10-QPeriod: Q3 FY2009

Mastercard Inc Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 3, 2009For Securities:MA

Summary

Mastercard Inc. (MA) reported a strong recovery in the third quarter of 2009, significantly reversing the net losses experienced in the same period of 2008. Net income attributable to Mastercard for the nine months ended September 30, 2009, reached $1.17 billion, a substantial improvement from a net loss of $493 million in the prior year. This turnaround was driven by a notable increase in transaction processing fees and effective cost management, including a significant reduction in litigation settlement expenses which heavily impacted the prior year's results. The company's financial health remains robust, with $2.3 billion in cash and cash equivalents and a strong equity position of $3.2 billion as of September 30, 2009. Despite a slight decrease in gross dollar volume (GDV) when measured in U.S. dollars due to currency fluctuations, volumes measured in local currencies showed resilience, indicating underlying transaction growth. The company's strategic focus on expanding its role in targeted geographies and higher-growth segments, alongside ongoing investment in its brands, positions it well for continued recovery and growth in the evolving global payments landscape.

Financial Highlights

53 data points
Beta

Revenue

$1.36B

Net Income

$452.00M

33.1% Net Margin

EPS (Diluted)

$0.34

Total Assets

$6.94B

Cash & Equivalents

$2.32B

Free Cash Flow

$304.00M

Financial Statements
Beta
Revenue$1.36B
Operating Expenses$691.00M
Operating Income$673.00M
Interest Expense$24.00M
Net Income$452.00M
EPS (Basic)$0.35
EPS (Diluted)$0.34
Shares Outstanding (Basic)1.30B
Shares Outstanding (Diluted)1.30B

Key Highlights

  • 1Net income attributable to Mastercard for the nine months ended September 30, 2009, was $1.17 billion, a significant turnaround from a net loss of $493 million in the same period of 2008.
  • 2Operating expenses decreased substantially by 57.8% for the nine months ended September 30, 2009, primarily due to the resolution of significant litigation settlements in 2008.
  • 3Transaction processing fees saw a strong increase of 12.9% for the nine months ended September 30, 2009, indicating healthy growth in transaction volumes.
  • 4The company maintained a strong liquidity position with $2.3 billion in cash and cash equivalents and $3.2 billion in total equity as of September 30, 2009.
  • 5Despite a 7.9% decrease in Gross Dollar Volume (GDV) on a U.S. dollar converted basis, GDV measured in local currency increased slightly (0.1%), suggesting underlying transaction resilience.
  • 6General and administrative expenses decreased by 4.7% for the nine months ended September 30, 2009, reflecting cost containment initiatives.
  • 7The effective income tax rate for the nine months ended September 30, 2009, was 33.6%, down from 40.4% in the prior year, partly due to the favorable impact of resolving prior year tax positions.

Frequently Asked Questions

The primary driver was a substantial decrease in operating expenses, largely due to the absence of major litigation settlement charges that heavily impacted the prior year. Additionally, an increase in transaction processing fees and effective cost management measures contributed to the improved profitability.

The strengthening of the U.S. dollar against the euro and Brazilian real negatively impacted reported revenues and expenses due to translation effects. This also led to a decrease in Gross Dollar Volume (GDV) when measured in U.S. dollars, although GDV measured in local currencies remained relatively stable, indicating underlying transactional activity.

As of September 30, 2009, Mastercard maintained a strong financial position with $2.3 billion in cash and cash equivalents and $3.2 billion in total equity. The company generated $1.1 billion in net cash from operating activities during the first nine months of 2009.

Yes, Mastercard is involved in various ongoing legal and regulatory proceedings globally, particularly concerning interchange fees, antitrust matters, and currency conversion fees. While the company has settled some major litigation (like the Discover and American Express settlements which heavily impacted 2008 results), the outcomes of remaining proceedings are uncertain and could potentially have a material adverse effect on future financial results.