10-QPeriod: Q3 FY2017

Mastercard Inc Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 31, 2017For Securities:MA

Summary

Mastercard Inc. reported robust financial results for the third quarter and nine months ended September 30, 2017, demonstrating strong revenue growth driven by an increase in switched transactions, gross dollar volume, and cross-border volume. The company's strategic focus on growing, diversifying, and building its business, including the recent acquisition of VocaLink, is contributing to this performance. Net revenue saw a significant increase, bolstered by strong performance across domestic assessments, cross-border volume fees, and transaction processing. Despite increased operating expenses, largely due to investments in strategic initiatives and acquisitions, the company maintained healthy operating margins and delivered substantial net income and earnings per share growth.

Financial Highlights

53 data points
Beta

Revenue

$3.40B

Net Income

$1.43B

42.1% Net Margin

EPS (Diluted)

$1.34

Total Assets

$20.91B

Cash & Equivalents

$5.56B

Free Cash Flow

$1.69B

Financial Statements
Beta
Revenue$3.40B
Operating Expenses$1.46B
Operating Income$1.94B
Interest Expense$35.00M
Net Income$1.43B
EPS (Basic)$1.34
EPS (Diluted)$1.34
Shares Outstanding (Basic)1.06B
Shares Outstanding (Diluted)1.07B

Key Highlights

  • 1Net revenue increased by 18% year-over-year for the three months ended September 30, 2017, reaching $3.4 billion, and by 15% for the nine months ended September 30, 2017, reaching $9.2 billion.
  • 2Switched transactions grew by 17% for both the three-month and nine-month periods, indicating increased network utilization.
  • 3Cross-border volume increased by 15% for the three months and 14% for the nine months ended September 30, 2017, highlighting the company's global reach and the growing importance of international transactions.
  • 4Operating expenses increased by 20% for the three months and 13% for the nine months, primarily due to investments in strategic initiatives and the impact of acquisitions, such as VocaLink.
  • 5Net income grew by 21% for the three months to $1.43 billion and by 18% for the nine months to $3.69 billion.
  • 6Diluted earnings per share (EPS) increased by 24% for the three months to $1.34 and by 21% for the nine months to $3.43, reflecting strong profitability.
  • 7Mastercard returned capital to shareholders through $709 million in dividends and $2.7 billion in share repurchases during the nine-month period.

Frequently Asked Questions

Mastercard experienced strong revenue growth. Net revenue increased by 18% to $3.4 billion for the third quarter and by 15% to $9.2 billion for the first nine months of 2017, compared to the respective periods in 2016. This growth was driven by increases in domestic assessments, cross-border volume fees, and transaction processing, supported by a rise in switched transactions and gross dollar volume.

Operating expenses rose primarily due to increased personnel costs reflecting continued investment in strategic initiatives such as digital capabilities and geographic expansion, as well as the impact of acquisitions, notably VocaLink. Advertising and marketing expenses also increased, particularly related to Masterpass.

Mastercard demonstrated a commitment to returning capital to shareholders. For the first nine months of 2017, the company paid $709 million in dividends and repurchased $2.7 billion worth of its Class A common stock, indicating confidence in its financial health and future prospects.

The acquisition of VocaLink, a payment systems and ATM switching platform operator, is contributing to Mastercard's strategy of diversifying its business and capturing more payment flows, including ACH payments. The acquisition added 2.5 and 1.5 percentage points to revenue growth in the third quarter and first nine months of 2017, respectively, and significantly impacted operating expenses and depreciation/amortization.