01—Abstract
Summary
Summary of the 10-K filed February 13, 2019. Cited figures are marked; the original filing is the authoritative source.
Mastercard's 2018 10-K filing highlights a year of strong growth and strategic expansion.
The company demonstrated robust performance with a 20%a 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 millionb charge in Q4 2018. Furthermore, Mastercard continued its share repurchase program and dividend payments, demonstrating a commitment to returning value to shareholders.
02—Key points
Key Highlights
- Net 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.
- Mastercard 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.
- Significant investments were made in strategic initiatives, including a $100 million contribution to the Mastercard Impact Fund to support inclusive growth.
- The company reinforced its commitment to safety and security by implementing EMV 3D Secure 2.0 and expanding AI capabilities for fraud detection and prevention.
- Mastercard announced an anticipated resolution of an investigation by the European Commission concerning interregional interchange rates, which may lead to fee modifications.
- A 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.
- Shareholder returns were bolstered through share repurchases totaling $4.9 billion and dividend payments of $1.0 billion during the year.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 13, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $14.95B$12.50B | +19.6% |
| Operating Expenses | $7.67B$5.88B | +30.5% |
| Operating Income | $7.28B$6.62B | +10.0% |
| Interest Expense | $186.00M$154.00M | +20.8% |
| Net Income | $5.86B$3.92B | +49.7% |
| EPS (Basic) | $5.63$3.67 | +53.4% |
| EPS (Diluted) | $5.60$3.65 | +53.4% |
| Shares Outstanding (Basic) | 1.04B1.07B | −2.4% |
| Shares Outstanding (Diluted) | 1.05B1.07B | −2.3% |
05—Questions
Frequently Asked Questions
What were the key drivers of Mastercard's revenue growth in 2018?
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%.
What is Mastercard's strategy for future growth?
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.
What were the significant legal and regulatory developments impacting Mastercard in 2018?
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.
How did Mastercard return value to shareholders in 2018?
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.
06—Continue