10-QPeriod: Q1 FY2019

Mastercard Inc Quarterly Report for Q1 Ended Mar 31, 2019

Filed April 30, 2019For Securities:MA

Summary

Mastercard Inc. reported strong financial performance for the first quarter of 2019, demonstrating robust revenue growth driven by increased transaction volumes and cross-border activity. Net revenue increased by 9% (13% on a currency-neutral basis) to $3.9 billion, supported by a 17% rise in switched transactions and a 13% increase in cross-border volume. The company maintained healthy profitability with operating income growing 21% to $2.2 billion and net income surging 25% to $1.9 billion, resulting in diluted EPS of $1.80. Mastercard also actively returned capital to shareholders through substantial share repurchases totaling $1.8 billion and dividend payments of $340 million, underscoring its commitment to shareholder value while continuing strategic investments.

Financial Highlights

51 data points
Beta

Revenue

$3.89B

Net Income

$1.86B

47.9% Net Margin

EPS (Diluted)

$1.80

Total Assets

$23.52B

Cash & Equivalents

$5.86B

Free Cash Flow

$1.23B

Financial Statements
Beta
Revenue$3.89B
Operating Expenses$1.68B
Operating Income$2.21B
Interest Expense$46.00M
Net Income$1.86B
EPS (Basic)$1.81
EPS (Diluted)$1.80
Shares Outstanding (Basic)1.03B
Shares Outstanding (Diluted)1.03B

Key Highlights

  • 1Net revenue grew 9% to $3.9 billion, with a 13% increase on a currency-neutral basis, driven by strong switched transaction growth (17%) and cross-border volume growth (13%).
  • 2Operating income increased by 21% to $2.2 billion, and operating margin improved to 56.9% from 51.0% in the prior year period.
  • 3Net income rose by a significant 25% to $1.9 billion, leading to diluted earnings per share of $1.80, up 28% from $1.41 in the prior year.
  • 4The company returned $1.8 billion to shareholders through share repurchases and paid $340 million in dividends during the quarter.
  • 5Operating expenses decreased by 5% to $1.7 billion, largely due to the absence of significant litigation provisions recorded in the prior year's comparable period. Adjusted operating expenses increased by 2% (5% on a currency-neutral basis) reflecting ongoing investments.
  • 6The effective income tax rate decreased to 15.5% from 17.3%, primarily due to tax regulations and discrete benefits.
  • 7Mastercard is actively managing its settlement exposure, with net uncollateralized settlement exposure at $43.7 billion as of March 31, 2019.

Frequently Asked Questions

Mastercard's revenue growth in Q1 2019 was primarily driven by a strong increase in switched transaction volume (up 17%) and cross-border transaction volume (up 13% on a local currency basis). These increases were partially offset by higher rebates and incentives.

Operating expenses decreased by 5% year-over-year. This was largely due to the absence of significant litigation provisions that were recorded in the first quarter of 2018. On an adjusted (non-GAAP) basis, excluding these special items, operating expenses increased by 2% (5% on a currency-neutral basis), reflecting continued investments in strategic initiatives.

Mastercard demonstrated a strong commitment to returning capital to shareholders. In the first quarter of 2019, the company repurchased approximately $1.8 billion of its common stock and paid $340 million in dividends, highlighting its robust cash flow generation and capital allocation strategy.

In April 2019, the European Commission accepted Mastercard's settlement proposal to change its interregional interchange fees, which will go into effect in Q4 2019. However, the EC also issued a negative decision regarding Mastercard's historic central acquiring rule, resulting in a fine of €571 million (approximately $641 million), which was paid in April 2019. This fine was partially accrued in 2018.