10-KPeriod: FY2018

Mastercard Inc Annual Report, Year Ended Dec 31, 2018

Filed February 13, 2019For Securities:MA

Summary

Mastercard's 2018 10-K filing highlights a year of strong growth and strategic expansion. The company demonstrated robust performance with a 20% increase in net revenue, driven by solid growth in switched transactions, cross-border volume, and gross dollar volume. Mastercard continued to invest in its core business while diversifying into new payment flows, such as B2B and P2P, and enhancing its value-added services, including safety and security products and data analytics. The company also addressed significant legal and regulatory matters. A notable development was the announcement of a proposed resolution with the European Commission regarding interchange rates, which, if accepted, would lead to modifications in these fees. The EC also issued a decision regarding Mastercard's central acquiring rule, including a fine of €571 million, for which Mastercard recorded a $654 million charge in Q4 2018. Furthermore, Mastercard continued its share repurchase program and dividend payments, demonstrating a commitment to returning value to shareholders.

Financial Highlights

54 data points
Beta

Revenue

$14.95B

Net Income

$5.86B

39.2% Net Margin

EPS (Diluted)

$5.60

Total Assets

$24.86B

Cash & Equivalents

$6.68B

Free Cash Flow

$5.89B

Financial Statements
Beta
Revenue$14.95B
Operating Expenses$7.67B
Operating Income$7.28B
Interest Expense$186.00M
Net Income$5.86B
EPS (Basic)$5.63
EPS (Diluted)$5.60
Shares Outstanding (Basic)1.04B
Shares Outstanding (Diluted)1.05B

Key Highlights

  • 1Net revenue increased by 20% year-over-year, reaching $14.95 billion, driven by a 17% increase in switched transactions and 18% growth in cross-border volume.
  • 2Mastercard is actively expanding its capabilities beyond core payments, focusing on new payment flows like Business-to-Business (B2B) and Person-to-Person (P2P) through platforms like Mastercard Send and real-time account-based payments.
  • 3Significant investments were made in strategic initiatives, including a $100 million contribution to the Mastercard Impact Fund to support inclusive growth.
  • 4The company reinforced its commitment to safety and security by implementing EMV 3D Secure 2.0 and expanding AI capabilities for fraud detection and prevention.
  • 5Mastercard announced an anticipated resolution of an investigation by the European Commission concerning interregional interchange rates, which may lead to fee modifications.
  • 6A fine of €571 million was issued by the European Commission related to a historic central acquiring rule, resulting in a $654 million charge recorded in Q4 2018.
  • 7Shareholder returns were bolstered through share repurchases totaling $4.9 billion and dividend payments of $1.0 billion during the year.

Frequently Asked Questions

Mastercard's net revenue grew by 20% in 2018. This growth was primarily driven by a 17% increase in switched transactions (adjusted for Venezuela deconsolidation), an 18% increase in cross-border volume on a local currency basis, and a 14% increase in gross dollar volume on a local currency basis. These volume increases were partially offset by higher rebates and incentives, which rose by 18%.

Mastercard's strategy focuses on growing its core business globally, diversifying into new payment flows such as B2B and P2P, and building its business by creating and acquiring differentiated products and services. Key initiatives include expanding acceptance in emerging markets, promoting financial inclusion, and leveraging technology like AI and blockchain for enhanced payment solutions and security.

In 2018, Mastercard announced an anticipated resolution of a European Commission investigation into its interchange fees, proposing changes to interregional interchange rates. Additionally, the European Commission issued a negative decision and a fine of €571 million regarding Mastercard's historic central acquiring rule, for which Mastercard recorded a $654 million charge. The company also settled U.S. antitrust litigation with merchants for monetary damages.

Mastercard demonstrated a strong commitment to shareholder returns by repurchasing approximately $4.9 billion of its common stock and paying $1.0 billion in dividends during 2018. The company also declared an increased quarterly dividend in December 2018.