10-QPeriod: Q2 FY2009

Mastercard Inc Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 31, 2009For Securities:MA

Summary

Mastercard Inc. reported its second quarter 2009 financial results, showing a strong recovery from the prior year's losses. For the three months ended June 30, 2009, the company posted a net income of $349 million, a significant improvement from a net loss of $747 million in the same period of 2008. This rebound was driven by a 2.7% increase in net revenues to $1.28 billion, primarily due to higher transaction volumes and strategic pricing adjustments. Operating expenses saw a substantial decrease of 70.9% to $723 million, largely influenced by the absence of a significant litigation settlement expense that impacted the prior year. For the six months ended June 30, 2009, net income reached $716 million, a substantial turnaround from a net loss of $300 million in the comparable period of 2008. Net revenues grew slightly by 0.3% to $2.44 billion, despite unfavorable foreign currency impacts. Operating expenses declined 58.1% to $1.32 billion, again significantly benefiting from the year-over-year absence of major legal settlements. The company maintained a strong liquidity position with $2.7 billion in cash and cash equivalents and available-for-sale securities, and generated robust operating cash flows of $778 million during the first half of the year.

Financial Highlights

52 data points
Beta

Revenue

$1.28B

Net Income

$349.00M

27.3% Net Margin

EPS (Diluted)

$0.27

Total Assets

$6.98B

Cash & Equivalents

$2.05B

Free Cash Flow

$349.00M

Financial Statements
Beta
Revenue$1.28B
Operating Expenses$723.00M
Operating Income$557.00M
Interest Expense$32.00M
Net Income$349.00M
EPS (Basic)$0.27
EPS (Diluted)$0.27
Shares Outstanding (Basic)1.30B
Shares Outstanding (Diluted)1.30B

Key Highlights

  • 1Net income of $349 million for Q2 2009, compared to a net loss of $747 million in Q2 2008.
  • 2Net revenues increased by 2.7% to $1.28 billion for Q2 2009.
  • 3Operating expenses decreased by 70.9% to $723 million for Q2 2009, significantly benefiting from the absence of large litigation settlement costs from the prior year.
  • 4For the first six months of 2009, net income was $716 million, a substantial improvement from a net loss of $300 million in the same period of 2008.
  • 5Generated $778 million in cash flow from operating activities for the first six months of 2009.
  • 6Maintained a strong liquidity position with $2.7 billion in cash and cash equivalents and current available-for-sale securities as of June 30, 2009.
  • 7Transaction processing fees increased by 14.6% in Q2 2009, driven by higher transaction volumes and pricing changes.

Frequently Asked Questions

Mastercard showed a significant improvement in the second quarter of 2009 compared to the second quarter of 2008. The company reported a net income of $349 million, a substantial turnaround from a net loss of $747 million in the prior year. This was accompanied by a 2.7% increase in net revenues to $1.28 billion and a significant decrease of 70.9% in operating expenses, largely due to the absence of a large litigation settlement that impacted 2008 results.

Revenue growth was primarily driven by strategic pricing adjustments implemented in October 2008 and April 2009, which increased net revenues by approximately 8 percentage points in the quarter. Higher transaction volumes also contributed positively, particularly an increase in transaction processing fees of 14.6%.

Mastercard maintained a strong financial position. As of June 30, 2009, the company had $2.7 billion in cash and cash equivalents and current available-for-sale securities. Furthermore, it generated $778 million in cash flow from operating activities during the first six months of 2009, indicating healthy operational cash generation.

Mastercard is involved in several significant legal and regulatory proceedings, particularly concerning interchange fees in various jurisdictions, including the U.S. and Europe, as well as antitrust litigation. While the absence of large settlement expenses from the prior year significantly improved the current period's results, ongoing legal and regulatory scrutiny, as detailed in Note 18 and Item 1A of the filing, continues to pose a risk to future revenues and business operations.