10-QPeriod: Q1 FY2012

Mastercard Inc Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 2, 2012For Securities:MA

Summary

Mastercard Inc. reported solid financial performance for the first quarter of 2012, demonstrating continued revenue growth and profitability. Net revenues increased by 17% year-over-year, driven by strong growth in processed transactions (up 29%) and overall volume increases (up 18% in local currency). This robust top-line growth translated into a 21% increase in net income attributable to MasterCard, reaching $682 million. The company maintained healthy operating margins, reflecting its efficient business model and operational leverage. The company also highlighted its focus on strategic growth initiatives, including expanding its core businesses globally and diversifying into new areas. While facing a dynamic competitive landscape and ongoing economic uncertainties, Mastercard's strong financial position, evidenced by substantial cash flows from operations and a solid balance sheet, positions it well to navigate these challenges and pursue future growth opportunities. The company continues to return value to shareholders through share repurchases and dividends.

Financial Highlights

49 data points
Beta

Revenue

$1.76B

Net Income

$682.00M

38.8% Net Margin

EPS (Diluted)

$0.54

Total Assets

$11.13B

Cash & Equivalents

$3.68B

Free Cash Flow

$415.00M

Financial Statements
Beta
Revenue$1.76B
Operating Expenses$758.00M
Operating Income$1.00B
Interest Expense$6.00M
Net Income$682.00M
EPS (Basic)$0.54
EPS (Diluted)$0.54
Shares Outstanding (Basic)1.27B
Shares Outstanding (Diluted)1.27B

Key Highlights

  • 1Net revenues increased by 17% to $1.76 billion for the three months ended March 31, 2012, compared to $1.50 billion in the prior year period.
  • 2Net income attributable to MasterCard grew by 21% to $682 million, with diluted earnings per share rising to $5.36 from $4.29.
  • 3Processed transactions increased significantly by 29%, and volumes grew by 18% on a local currency basis year-over-year.
  • 4Operating income showed strong growth of 20%, reaching $1.00 billion, with operating margins improving slightly to 56.9%.
  • 5The company repurchased approximately 0.7 million shares of Class A common stock for $248 million during the quarter, reflecting its commitment to returning capital to shareholders.
  • 6MasterCard maintained a strong liquidity position with $5.1 billion in cash and cash equivalents and current available-for-sale securities at the end of the quarter.
  • 7The company declared a quarterly cash dividend of $0.30 per share, an increase from the previous quarter.

Frequently Asked Questions

Mastercard's revenue growth was primarily driven by an increase in the dollar volume of activity on cards carrying its brands and a significant increase in the number of transactions processed. Specifically, processed transactions increased by 29% and volumes grew by 18% on a local currency basis compared to the same period in the prior year.

Mastercard has recorded a $770 million pre-tax charge in Q4 2011 as an estimate for the financial portion of a potential settlement in the U.S. merchant litigation. The company continues to engage in settlement negotiations and mediation. While this charge represents an estimate for settlement, the potential liability if the case is litigated is not currently estimable. The company is also actively managing various other legal and regulatory proceedings globally, particularly those related to interchange fees.

MasterCard manages its exposure to foreign currency fluctuations by entering into foreign currency forward contracts. The company uses a rolling hedge program to reduce the anticipated foreign exchange risk on cash flows and may also use these contracts to offset changes in the value of assets and liabilities denominated in foreign currencies. While these activities reduce risk, they do not eliminate it entirely, and changes in the fair value of derivatives can result in gains or losses.

MasterCard is returning capital to shareholders through two primary methods: share repurchases and dividends. During the first quarter of 2012, the company repurchased approximately 0.7 million shares for $248 million. Additionally, the company declared a quarterly cash dividend of $0.30 per share, an increase from the previous quarter, demonstrating its commitment to shareholder returns.