10-QPeriod: Q3 FY2012

Mastercard Inc Quarterly Report for Q3 Ended Sep 30, 2012

Filed October 31, 2012For Securities:MA

Summary

MasterCard Inc. reported solid financial performance for the nine months ended September 30, 2012, demonstrating continued revenue growth and strong profitability. Net revenues increased by 10% year-over-year to $5.5 billion, driven by a 16% increase in local currency gross dollar volume and a 27% rise in processed transactions. This top-line growth translated into a 14% increase in net income attributable to MasterCard, reaching $2.15 billion for the period, with diluted earnings per share rising to $17.07. The company maintained healthy operating margins, reflecting efficient cost management, although general and administrative expenses saw an increase due to personnel and strategic initiatives. MasterCard also continued its capital return strategy, actively repurchasing shares under a new $1.5 billion program and increasing its quarterly dividend. The company maintains a strong liquidity position with over $5.6 billion in cash and cash equivalents and current available-for-sale securities.

Financial Highlights

50 data points
Beta

Revenue

$1.92B

Net Income

$772.00M

40.3% Net Margin

EPS (Diluted)

$0.62

Total Assets

$12.12B

Cash & Equivalents

$3.04B

Free Cash Flow

$986.00M

Financial Statements
Beta
Revenue$1.92B
Operating Expenses$854.00M
Operating Income$1.06B
Interest Expense$4.00M
Net Income$772.00M
EPS (Basic)$0.62
EPS (Diluted)$0.62
Shares Outstanding (Basic)1.25B
Shares Outstanding (Diluted)1.25B

Key Highlights

  • 1Net revenues increased by 10% year-over-year to $5.496 billion for the nine months ended September 30, 2012.
  • 2Net income attributable to MasterCard grew by 14% to $2.154 billion for the nine months ended September 30, 2012.
  • 3Diluted earnings per share increased by 16% to $17.07 for the nine months ended September 30, 2012.
  • 4Gross Dollar Volume (GDV) increased by 11% on a U.S. dollar converted basis, and processed transactions rose by 27% year-over-year for the nine months ended September 30, 2012.
  • 5Operating income grew by 12% to $3.038 billion for the nine months ended September 30, 2012.
  • 6MasterCard repurchased approximately 2.8 million shares for $1.1 billion during the nine months ended September 30, 2012, under its share repurchase programs.
  • 7The company declared an increased quarterly cash dividend of $0.30 per share.

Frequently Asked Questions

For the three months ended September 30, 2012, net revenues increased by 5% to $1.918 billion compared to the same period in 2011. For the nine months ended September 30, 2012, net revenues increased by 10% to $5.496 billion compared to the same period in 2011. This growth was primarily driven by increased dollar volume of activity on cards and a higher number of processed transactions.

MasterCard has accrued a total of $790 million pre-tax for the settlement of U.S. merchant litigations, with $770 million recorded in Q4 2011 and an additional $20 million in Q2 2012. The company is also involved in other legal and regulatory proceedings globally, the outcomes of which are uncertain and could potentially have a material adverse effect, though MasterCard believes it has strong defenses.

MasterCard maintains a strong liquidity position with $3.045 billion in cash and cash equivalents and $2.594 billion in investment securities available-for-sale as of September 30, 2012. The company actively returned capital through share repurchases, having bought back approximately 2.8 million shares for $1.1 billion in the first nine months of 2012 under new and prior programs. Additionally, the quarterly cash dividend was increased to $0.30 per share.

The strengthening of the U.S. dollar against the euro and Brazilian real negatively impacted reported results. For the nine months ended September 30, 2012, foreign currency translation reduced net revenues by approximately 4 percentage points and operating expenses by approximately 2 percentage points. This effect is also reflected in Gross Dollar Volume (GDV) growth, where local currency growth outpaced U.S. dollar converted growth.