8-KEarnings & ResultsExhibits & Filings

Mastercard Inc 8-K Report, Financial Results (May 2, 2018)

Filed May 2, 2018For Securities:MA

Summary

Mastercard Inc. filed an 8-K on May 2, 2018, to report its financial results for the first quarter of 2018. The filing includes an earnings release that details both GAAP and non-GAAP financial measures. A significant focus in this quarter's results was the impact of litigation provisions, particularly related to settlements with European and U.S. merchants. Management has excluded these "Special Items" to provide a clearer view of ongoing operational performance and to facilitate period-over-period comparisons. Investors should pay close attention to the adjusted figures which management believes better reflect the underlying business trends.

Key Highlights

  • 1Mastercard announced its Q1 2018 financial results on May 2, 2018, via an 8-K filing.
  • 2The filing includes an earnings release detailing both GAAP and non-GAAP financial results.
  • 3Significant litigation provisions were recorded in Q1 2018 related to Pan-European merchant settlements, U.S. merchant opt-out cases, and U.K. merchant settlements.
  • 4A litigation provision for Canadian merchant settlements was recorded in Q1 2017.
  • 5Management is presenting non-GAAP financial measures (adjusted operating expenses, margin, effective tax rate, net income, and diluted EPS) that exclude these litigation-related "Special Items".
  • 6The company believes these non-GAAP measures offer a better understanding of ongoing operational performance and comparability.
  • 7Currency-neutral growth rates are also presented as a non-GAAP measure to exclude foreign currency impacts.

Frequently Asked Questions

The primary "Special Items" are provisions for litigation settlements. In Q1 2018, these relate to settlements with Pan-European merchants, an increased reserve for U.S. merchant opt-out cases, and settlements with U.K. merchants. A related provision for Canadian merchant settlements impacted Q1 2017.

Mastercard's management uses non-GAAP measures, such as adjusted net income and adjusted diluted EPS, to exclude the impact of these significant litigation provisions. They believe these adjusted figures provide a better reflection of ongoing operational performance and facilitate more meaningful comparisons between periods.

Currency-neutral growth rates are calculated by remeasuring the prior period's results using the current period's exchange rates. This method accounts for both translational and transactional impacts of foreign currency fluctuations, aiming to show growth independent of currency movements.

No, the non-GAAP financial measures are supplementary. The press release also includes GAAP financial results, and these non-GAAP measures should not be considered in isolation or as a substitute for the GAAP figures. Reconciliations between GAAP and non-GAAP measures are provided in the earnings release.