01—Abstract
Summary
Summary of the 10-Q filed October 28, 2016. Cited figures are marked; the original filing is the authoritative source.
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%a 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.
02—Key points
Key Highlights
- Net 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.
- Processed transactions increased by 18% and 15% for the three and nine months ended September 30, 2016, respectively.
- Operating 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.
- Net 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.
- Diluted earnings per share (EPS) increased by 26% to $1.08 for the quarter and 11% to $2.83 for the nine months.
- The company repurchased approximately 26.3 million shares for $2.41 billion during the first nine months of 2016.
- Mastercard announced its intention to acquire a controlling interest in VocaLink Holdings Limited for approximately £700 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2016filed October 28, 2016Financial Statements
Q3 FY2016 against Q3 FY2015
| Line item | Q3 FY2016Q3 FY2015 | Change |
|---|---|---|
| Revenue | $2.88B$2.53B | +13.8% |
| Operating Expenses | $1.21B$1.16B | +4.2% |
| Operating Income | $1.67B$1.37B | +22.0% |
| Interest Expense | $23.00M$15.00M | +53.3% |
| Net Income | $1.18B$977.00M | +21.2% |
| EPS (Basic) | $1.08$0.86 | +25.6% |
| EPS (Diluted) | $1.08$0.86 | +25.6% |
| Shares Outstanding (Basic) | 1.10B1.13B | −3.0% |
| Shares Outstanding (Diluted) | 1.10B1.13B | −3.0% |
05—Questions
Frequently Asked Questions
What was Mastercard's revenue performance in the third quarter of 2016?
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.
How did operating expenses change during the period, and what were the main drivers?
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.
What is the status of Mastercard's ongoing litigation, and how is it impacting the financials?
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.
How is Mastercard returning capital to shareholders?
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.
06—Continue