10-QPeriod: Q2 FY2011

Mastercard Inc Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 3, 2011For Securities:MA

Summary

Mastercard Inc. reported strong financial performance for the second quarter and the first half of 2011. Net revenues saw a significant increase of 22.1% and 18.5% respectively, driven by higher transaction volumes and pricing changes. The company also benefited from favorable foreign currency movements, particularly against the Euro and Brazilian Real. This robust revenue growth translated into substantial net income increases of 32.8% for the quarter and 28.2% for the first half of the year, leading to improved earnings per share. Operationally, Mastercard successfully integrated the acquisition of Access Prepaid Worldwide, contributing to revenue growth. The company continued its aggressive share repurchase program, demonstrating confidence in its financial position and commitment to returning value to shareholders. Despite ongoing legal and regulatory scrutiny, particularly concerning interchange fees globally, Mastercard's core business demonstrated resilience and strong execution, positioning it well for continued growth in the evolving payments landscape.

Financial Highlights

50 data points
Beta

Revenue

$1.67B

Net Income

$608.00M

36.5% Net Margin

EPS (Diluted)

$0.48

Total Assets

$9.03B

Cash & Equivalents

$2.76B

Free Cash Flow

$513.00M

Financial Statements
Beta
Revenue$1.67B
Operating Expenses$782.00M
Operating Income$885.00M
Interest Expense$2.00M
Net Income$608.00M
EPS (Basic)$0.48
EPS (Diluted)$0.48
Shares Outstanding (Basic)1.27B
Shares Outstanding (Diluted)1.28B

Key Highlights

  • 1Net revenues increased by 22.1% year-over-year for the three months ended June 30, 2011, reaching $1.67 billion.
  • 2Net income attributable to MasterCard for the second quarter of 2011 was $608 million, a 32.8% increase from the prior year.
  • 3Diluted Earnings Per Share (EPS) for the quarter was $4.76, up 36.4% compared to $3.49 in the second quarter of 2010.
  • 4Acquisition of Access Prepaid Worldwide, completed on April 15, 2011, contributed to revenue growth and expanded service offerings.
  • 5MasterCard repurchased approximately 4.1 million shares of Class A common stock for $1 billion during the first six months of 2011, demonstrating a strong commitment to share buybacks.
  • 6Gross Dollar Volume (GDV) increased by 23.6% on a U.S. dollar converted basis for the quarter, indicating strong underlying transaction growth.
  • 7Operating income margin remained robust at 53.1% for the quarter, reflecting efficient operations despite increased operating expenses.

Frequently Asked Questions

The acquisition of Access Prepaid Worldwide, completed on April 15, 2011, contributed to revenue growth. Recent acquisitions, including Access, added approximately 3 and 2 percentage points to net revenue growth for the three and six months ended June 30, 2011, respectively. Operating expenses also saw an increase attributed to these acquisitions, contributing approximately 7 and 5 percentage points to the rise in operating expenses for the same periods.

MasterCard has an active share repurchase program. In April 2011, the Board of Directors authorized an additional $1 billion for repurchases, bringing the total authorization to $2 billion. During the first six months of 2011, the company repurchased approximately 4.1 million shares for $1 billion. This demonstrates a strong commitment to returning capital to shareholders and confidence in the company's financial health.

Revenue growth was primarily driven by an increase in the dollar volume of activity on cards carrying MasterCard's brands and a higher number of processed transactions. Specifically, processed transactions increased by 17.4% for the quarter, and Gross Dollar Volume (GDV) increased by 23.6% on a U.S. dollar converted basis. Pricing changes and favorable foreign currency impacts also contributed to the revenue growth.

MasterCard faces ongoing legal and regulatory scrutiny globally, especially regarding interchange fees and antitrust matters. The company is actively engaged in these proceedings, and while many matters are uncertain, management believes it has strong defenses. Note 19 provides extensive detail on these legal and regulatory proceedings. Despite these challenges, the company's core business operations and financial performance remain strong.