10-QPeriod: Q1 FY2010

Mastercard Inc Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 4, 2010For Securities:MA

Summary

Mastercard Inc. reported a solid financial performance for the first quarter of 2010, with net income attributable to the company increasing by 23.8% to $455 million, or $3.46 per diluted share, compared to $367 million, or $2.80 per diluted share, in the same period of 2009. This growth was driven by a 13.1% increase in net revenues to $1,308 million, fueled by higher dollar volumes and transaction counts on its branded cards, coupled with strategic pricing adjustments. The company maintained a strong liquidity position with $3.0 billion in cash and cash equivalents and available-for-sale securities at the end of the quarter. Despite a challenging global economic environment, Mastercard demonstrated resilience and strategic execution. The company highlighted the ongoing shift from paper-based payments to electronic forms as a key long-term growth driver. Management's focus remains on penetrating existing customer bases, expanding into targeted geographies and high-growth segments, and investing in its brands and payment innovations. While operating expenses saw a modest increase, the company managed to improve its operating margins significantly year-over-year, indicating efficient operations and effective cost management in the face of revenue growth.

Financial Highlights

50 data points
Beta

Revenue

$1.31B

Net Income

$455.00M

34.8% Net Margin

EPS (Diluted)

$0.35

Total Assets

$7.29B

Cash & Equivalents

$2.12B

Free Cash Flow

$92.00M

Financial Statements
Beta
Revenue$1.31B
Operating Expenses$608.00M
Operating Income$700.00M
Interest Expense$15.00M
Net Income$455.00M
EPS (Basic)$0.35
EPS (Diluted)$0.35
Shares Outstanding (Basic)1.30B
Shares Outstanding (Diluted)1.31B

Key Highlights

  • 1Net income increased by 23.8% to $455 million in Q1 2010 compared to Q1 2009.
  • 2Net revenues grew by 13.1% to $1,308 million, driven by increased transaction volumes and pricing.
  • 3Diluted Earnings Per Share (EPS) rose to $3.46 from $2.80, a 23.6% increase year-over-year.
  • 4Operating income saw a significant increase of 24.6% to $700 million.
  • 5Mastercard maintained a strong balance sheet with $3.8 billion in equity and $3.0 billion in cash and cash equivalents and current available-for-sale securities.
  • 6Rebates and incentives (contra-revenue) increased by 30.7% year-over-year, reflecting strategic customer agreements.
  • 7Gross dollar volume (GDV) on a U.S. dollar converted basis increased by 14.8%.

Frequently Asked Questions

Mastercard's revenue growth was primarily driven by an increase in the dollar volume of activity and transactions on cards carrying its brands, combined with strategic pricing adjustments. Favorable foreign currency exchange impacts also contributed to the revenue increase.

Total operating expenses increased by 2.2% to $595 million. This increase was primarily due to unfavorable foreign currency exchange impacts and higher general and administrative expenses, partially offset by lower advertising and marketing costs.

Mastercard acknowledges the challenging global economic environment but believes the ongoing shift from paper to electronic payments presents significant long-term growth opportunities. The company is focused on strategic expansion, innovation, and maintaining strong customer relationships to navigate these conditions.

The filing details various legal and regulatory proceedings, including antitrust litigation (DOJ, American Express, Discover), currency conversion litigations, interchange fee investigations in the US and Europe, and other matters. While the company believes it has strong defenses, adverse outcomes could materially impact its financial position and results of operations. The American Express Settlement involves significant quarterly payments, and other litigations may result in substantial damages or fines.