10-QPeriod: Q3 FY2016

Mastercard Inc Quarterly Report for Q3 Ended Sep 30, 2016

Filed October 28, 2016For Securities:MA

Summary

Mastercard Inc. reported solid financial results for the third quarter and the first nine months of 2016, demonstrating continued growth and operational strength. Net revenue saw a significant increase of 14% for the quarter and 12% for the nine-month period, driven by robust transaction volumes and cross-border activity. The company's strategic investments in digital, services, and geographic expansion are reflected in increased operating expenses, particularly in personnel and data processing, but are managed to support long-term growth. Despite ongoing litigation provisions, Mastercard maintained strong profitability, with net income rising 21% for the quarter and 7% for the nine-month period. The company also actively returned capital to shareholders through dividends and share repurchases, underscoring its commitment to shareholder value. Operationally, Mastercard continues to expand its reach and offerings, with notable progress in transaction processing and cross-border volumes. The company is also strategically positioning itself for future growth through acquisitions, such as the announced acquisition of VocaLink. Management's focus remains on growing its core business, diversifying its customer base, and building on evolving payment trends, all while navigating a dynamic global economic and regulatory environment. The company's financial position remains strong, with ample liquidity to fund operations and strategic initiatives.

Financial Highlights

52 data points
Beta

Revenue

$2.88B

Net Income

$1.18B

41.1% Net Margin

EPS (Diluted)

$1.08

Total Assets

$17.32B

Cash & Equivalents

$5.21B

Free Cash Flow

$1.37B

Financial Statements
Beta
Revenue$2.88B
Operating Expenses$1.21B
Operating Income$1.67B
Interest Expense$23.00M
Net Income$1.18B
EPS (Basic)$1.08
EPS (Diluted)$1.08
Shares Outstanding (Basic)1.10B
Shares Outstanding (Diluted)1.10B

Key Highlights

  • 1Net revenue increased by 14% to $2.88 billion for the three months ended September 30, 2016, and by 12% to $8.02 billion for the nine months ended September 30, 2016.
  • 2Processed transactions increased by 18% and 15% for the three and nine months ended September 30, 2016, respectively.
  • 3Operating expenses increased by 4% for the quarter and 14% for the nine months, with adjusted operating expenses (excluding special items) increasing by 12% and 16% respectively, driven by investments in strategic initiatives.
  • 4Net income rose by 21% to $1.18 billion for the three months and 7% to $3.13 billion for the nine months ended September 30, 2016.
  • 5Diluted earnings per share (EPS) increased by 26% to $1.08 for the quarter and 11% to $2.83 for the nine months.
  • 6The company repurchased approximately 26.3 million shares for $2.41 billion during the first nine months of 2016.
  • 7Mastercard announced its intention to acquire a controlling interest in VocaLink Holdings Limited for approximately £700 million.

Frequently Asked Questions

Mastercard reported a net revenue of $2.88 billion for the three months ended September 30, 2016, representing a 14% increase compared to the same period in the prior year. This growth was primarily driven by increased transaction volumes and cross-border activity.

Operating expenses increased by 4% for the quarter and 14% for the nine-month period. Excluding special items, adjusted operating expenses rose by 12% and 16%, respectively. The primary drivers for this increase were continued investments in strategic initiatives such as digital payments, services, data analytics, and geographic expansion, leading to higher personnel and data processing costs.

Mastercard is involved in several significant legal and regulatory proceedings, notably the U.S. merchant class litigation and UK merchant litigation. The company has accrued liabilities for these matters. For the nine months ended September 30, 2016, a provision of $107 million was recorded related to a UK merchant litigation judgment, and a provision of $61 million was recorded in the prior year for a UK settlement. These provisions are considered 'Special Items' and are often excluded when evaluating non-GAAP financial performance.

Mastercard returned capital to shareholders through a combination of dividends and share repurchases. For the nine months ended September 30, 2016, the company paid $630 million in dividends and repurchased approximately 26.3 million shares for $2.41 billion under its authorized share repurchase programs.