01—Abstract
Summary
Summary of the 10-Q filed October 31, 2017. Cited figures are marked; the original filing is the authoritative source.
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.
02—Key points
Key Highlights
- Net 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.
- Switched transactions grew by 17% for both the three-month and nine-month periods, indicating increased network utilization.
- Cross-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.
- Operating 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.
- Net income grew by 21% for the three months to $1.43 billion and by 18% for the nine months to $3.69 billion.
- Diluted 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.
- Mastercard returned capital to shareholders through $709 million in dividends and $2.7 billion in share repurchases during the nine-month period.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2017filed October 31, 2017Financial Statements
Q3 FY2017 against Q3 FY2016
| Line item | Q3 FY2017Q3 FY2016 | Change |
|---|---|---|
| Revenue | $3.40B$2.88B | +18.0% |
| Operating Expenses | $1.46B$1.21B | +20.4% |
| Operating Income | $1.94B$1.67B | +16.2% |
| Interest Expense | $35.00M$23.00M | +52.2% |
| Net Income | $1.43B$1.18B | +20.8% |
| EPS (Basic) | $1.34$1.08 | +24.1% |
| EPS (Diluted) | $1.34$1.08 | +24.1% |
| Shares Outstanding (Basic) | 1.06B1.10B | −3.0% |
| Shares Outstanding (Diluted) | 1.07B1.10B | −2.8% |
05—Questions
Frequently Asked Questions
How did Mastercard's revenue perform in the third quarter and first nine months of 2017?
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.
What drove the increase in operating expenses?
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.
What is the company's stance on returning capital to shareholders?
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.
How is the VocaLink acquisition impacting the business?
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.
06—Continue