01—Abstract
Summary
Summary of the 10-Q filed July 29, 2015. Cited figures are marked; the original filing is the authoritative source.
Mastercard Inc.'s (MA) Q2 2015 report shows resilience with slight net revenue growth despite foreign currency headwinds.
For the three and six months ended June 30, 2015, net revenue increased by 1% and 2% respectively, reaching $2.39 billiona and $4.62 billion. This growth was primarily driven by an increase in processed transactions and overall transaction volumes, though partially offset by higher rebates and incentives and the negative impact of foreign currency translation. Net income for the quarter was $921 million, a slight decrease from $931 million in the prior year, impacted by a $61 million provision for a UK merchant litigation settlement.
On a non-GAAP adjusted basis, excluding this settlement, net income saw a healthy increase of 4%b and 10% for the respective periods. Operating expenses saw a notable increase, largely due to acquisition activity and litigation provisions. Acquisitions contributed significantly to operating expense growth, impacting the bottom line by $(0.03) and $(0.06) per diluted share for the respective periods.
Despite these pressures, the company generated strong operating cash flow of $1.7 billionc for the first six months of 2015. Mastercard continues its strategic focus on growing its core business, diversifying into new areas, and building value through technology and partnerships, underscored by substantial share repurchase programs and consistent dividend payments.
02—Key points
Key Highlights
- Net revenue increased by 1% for the quarter and 2% for the year-to-date period compared to 2014, driven by higher transaction volumes and processed transactions.
- Net income for the quarter was $921 million, down slightly from $931 million in Q2 2014, primarily due to a $61 million provision for UK merchant litigation settlement.
- Adjusted net income (excluding the litigation provision) increased by 4% for the quarter and 10% for the year-to-date period, demonstrating underlying operational strength.
- Operating expenses rose by 15% for the quarter and 8% for the year-to-date period, significantly impacted by acquisition activity and the litigation settlement provision.
- Acquisitions had a negative impact on net income growth of 4% and 3% for the quarter and year-to-date periods, respectively, and a negative impact of 9 percentage points on operating expense growth in both periods.
- The company generated $1.7 billion in net cash from operating activities for the first six months of 2015, an increase from $1.3 billion in the prior year.
- Mastercard returned significant capital to shareholders through $1.8 billion in share repurchases and $367 million in dividends paid during the first six months of 2015.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2015filed July 29, 2015Financial Statements
Q2 FY2015 against Q2 FY2014
| Line item | Q2 FY2015Q2 FY2014 | Change |
|---|---|---|
| Revenue | $2.39B$2.37B | +0.9% |
| Operating Expenses | $1.14B$985.00M | +15.6% |
| Operating Income | $1.25B$1.38B | −9.5% |
| Interest Expense | $17.00M$15.00M | +13.3% |
| Net Income | $921.00M$931.00M | −1.1% |
| EPS (Basic) | $0.81$0.80 | +1.3% |
| EPS (Diluted) | $0.81$0.80 | +1.3% |
| Shares Outstanding (Basic) | 1.14B1.17B | −2.3% |
| Shares Outstanding (Diluted) | 1.14B1.17B | −2.4% |
05—Questions
Frequently Asked Questions
What is the primary driver of revenue growth in this period?
Revenue growth was primarily driven by an increase in processed transactions and overall transaction volumes on Mastercard-branded cards, as well as contributions from acquisitions. However, this growth was partially offset by higher rebates and incentives and the negative impact of foreign currency translation.
How did the UK merchant litigation settlement affect the company's financial results?
The UK merchant litigation settlement resulted in a $61 million pre-tax charge, or $44 million after-tax, which reduced net income by $0.04 per diluted share for the quarter. This item was excluded from non-GAAP adjusted results to provide a clearer view of ongoing operational performance.
What is the impact of acquisitions on the company's financial performance?
Acquisitions contributed positively to net revenue growth (2 percentage points) but had a negative impact on net income growth and operating expense growth. Specifically, acquisitions negatively impacted net income by $(0.03) and $(0.06) per diluted share for the three and six-month periods ended June 30, 2015, respectively, and accounted for a 9 percentage point increase in operating expense growth for both periods.
How is Mastercard managing its capital and returning value to shareholders?
Mastercard is actively returning capital to shareholders through its share repurchase programs and dividend payments. In the first six months of 2015, the company repurchased $1.8 billion of its Class A common stock and paid $367 million in dividends. The company also has a strong liquidity position with $5.1 billion in cash, cash equivalents, and investment securities as of June 30, 2015.
06—Continue