10-QPeriod: Q2 FY2019

Mastercard Inc Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 30, 2019For Securities:MA

Summary

Mastercard Inc. reported strong financial performance for the second quarter and first half of 2019, demonstrating robust revenue growth driven by increased transaction volumes and cross-border activity. Net revenue saw a 12% increase year-over-year for the quarter and a 10% increase for the first half. This growth was complemented by effective management of operating expenses, leading to significant improvements in operating income and margins. The company also highlighted strong cash flow generation from operations and continued commitment to returning capital to shareholders through dividends and share repurchases. Key financial metrics such as diluted earnings per share (EPS) showed significant year-over-year improvement, reflecting the company's operational efficiency and top-line growth. While the company faces ongoing litigation and regulatory matters, particularly concerning interchange fees, the financial impact in the current reporting period was managed. Mastercard's strategic investments in areas like data and services, alongside its core payment processing business, position it for continued growth.

Financial Highlights

53 data points
Beta

Revenue

$4.11B

Net Income

$2.05B

49.8% Net Margin

EPS (Diluted)

$2.00

Total Assets

$24.73B

Cash & Equivalents

$5.69B

Free Cash Flow

$1.45B

Financial Statements
Beta
Revenue$4.11B
Operating Expenses$1.72B
Operating Income$2.40B
Interest Expense$51.00M
Net Income$2.05B
EPS (Basic)$2.01
EPS (Diluted)$2.00
Shares Outstanding (Basic)1.02B
Shares Outstanding (Diluted)1.02B

Key Highlights

  • 1Net revenue increased by 12% year-over-year for the three months ended June 30, 2019, and 10% for the six months ended June 30, 2019, driven by strong transaction and cross-border volume growth.
  • 2Operating income grew significantly by 24% for the three months and 23% for the six months ended June 30, 2019, leading to improved operating margins.
  • 3Diluted earnings per share (EPS) increased by 33% for the three months and 31% for the six months ended June 30, 2019, compared to the prior year periods.
  • 4The company generated $2.8 billion in net cash from operating activities for the six months ended June 30, 2019.
  • 5Mastercard repurchased $3.7 billion of its common stock and paid $677 million in dividends during the first half of 2019, demonstrating a commitment to capital return.
  • 6Acquisitions played a role in expense growth, with adjusted operating expenses increasing by 14% (17% on a currency-neutral basis) for the quarter and 8% (11% on a currency-neutral basis) for the half.
  • 7The company incurred a €571 million ($654 million) fine related to an EC investigation into interregional interchange fees, which was paid in April 2019, and had a corresponding charge in 2018.

Frequently Asked Questions

Mastercard's revenue growth was primarily driven by a significant increase in switched transaction volumes (18% for the quarter) and strong cross-border volume growth (16% for the quarter on a local currency basis). Other revenues, particularly from Cyber & Intelligence and Data & Services solutions, also contributed positively.

In the three months ended June 30, 2019, Mastercard recorded no provision for litigation, compared to $225 million in the prior year period. For the six months ended June 30, 2019, there were no litigation provisions recorded, compared to $342 million in the prior year period. The company did incur a €571 million fine from the European Commission in April 2019 related to interregional interchange fees, with a corresponding charge recorded in 2018.

Mastercard demonstrated a strong commitment to capital allocation during the first half of 2019. The company repurchased approximately 16.4 million shares of its common stock for $3.7 billion and paid $677 million in dividends. The company also has an ongoing share repurchase authorization of $3.06 billion.

The adoption of the new lease accounting standard (effective January 1, 2019) led to an increase in 'Property, equipment and right-of-use assets, net' by $375 million and an increase in 'Other current liabilities' and 'Other liabilities' by $72 million and $303 million, respectively, as of December 31, 2018, to reflect the recognized lease assets and liabilities.