross-border volume growth this quarter include Australia, China, Russia, Italy and Sweden. And we also saw some deceleration in Latin America and in Canada.

Turning to Page 5, here you see process transaction. They grew almost 14% globally to more than $9.8 billion. We saw double digit growth in most regions with particular strengths in APMEA and Europe. And globally, the number of cards grew 8% to just over 2 billion MasterCard and Maestro branded cards.

So let me turn to Page 6 for some insights on a few of our revenue line items. Domestic assessments grew 8%, while worldwide GDV grew 14%. And then the gap between these two growth rates is 6 PPT [ph] which is driven primarily by the contribution of higher growth outside the US with lower than average revenue yield. Also many of these non-US markets fall into the category of emerging markets where the growth of the ATM transactions is often higher than POS transactions.

Cross-border volume fees grew 17% in line with cross-border volume growth. And when you drill down into the detail, 10 percentage points of pricing, the majority of which lays zapped in this quarter was essentially offset by a higher mix of intra-European activity. Transaction processing fee grew 14% in line with the 14% growth in process transactions I just spoke about.

And overall, as I said earlier, net revenue growth was 14% growth both on an as-reported and FX-adjusted basis as the impact of the euro and the real offset each other. Beyond those two currencies, we had a roughly 2 PPT headwind from the weakening of other local currencies such as the Russian ruble, the Canadian dollar, the Australian dollar and the Turkish lira, mostly in the domestic assessment in cross-border revenue categories.

And moving on to Page 7; here you can see that total operating expenses were up 11% in the quarter as it continued investing back into the business. In addition, I’d like to point out two other items that contributed to this growth. First, there was a 2 PPT impact due to the rebalancing of our quarterly cadence of A&M away from Q4. And second, there was an almost 2 PPT impact due to acquisition.

Also, D&A increased 19% as we begin to see the impact of our growing levels of capital expenditures. This primarily reflects investments and technology, supporting initiatives like Priceless Cities and MasterCard.

Turning to Slide 8; let’s discuss what we have seen in April through this past Monday. Each of our business drivers were flat or higher compared to the first quarter. The numbers through April 28 are as follows – globally, our cross-border volumes grew about 17%, the same as our first quarter growth rate. While US cross-border was down slightly, rest abroad was a bit better driven by Europe. In the US, our processed volume grew 11%, up about 2% from what we saw last quarter due to the continued improvement in both consumer and commercial credit.

Process volume growth outside the US grew 16%. That’s essentially the same as the first quarter. Our European processed volume growth was in the mid-teens; again, the same as what we saw in the first quarter despite some deceleration in Russia. And globally, process transaction growth was 14%, the same as what we saw in the first quarter.

Looking forward, let me start with our long term performance objectives for the 2013 to 2015 periods. We continue to believe that our business can deliver an 11% to 14% net revenue CAGR and at least 20% EPS CAGR over this period. These rates are on a constant currency basis and exclude new M&A activities. We also remain committed to our annual operating margin target of at least 50%.

Since we first introduced these performance targets back in September of 2012, a number of things have happened in the payments space. Three interesting and relatively recent developments are – one, while we learned about the loss of the Chase portfolio in late 2012, we are only now in the process of working through that deconversion. However, you can already see our progress on winning new deals particularly in the US consumer credit space, which shows up very nicely in our US credit metrics. Two; the current geopolitical tensions around the Russia situation. And three, the continued evolution of the European payments industry regulation.

We expect minimal impact in 2014 from either the Russia situation or the European regulation. Looking ahead, Russia will be complicated to work through. While that market currently represents a little over 2% of our revenue, it’s unclear today how developments there will impact us over the next two to three years.

With respect to the European regulation, like all other regulatory actions that we’ve faced over time, it will create challenges for the payments space. But as in other cases, it will also open up new opportunities for those who are innovative and competitive. And we will look for ways to take advantage of that.

We are monitoring each of these situations closely but after weighing a number of factors, we are still confident about being able to deliver on our long term commitments. That said, remember these objectives exclude M&A activities and since we’ve done a number of deals, our as-reported results will include the impact of those.

So let me now share with you some more specific thoughts about 2014. Over the past several months, we have announced four acquisitions spanning the processing, mobile and loyalty spaces. Therefore, I’m updating the EPS dilution in our expected as-reported results for full year 2014 from the $0.01 to $0.02 that I mentioned on our last earnings call to $0.06 to $0.08. The quarterly impact will ramp up over the course of the year and the timing of the deal closings could affect the total dilution as well as the quarterly impact. We will continue to update you as we go forward about the potential impact of any additional M&A activity.

Turning specifically to net revenue, let me highlight three points. First, Q1 growth came in a bit higher than expected; however, we are still forecasting to come in at the low end of our three-year range for full year 2014 excluding M&A and at the constant currency. That includes some small impact from the Russian situation as well as the attrition that we expect from Chase.

Second, we still have no definitive schedule from Chase and why deconversions have started a bit slower than we originally expected. We continue to believe most of the attrition will occur in the latter half of this year with some continuation into 2015. And third, our new acquisitions are expected to contribute up to an additional 1 PPT to our as-reported net revenue growth.

On the operating expense front, similar to net revenue, we haven’t changed our view at all about expense growth from what we’ve said in January. However, when you now add in the impact of acquisitions, the as-reported growth rate will be in the low double digits.

Growth in D&A will continue to accelerate beyond what we have seen in the past, likely in the 25% range, due to our higher level of capital expenditures as well as the impact of amortizing intangible assets related to acquisitions. As a reminder, you will need add into your models roughly $30 million over the balance of the year to account for the interest expense associated with the inaugural debt offering that we did in late March. And again for modeling purposes, you should continue to assume a full year tax rate of about 32% which does not recognize the impact of the discrete items.

And finally, with respect to FX in 2014, you need to think about it in two pieces. First, remember that when we talk about constant currency, we’re talking about the impact from our functional currencies besides the US dollar. If those rates remain similar to where they are today, so that’s the euro trading at the 138 level and the Brazilian real at the 224 level for the rest of the year, the net impact of the euro and the real would be a slight tailwind for the full year. As I mentioned earlier, the FX impact of these two currencies was minimal in the first quarter due to the strength of the euro offset by the weakness of the real.

Further, beyond the functional currency impact of the euro and the real, they have already seen a 2 PPT headwinds-to-net revenue growth in the first quarter from other currencies depreciating against the US dollar and the euro primarily. While we are carefully managing those exposures, we have assumed some impact for the rest of the year.

Now let me turn the call back to Barbara to begin the Q&A session.

Barbara Gasper

Thank you, Martina. We’re now ready to begin the question-and-answer period. In order to get to as many people as possible, we ask that you limit yourself to a single question and then queue back in for additional questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator instructions) And our first question comes from Dave Koning from Baird. Go right ahead.

Dave Koning – Baird

Yeah. Good morning. And great job. I guess my question is just cross-border you mentioned the price increase that lapsed. Should we expect now if we have high-teens cross-border growth to generate high single digit revenue growth, so about a 10% a disconnect between the two for the rest of the year?

Martina Hund-Mejean

Yeah. I mean, I’ve said that the pricing that we have put in last April in 2013 is pretty much lapping – almost all of it is lapping at this point in time. So you should expect that what’s happening between the cross-border volume fees as well as the cross-border volume growth itself should be much closer in range. The impact – it has continued to be impacted, of course, by two things – one, the mix of the intra-European travel; and two, by local currency as we’re still seeing and beaconing in foreign exchange rates versus the euro and the US dollar.

Dave Koning – Baird

Great. Thank you.

Operator

And our next question comes from Dan Perlin from RBC Capital Markets. Go right ahead, sir.

Daniel Perlin – RBC Capital Markets, LLC

Thanks. So the question I have I guess is, the success you guys are starting to have in the current pace of kind of the co-branded card portfolios in the United States for credit, I’m just wondering, how is it that you’re differentiating yourself here in that environment? I know that your competitor recently announced that they’re going to drop I think 50% of their operating rules, and I’m just wondering, are you guys like cumbersome in that respect, are you closer to these retailers? And just generally, what is – I guess what is allowing you to differentiate yourself right now? Thanks.

Ajay Banga

So I guess – I’m not quite sure what the competitors are doing in that space. We have already worked our operating rules down actually quite some time ago – a couple of months back, three, four months back, towards the end of last year. I’m actually not aware of exactly what the others are planning to do, so I’m not going to comment on a comparison.

But I’m pretty confident that we aren’t winning our business based on operating rules only. We win our business based on analytics and capabilities around those. We’ve built our – we build our business based on what we do in terms of acceptance. We build our business based on the kind of marketing and co-programs we do. We build it based on relationships. We – but of course, we build it based on pricing and that’s always the thing that everybody looks at.

So it’s a mix of all those things. And to me, the last few periods of months when this entre issue with Target happened actually has opened a whole new set of discussions around EMV and chips and signature and PIN and tokenization, and we think that we represent a good thought process in that space. And so all these things put together I think are helping us win business.

Now, we don’t win every deal we bid for, don’t get me wrong. We – and these are still going to be singles and doubles. But – and I said that a year or two ago but we’re doing them consistently and steadily and we’ll win some, we won’t win the others, but that’s one of the ways for us to rebuild our position in the consumer credit business in the US in addition to what we’re doing with our bank partners where we are little by little winning deals in that growth area of that credit book too. So it’s kind of a mixed bag of what we are doing. I wouldn’t put it all down on any one silver bullet. I wish life were that simple but it isn’t.

Daniel Perlin – RBC Capital Markets, LLC

Thank you.

Operator

And our next question comes from Tien-tsin Huang from J.P. Morgan. Go right ahead, sir.

Tien-tsin Huang – J.P. Morgan

Okay, great. Thanks. Just a follow up to that last question. On the Target front, I’m curious, was – did your EMV solution cause you to win that or are there other factors behind it? And then, as a follow on or a bigger picture question, do you think this EMV push could actually drive some brand flips? Thanks.

Ajay Banga

Tien-tsin, I – you will have to ask Target why they gave us all the business. But at the end of the day, again, I believe it is a mix of things. And I wouldn’t rely openly on any one thing because I don’t think any merchant or any bank goes based on any one item. It’s the mix of things we bring to the party that allows us to win and in other times, they will lose because you don’t bring the right mix to that party. So I’ve kind of got my feet firmly on the ground about this issue. I – we’ve got two of the largest retailers in the US between Wal-Mart and Sam’s on the one end and Target now, but it’s kind of – it’s a win one by one at a time.

So I wouldn’t conclude too much either one way or the other unless you ask Target and they give you a different answer. We’re just very excited to be their partner because I see in them having gone through what they’ve gone through, the desire to really make a big difference. And that’s useful for somebody like us who also is trying to grow in that space. So that’s kind of what’s going on in these wins.

Will you get a chance to get more flips? I don’t know yet. I honestly don’t know. I’m still focused on the singles and doubles and just keeping my head down and trying to win deals.

Barbara Gasper

Next question please, operator.

Operator

Thank you. And our next question comes from Chris Donat from Sandler O’Neill. Go right ahead, sir.

Christopher Donat – Sandler O’Neill

Good morning. Thanks for taking my questions. I wanted to ask a follow up on the Target and the chip and PIN enablement. Is that something that – in the United States, chip and PIN isn’t – entering PINs is not something I think US consumers are comfortable doing. So is this more giving Target the optionality that if consumers do want that level of security they have it or is it a blanket for everything? Can you just help us understand where that fits in?

Ajay Banga

Sure. Sure. Sure. The whole EMV migration is going to depend a little bit on the manner in which this rolls out. The chip cards will definitely be coming in. I mean, look, a number of issuers are already issuing chip cards for their overseas travel. And I have – my number may be wrong in the head. It’s a month or two old, but I do recollect somewhere between 6 million and 8 million cards but I might be a little off the number – already issued that are chip enabled for banks – by banks to individuals who travel. I personally use those as well. Our entire corporate card portfolio in MasterCard for our employees is chip-enabled. In some cases, it’s chip and PIN like our corporate card. And in others like my personal card, its chip and signature.

The – you will find that different models of this will emerge or appear over time, depending on the adoption of PIN terminals or the point of sale, depending on the banks’ concerns about different kinds of losses in their loss book and the advantages and disadvantages of those.

And then finally and most importantly, it’ll depend on consumer behavior. And so it’s a mix of those three. And in all these cases, while we are going to enable chip and PIN, as you know, we’ve even incented for people to have chip and PIN. But at the end of the day, we will work with what works in that environment. And that’s what we’re trying to do.

Barbara Gasper

Next question, operator.

Operator

And our next question comes from Jason Kupferberg from Jefferies. Go right ahead.

Jason Kupferberg – Jefferies LLC

Thank you, guys. Ajay, just hoping you could just drill a little bit more into the Russia legislative process to the extent you guys have some insight into some of the milestones or next steps, I think you said it’ll probably be a multi-month process until it fully plays out. So if you can help us understand that a little bit. And in conjunction with that, just how are you guys sort of probability weighting some of these I guess worst case scenarios if some of these more onerous provisions actually become law? I mean, does it feel more like that’s just kind of some saber-rattling or is it felt to be a very serious threat of passage into law?

Ajay Banga

Jason, I think that the whole Russia situation is all very serious. I – both at a geopolitical level and in our own small way. I don’t think this is a saber-rattling situation any longer. I just – I think this is going to be tough to work for almost everybody, governments and companies, over the next few months or periods of time. It might last longer than that in one way or the other. That’s just me and my personal opinion.

As far as we’re concerned as a company, what we’ve seen in the recent legislation that got approved by the Duma and then by the Upper House but haven’t, at least until this morning, received the signature of the President, but I’m assuming that’s a matter of time. And somewhere over the next few days, that’ll probably happen. After all, I know it could be happening now.

And therefore, I assume that that legislation will get enacted. Two of its provisions that are really interesting and complicated are the ones that I picked on and speaking and Martina picked on a little bit too. One of those has to do with the on-soil requirement. And the definition of on-soil obviously will depend – the devil is in the details of what constitutes on-soil versus what constitutes not being there. Is it just a question of data moving, is it a question of clearing, is it a question of authorizing, is it a question of settlement, is it clearing, authorizing and settlement?

There’s a gazillion different – and gazillion’s a technical term – but there’s a heck of a lot of these different permutations and combinations that we are working our way through. I actually don’t have clarity on that yet because a lot will depend on the dialog with the Central Bank of Russia which will establish the rules and the processes by which the legislation actually gets implemented on the ground.

My sense is that could take anywhere between, if done rapidly, 60 days to longer than that. Given that Russia clearly feels that they need to get something done quickly, I would expect they will make some energetic efforts to get it done quickly rather than later. It was on that context that we came around to the belief that the limitation of the impact in 2014 will be small which Martina has factored into our estimate of our revenue growth for the year which is why – one of the reasons why even though our first quarter did a little better than we thought, we’re still sticking around with the guidance we gave you earlier for the year as a whole.

Now, if Russia doesn’t become as onerous than that or something else changes, then life will change. But right now, we’re dealing with these imponderables. And we didn’t want to not acknowledge the imponderables but at the same time tell you that in our head, there is some checking balance in that system bringing us back to the guidance we already gave you earlier in the year.

That’s kind of how we are thinking about it. There is another very onerous element in the legislation which has to do with the provision of collateral that will be required if somebody is considered to be a foreign payments player. Now, what’s foreign? What’s domestic? How do you become more domestic? Does on-soil with clearing authorization and settlement make you more domestic? Is it something else that makes you more domestic? Not clear.

So I don’t know all that yet. I worry about all this because I consider myself to be a worrier and a paranoid guy about some of these things but I don’t know the answer yet. So however, I don’t think that will impact us directly in a financial sense as hard as could some other elements of this.

Now, the third element of this is how our consumers in the market’s economy in Russia behaving. In truth, the Russian economy was already slowing over the last couple of years. That’s public knowledge. And we could see it in our data where we went down from very high growth rates and transactions and revenue a couple of years ago even though we’ve been growing shares in Russia over the last few years, our growth rate is reducing – reducing but still very attractive in that sense.

What we have seen in the first quarter as Martina told you was really no direct impact. Our people were doing what they had to do. I guess that’s how it would be. Remember that the sanctions of all the banks, including the more recent ones, in fact, less than 1% of the cards we’ve issued.

So day to day sense, people are still buying the stuff. And what we are seeing changed, however, which is about to happen is some cross-border activity – people going in, people coming out. That I expect would happen when tensions increase in an area. And I expect that to be the first impact even going out further as the Russian economy continues to get impacted by whatever goes on in the geopolitics and the reactions of the United States and Europe and other countries.

That’s kind of where I am. It’s a long answer. It’s a complicated issue. We’ve tried to drill into it and come out with the thought that some impact will happen in 2014. And probably ‘15 and ‘16, that’ll have more of the impact. We’ve tried to give you guidance but at the end of the day, this is a little over 2% of our revenue. But it’s a good growth market, so I don’t like it but it’s what’s happening. It’s what we’ve got to deal with.

Jason Kupferberg – Jefferies LLC

Thank you.

Martina Hund-Mejean

As well as at least that – when you look at the domestic value, that has been going down from a growth rate point of view, from very high growth rates last year [indiscernible] trending down given what is going on from an economic, from a pure economic point of view in Russia.

And on cross-border volume, we really haven’t seen a lot of change – a little bit of trending down but not a lot of change, certainly not in the first quarter. Only very recently over the last couple of weeks we’ve seen a little bit less as I said in my remarks for the April 28th numbers, we’ve seen a little bit more of the growth coming down from a cross-border perspective.

Barbara Gasper

Next question, please.

Operator

Our next question comes from Smittipon Srethapromote from Morgan Stanley. Go right ahead, sir.

Smittipon Srethapromote – Morgan Stanley

Thank you. My question is on there but your competitor recently spoke about weakness and debit payment volumes while your numbers seem quite robust. Do you think you’re gaining share or are there any notable differences in debit exposure to call out that drove that divergence in trends?

Ajay Banga

I guess the macro side [ph] we are gaining share but I don’t know what’s causing the issue for the others in truth. I know that our in debit volumes continue to remain, as I’ve said, above that 400 million transactions a month which is up from the hundreds that we used to have pre-Durbin. It goes up and down by 10 million, 20 million transactions depending on where we are on the routing table of the larger retailers.

We have a very sophisticated way of comprehending where they want to pass that transaction. But that’s kind of where we are.

Barbara Gasper

Next question, please.

Operator

We have our next question comes from Craig Maurer from CLSA. Go right ahead, sir.

Craig Maurer – CLSA Limited

Hey, good morning. Thanks. Regarding how we’re progressing towards a mobile payments infrastructure in the US, I was wondering how discussion with banks are proceeding in terms of MasterCard, perhaps filling the role of a central token provider that can aggregate all the banks into a single token source and make it easier for a mobile rollout from someone, say, like Apple.

Ajay Banga

So as you know, Craig, we put out this whole announcement not just with MasterCard, by the way, but as an industry – Visa, AmEx [indiscernible] in their announcement about providing tokenization as a way to help protect the increasing percentage of transactions that are digital because that’s where this impacts the most. While at the same time allowing the right amount of information about which card is being used, which category, which type, which institution, who issued the card to flow back and forth between the merchant and the issuer. That’s the whole purpose of what we’re trying to do with tokenization the way that Visa, AmEx and us are trying to do it.

It’s really not suspect to us only. The discussions are proceeding. We’re talking to every institution, we’re talking to merchants, we’re talking to banks. We’ve had discussions with legislators who want to understand tokenization although that’s in very early stages. As you know, there’s always interest in the legislative community around the whole mobile payment space more as a way of getting aware of what’s going on in the space than any other comprehension.

So that’s going on even as we speak. So the dialog is usual. We’re making progress in being ready to do all of these things. We are – our technological development is continuing apace and in fact, it’s going to keep adding to our CapEx. That’s one of the things we’ve got to do. We’ve got to invest money in tokenization and MasterPass and we’re doing it. So that’s what’s going on.

But at the same time, as I’ve said in my remarks, we’re also working on different ways in which the mobile payments industry will develop. It could be through secure elements, it could be through postcard innovation. And there are different levels of interest from banks, merchants and hardware and M&O [ph] providers on those two elements.

And then there’s of course the more old-fashioned way of mobile payments which is really more for transfers which is the SMS or simple wallet-based transfer of money. We’re playing around with all of those, from Telefonica which was more in the simple transfer of money to the conversations that you’ve had – you know we’ve been having with more sophisticated players who are trying out different ways of doing mobile payments. So that’s the whole range.

And as I said in the past, I don’t want to pick winners and losers in this. I believe that one of the things we need to do as a company is to be a strong participant in these alternative ways in which digital payments will evolve. And I actually don’t know that mobile payments is the only way digital payments will evolve. It may be through wearables.

And mobility as a whole will probably be an asset. It may not be only the phone. And so we’re trying to play around all of those. And between Ed McLaughlin in our emerging payments area and Garry Lyons in MasterCard Labs, we have a very strong team that is working with our core products team to try and work with as many of these different methodologies as possible.

Craig Maurer – CLSA Limited

Thank you.

Operator

And our next question comes from David Hochstim from Buckingham Research. Go right ahead, sir.

David Hochstim – The Buckingham Research Group Incorporated

Yes. So I wonder if you can just clarify two things in the 2% of revenues from Russia, does that include cross-border volume and then could you give us –

Martina Hund-Mejean

Yes.

David Hochstim – The Buckingham Research Group Incorporated

Okay. And so that could be a high percentage of that that might not disappear?

Martina Hund-Mejean

And you said –

Ajay Banga

Actually, it’s not. It’s not a high percentage.

Martina Hund-Mejean

It’s not. It’s actually a relatively low percentage. And first of all, we said a little bit more than 2% of our revenues but it does include all of cross-border and it’s not a very significant – it’s some portion but it’s not the majority. It’s much less than that.

David Hochstim – The Buckingham Research Group Incorporated

Okay. And could you just clarify what the –

Ajay Banga

Dave, let me give you a hint. An overwhelming majority of the Russian revenue is domestic. How’s that?

David Hochstim – The Buckingham Research Group Incorporated

Thank you. That’s helpful, thank you. And could you just remind us what the revenue could be once the base portfolio [ph] is slowly deconverted?

Martina Hund-Mejean

No. So David, we are doing it – all of my remarks that I have done for 2014 as well as for the longer period, 2013 to ‘15, obviously takes them – takes the conversion. But we are not calling out a specific number to a specific customer.

David Hochstim – The Buckingham Research Group Incorporated

Okay. Thank you.

Operator

And our next question comes from Kevin McVeigh from Macquarie. Go right ahead, sir.

Kevin McVeigh – Macquarie Research

Great, thank you. Just given what seemed like a little bit of higher level rebate incentives in Q1 and obviously Q4, should we expect that to tell off the balance of the year or just pretty consistent with historical trends as well? Should we see a bit of a step down given the investments in Q1 and Q4 or still at relatively historical levels?

Martina Hund-Mejean

So Kevin, let me just set this a little bit correctly. What happened in Q4 was basically a catch-up from the prior quarters. When you look at our Q2 and Q3, in 2013 rebate [indiscernible] the numbers were relatively low and then you had a catch-up in Q4 for that. What you’re now seeing in Q1 of 2014 is very similar to what you have seen in prior years. So you can actually say that 2013 was an anomaly from a quarter-over-quarter performance, not from a whole year. And now in 2014, you’re going to see something very similar to 2012 – in 2014 to 2012.

Kevin McVeigh – Macquarie Research

Thank you.

Operator

And our next question comes from Sanjay Sakhrani from KBW. Go right ahead, sir.

Sanjay Sakhrani – KBW

Thank you. I guess the accelerating GDV and process transaction growth in the United States is pretty encouraging given the backdrop. Could you just talk about what’s driving that? Is it your customer engagement or is it consumer spending more? And maybe you could just talk about kind of a broader lead across to the economy. Thank you.

Ajay Banga

Hi, Sanjay. So yes, as I said, spending falls short at 2 point something – 2.8% or 2.9% growth in the first quarter ex auto. As you know, it was down from the growth rate of the fourth quarter over the same quarter of the prior year. All these numbers, by the way, are not sequential quarter. They are quarter-over-quarter, same quarter prior year.

The – and that is down – by the way, the fourth quarter was down over the third quarter. So in a sense, it feels like the growth rate of consumer spending ex auto in the US felt like it was slowing over these three quarters. But interestingly, when you unpeel the first quarter, I should see two things that make me feel that we shouldn’t jump to that conclusion too quickly.

And the first one has to do with the regional spending trends in the United States in the consumer spending trend. Aside from the Northeast which actually in our SpendingPulse data, declined for the total consumer spending ex auto in the Northeast. And actually, the growth rate was minus. So a little decline in the first quarter of 2014 over the first quarter of 2013. And similarly, in the mid-West where there was very bad weather, we had a small decline.

Now, a larger proportion of the US consumer spending comes from the Northeast than the mid-West. On the other hand, the Western part of the country from Seattle down to California grew very, very handsomely, almost in the double digits. And the Southwest of the country, Texas through Florida, did something similar. So when you put the whole of the United States together, the weather truly, truly did seem to have some kind of an impact because it just matches too closely to this pattern.

The second thing that was interest – and I don’t yet know how to calculate the impact of it – is Easter. Easter is coming at a different time and therefore, April’s numbers by and large look a little better for most of us and for the consumer spending early data that I’m seeing. I haven’t yet seen our new SpendingPulse data. It will come out within a few days of the 1st of May which is now, so in a few days it will emerge.

That’s kind of what I know so far. So overall, I’d say that the US even though the numbers at a bold [ph] level look like the growth rate is reducing, I wouldn’t jump to that conclusion too quickly.

Operator

And our next question comes from James Friedman from Susquehanna. Go right ahead, sir.

James Friedman – Susquehanna Financial Group

Hi. And Ajay, I wanted to follow up on the Svenska Handelsbanken win. Congratulations, I know that’s a very prestigious issue. I think you had in your comments suggested it was your largest conversion in Europe since Swedbank. So I don’t have to spend $10,000 for the Nielsen Report, could you give us some context on Svenska, how big are they relative to Sweden – to Swedbank? That would be helpful. Thank you.

Ajay Banga

I think you spend the 10 grand and you’ve got to pay for all this people too. I’ll send you my copy. How’s that? I’ll tell you this. I don’t want to talk about a particular institution. It’s not what I would do in terms of their size. But I will give you this idea.

In the Nordics, there are three of four very large institutions and you’re counting – the two names you mentioned are among those three or four right on the top. The Handelsbanken is actually the second largest retail bank in Sweden. It’s presence outside of Sweden in the rest of the Nordics is lower than its presence in Sweden, so it may not be – in fact, I don’t think it is the second largest for the whole of the Nordics. But it is very – one of the large three or four big ones there.

But it’s pretty significant for us because we’ve been trying to build our share in the Nordics now for a little while partly because that’s one of the markets where cash is truly not king, where electronic payments are king. And so much so that I think the estimate of cash in terms of percentage of transactions in Nordics is between 5% and 10% or even lower in some cases which makes it quite the opposite of the world which is 85% cash and checks.

And so we’ve been doing well there. We were not in a great position four, five years ago. We’ve actually grown ourselves nicely and that’s the flavor I was trying to provide you in terms of becoming among the largest players in the Baltics and now the largest debit card in Sweden and we’ve grown our share in credit and commercial and installment cards and co-brand cards and I feel generally good about where we are there.

James Friedman – Susquehanna Financial Group

Thank you.

Operator

And our next question comes from Bryan Keane from Deutsche Bank. Go right ahead, sir.

Bryan Keane – Deutsche Bank AG

Yes, hi guys, good morning. Just more details that have come out on the European regulation front, so I just want to get an update from you guys on any details on the potential challenges the MasterCard – I know you guys mentioned that is something you’re highlight. So what are the kind of things that you guys are looking at that could be a challenge?

Ajay Banga

Well, there’s multiple things in that legislation the way it is currently worded, although it has changed also from the original wordings and in some ways the current wording is less onerous and in others, it is more onerous. The one that came through the last round added commercial card interchange to be controlled and dictated just as consumer interchange in the current space is going to be controlled and dictated.

I actually don’t like that because it – remember we are inside this legislation. The aspect of other full party [ph] schemes as well as schemes that look like full party [ph] but may not be called full party [ph] are also included. But at the end of the day, I think what really happened here and this is information gleamed more from hearsay than reality, is that my sense is that the recent work was a confused one.

The legislators actually did not believe that commercial cards should be dictated in the same way as consumer credit cards but in a mix up in the wording pattern, it got worded the wrong way. I don’t know whether that will get corrected over this coming process but that’s kind of what we’re discussing openly and transparently with the legislative community and the regulatory community in Europe.

I would like that to not be in the rules really. But beyond that, there’s a bunch of other rules that had started. Remember the one about separation of management between scheme and processing. And there was this whole thing of what’s constituted in separation and what’s not. We’re getting a little more clarity it feels like the way it looks today, but management would have to be separated, you would have to have some legal entities separated. But the holding company could be the same.

Now, that’s complicated but not impossible. It’s a pain in the neck but it’s not impossible. And so those are the kind of things we’re working our way through. Some of them have more implications for other players in the ecosystem – for merchants, for banks, for us, it kind of varies each time. And we’re trying to take a balanced view for it.

I know for sure that when regulation comes in, it causes some amount of uncertainty in movement. But on the whole, what we’re trying to do here is work our way through the details of it, talk to the regulators and the community there about the whole aspect of the regulation. I think they’ve tried to bring in more elements around the level playing field that they’re asked for. I don’t know that all the elements are there yet in reference to commercial card, for example, but they are in the others.

And so kind of a mixed bag. And I’m not going to go much further on this call. But I’m going to work my way through it over the next six months. Remember, we’re talking about first half of 2014 when this will probably get batted down. And we’ve got, as you can imagine, a number of very smart people working at it in some detail.

Martina Hund-Mejean

First half of 2015, correct –

Ajay Banga

2015, sorry, not ‘14. Error. 2014 is what we’re in. 2015. As you can see, I’m losing track of time just like advancing age.

Martina Hund-Mejean

Looking ahead.

Bryan Keane – Deutsche Bank AG

Okay, thanks for the call.

Barbara Gasper

Operator, next question.

Operator

Our next question comes from Bob Napoli from William Blair. Go right ahead.

Bob Napoli – William Blair & Company L.L.C.

Thank you. Ajay, I wouldn’t send that Nielsen Report because I don’t think Nielsen likes that. There’s a very sharp word in the – so I was just wondering if you could give – with the Russia noise, if you can give an update on China and have you seen any movements there for opening up local processing in country and if you feel you’re in a position if they’re – if you think that other countries are going to follow what Russia is doing and when you see the effects that sanctions can have on a payments industry and on the banking industry. So if you could talk a little bit about Russia, if you’re seeing any movement there.

And then at what point do you just – I mean on Russia, I think one of the terms that I saw on one of the – I’m not sure what exactly what they passed but they wanted Visa and MasterCard to put up $4 billion, $3.8 billion, two days processing or something like that is – at what point do you just throw in the towel on Russia?

Ajay Banga

So I mean there are two different kind of parts there. The one about the level of collateral and as I mentioned, that’s one of the issues. I actually don’t think the number is what you just said. I think it’s a lower number than that. But having said that, it’s not a number I’m interested in. So to be clear, either which way, I’m not a happy boy on that one.

But, I don’t know, we’ll see. We’re going to have the discussions with the Central Bank. We are very transparently in conversation with them. It’s kind of interesting on the ground in Russia, banks and their clients and merchants are still doing a lot of new things with us. And it’s almost like that’s continuing. We’ve actually launched new things in the last three weeks with them.

And then on the other hand and having a very open, by the way, transparent discussion with the Central Bank which, as you would expect with a good regulator, you would expect that transparency of discussion. Clearly, there is a political circumstance in Russia that is driving in a different direction. This whole thing of having domestic payment schemes is not new to us. But we’re dealing with it in Europe for a long time before SEPA which of course changed it.

And as you know, that’s opened the doors for us there. Recently in Mexico which has always been dominated domestically by two domestic payment switches that were owned by the bank, the Mexican government has just literally – and I think it’s three, four weeks ago has put out a new regulation that actually opens that space for people like us and our competitors to attempt to begin to process domestic transactions. Now it’ll be a long road. Nothing happens overnight.

I mean SEPA has been one of the longest winding roads that we can think of. But it’s there. We’re going to go after that kind of stuff. So stuff comes in, stuff goes out. I don’t know that any one incident makes that whole domestic payment switch versus foreign company being – working here whether it changes the balance greatly. Stuff comes in, stuff goes out.

People keep talking to us – we get peaks and trust [ph] of conversation around that space. And remember, within it, there are flavors. There’s domestic payment switch versus on-soil processing, what constitutes on-soil as I was explaining in the earlier answer is in itself a very detailed conversation. So that’s kind of the whole element there.

China, we’ve continued to grow in China with the partnership that we have with China UnionPay. As you know, there’s been an actually overwhelming majority of the co-brands that get issued for domestic use with the cup blub [ph] on it and for overseas travel with MasterCard on it. And that’s a good thing.

We’re also doing things with them on eCommerce. We’re doing things with them on expanding acceptance from China and outside. But as far as the regulator is concerned, my sense is that they’re actually working their way through what kind of policy they would have to open up their domestic market while ensuring that their country’s needs are met and protected.

So I don’t know that you’ll go from having a completely closed domestic market to a US kind of market. I never expected that, to tell you the truth. The question is where in the middle does it come. And honestly, I don’t know enough about that. To let you know, I was there, I don’t know, five, six weeks ago at the China Development Forum. When I go and speak there and I talked about a few things and I met a number of regulators. I met senior leaders there.

And my sense is they’re very engaged and very open about the dialog, but they’re not there yet. They’re still working their way through it.

Bob Napoli – William Blair & Company L.L.C.

Okay, thank you.

Barbara Gasper

Sir, I think we have time for one last question.

Operator

Of course. And our last question will be from Darrin Peller from Barclays. Go right ahead.

Darrin Peller – Barclays Capital

Thanks, guys. Listen, I saw your comments on the European regulations [indiscernible] the Russian invocations chase [ph], all three of those not impacting your guidance I guess long term is helpful. I just want to be clear. First of all, that is long term, right? That’s the 11% to 14% CAGR you’re talking about?

And then, Martina, just as a follow up around the dilution, I guess you mentioned earlier I think from acquisitions during the year being $0.06 to $0.07 now versus $0.01 to $0.02 earlier in the year. Can you just give a little more color on what’s different now than in January? Maybe you can just brand [ph] the size – the relative size of the deals?

Ajay Banga

I’m from the first part and let’s not do the acquisition part as well. Let me give a little clarity of what I – I want to make sure that you hear where I’m coming from.

The guidance we’re referring to is up 2013 through 2015. That’s the guidance we have given, that’s what’s called our long term guidance.

Darrin Peller – Barclays Capital

Right.

Ajay Banga

I believe that what’s going on between Russia and the European regulation, Russia actually could be even more complicated given the level of detail we’re having here as a conversation. Europe could be – some early impact, this could be negative but that could be where if we are innovative, if we are creative and if we are competitive on the ground, I continue to believe that Europe is an enormous opportunity, given that so much of Europe’s expenditure outside of the Nordics is still in cash.

And I think we bring a lot of assets to the table for the European government and the European consumer and the European merchant and the European banks and the European M&Os who are now good partners of ours. So that’s where we’re coming from and that – we think that there’s a lot of negative in this but there’s a lot of positives too in a business like ours – conversion of secular trends, the market share we’re winning, the deals we are doing and somewhere in there is our attempt to balance and get to the guidance that we’re giving you.

It won’t be easy but it’s what we are committed to doing. We have in the past found our way through somewhat complicated situations. And I have some confidence that’s what we’re doing here too.

Martina Hund-Mejean

Yes. So as you can appreciate, we had to do a number of scenarios that gives us the comfort that we can go to the 11% to 14% for the 2013 to the 2015 period. And that we feel comfortable that we can do that.

Now you asked your second question on the acquisitions. What’s changed is what acquisitions we have made. So first of all, we had only two acquisitions, Provus and HomeSend, this is the processing play as well as the remittance play that we talked about on the first quarter – on the fourth quarter earnings call in Chile.

Darrin Peller – Barclays Capital

Sure.

Martina Hund-Mejean

And those were relatively small properties. The other two that we have announced, one we have now closed, was C-SAM that already Ajay quoted in terms of the mobile platform capabilities that C-SAM brings to us. That is relatively larger property as well as Pinpoint which is the loyalty play in Australia that will allow us to actually expand our loyalty capabilities all over Asia Pacific. So both – that hasn’t closed, by the way. Both of those are a little larger and that leads to the $0.06 to $0.08.

Darrin Peller – Barclays Capital

Okay, got it.

Ajay Banga

So I got to add. Pinpoint’s also factor into Martina’s thinking even though it’s not closed. That’s the real clarity that we want to make sure you get. And by the way, back to the earlier question to make sure you feel comfortable where we’re coming from. Honestly, what made me comfortable is the fact that there’s a range there. And I don’t know yet. I’m no crystal ball to tell you I’ll end up where in that range. And I know I’m going to have ups and downs. But that’s what you guys invest in us for which is to stay committed to trying to get to the right market share and revenue growth. And that’s what we’re going to do.

Darrin Peller – Barclays Capital

All right, very helpful, guys. Thanks.

Operator

And Barbara, do you have any final remarks?

Barbara Gasper

I’m going to turn the call over to Ajay for just a second.

Ajay Banga

Thanks, Adrianna [ph]. So everybody, thank you for your questions and I’m going to leave you with a couple of closing parts. So we’re off to a very good start in 2014. We feel good about them despite the mixed economic conditions. And I think we all believe those mixed economic conditions will probably be around for the near term.

We do have some challenges with Russia and the European payments industry regulation with the new wrinkle [ph] of commercial cards potentially being included that I just talked about. But you know what, there are opportunities too around the world which we believe give us some balance. And that’s what the answer was just now in the last question about our guidance.

As Martina said, we’re staying with our long term guidance. We’ve continued to make good progress in winning deals around the world, including our singles and doubles in US consumer credit. We’re also investing in new technology and other services. We’re doing it organically. You heard about that through MasterPass and tokenization. We’re also doing it through acquisitions – C-SAM which will help us scale MasterPass and other things in that space, the loyalty acquisition, Provus and processing and so on.

All of these help increase our share. They’re creating new opportunities for our business. And most importantly, they’re driving the conversion of our set target, our 85% cash that exists in the world. So all in all, our business continues with strong momentum. We’re focused on delivering another good year. And I want to thank you all for your continued support and your consideration of what we’re doing. And thank you for joining today’s call.

Operator

Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.

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