|MasterCard Incorporated Reports Third-Quarter 2010 Financial Results|
PURCHASE, N.Y.-- MasterCard Incorporated (NYSE:MA) today announced financial results for the third quarter 2010. The company reported net income of $518 million, up 14.6%, and earnings per diluted share of $3.94, up 14.2%, in each case versus the year-ago period.
Net revenue for the third quarter of 2010 was $1.4 billion, a 4.7% increase versus the same period in 2009. On a constant currency basis, net revenue increased 7.3% compared to the same period in 2009, driven by the revenue impact of the following:
In addition, a pricing contribution of approximately 7 percentage points, including the effect of cross-border rebates, was offset by a net increase in rebates and incentives due to new and renewed customer agreements.
Worldwide purchase volume during the quarter was up 7.9% on a local currency basis versus the third quarter of 2009, to $514 billion. The number of processed transactions increased 0.6% compared to the same period in 2009, to 5.8 billion. As of September 30, 2010, the company’s customers had issued 1.6 billion MasterCard and Maestro-branded cards.
"Consumers and businesses around the world continue to recognize the benefits of electronic payments and MasterCard remains at the heart of this evolution," said Ajay Banga, MasterCard president and chief executive officer. "Our year-to-date net income is up over 22%, aided by strong volume growth from markets outside of the U.S."
Banga commented, “Leveraging our global presence and differentiated assets, we continued to win new deals and execute against our three strategic pillars to grow, diversify and build MasterCard’s business. We are growing our global debit portfolio with new agreements that include Sovereign Bank, Chevy Chase (now part of Capital One) and Delta Air Lines in the U.S., Barclaycard in Germany and Qatar Islamic Bank. We are expanding our presence in new markets and channels, reflected in our memorandum of understanding with China Union Pay and an agreement with Singtel, one of the larger mobile operators in Asia. We also completed our acquisition of DataCash which enhances our e-Commerce capabilities."
Total operating expenses decreased 4.1%, to $662 million, during the third quarter of 2010 compared to the same period in 2009. Excluding currency fluctuations, operating expenses were down 2.6%. The decrease in total operating expenses was driven by a 6.7% reduction in general and administrative expenses, or 5.2% on a constant currency basis. This was due to lower personnel expense driven by decreased severance and compensation versus the year-ago quarter, primarily as a result of workforce reductions in 2009.
Advertising and marketing expenses increased $8 million, or 4.7%, in the third quarter of 2010 versus the third quarter of 2009. Excluding currency fluctuations, advertising and marketing expenses increased 6.2%.
Operating margin was 53.6% for the third quarter of 2010, up 4.2 percentage points over the year-ago period.
MasterCard's effective tax rate was 32.3% in the third quarter of 2010, versus a rate of 32.9% in the comparable period in 2009. The decrease was due primarily to benefits from the repatriation of foreign earnings and a lower state tax rate, partially offset by the impact of discrete adjustments in each of the three-month periods ending September 30, 2009 and September 30, 2010.
Year-to-Date 2010 Results
For the nine months ended September 30, 2010, MasterCard reported net income of $1.4 billion, or $10.89 per diluted share.
Net revenue for the nine months ended September 30, 2010 was $4.1 billion, an increase of 7.9% versus the same period in 2009. On a constant currency basis, net revenue increased 8.4%.
Cross-border volume growth of 13.9%, gross dollar volume growth of 8.5%, and the net impact of pricing changes of approximately 6 percentage points, including the effect of cross-border rebates, contributed to the net revenue growth in the year-to-date period. These factors were partially offset by a net increase in rebates and incentives due to new and renewed customer agreements.
Total operating expenses decreased 4.5%, to $1.9 billion, for the nine-month period compared to the same period in 2009. Excluding currency fluctuations, total operating expenses decreased 4.3%.
Operating margin was 53.2% for the nine months ending September 30, 2010, up 6.0 percentage points over the year-ago period.
Total other expense was $8 million for the nine-month period versus $32 million for the same period in 2009. The decrease was primarily due to a decrease in interest accretion on litigation settlements.
MasterCard’s effective tax rate was 34.2% in the nine months ended September 30, 2010, versus a rate of 33.6% in the comparable period in 2009. The increase in the effective tax rate was primarily due to the impact of discrete adjustments in each of the nine-month periods ended September 30, 2009 and September 30, 2010, partially offset by benefits from repatriation of foreign earnings and a lower state tax rate.
Third-Quarter Financial Results Conference Call Details
At 9:00 a.m. ET today, the company will host a conference call to discuss its third-quarter financial results.
The dial-in information for this call is 800-561-2718 (within the U.S.) and 617-614-3525 (outside the U.S.) and the passcode is 39627109. A replay of the call will be available for one week thereafter. The replay can be accessed by dialing 888-286-8010 (within the U.S.) and 617-801-6888 (outside the U.S.) and using passcode 88723546.
The live call and the replay, along with supporting materials, can also be accessed through the Investor Relations section of the company’s website at http://www.mastercard.com.
About MasterCard Incorporated
As a leading global payments company, MasterCard Incorporated prides itself on being at the heart of commerce, helping to make life easier and more efficient for everyone, everywhere. MasterCard serves as a franchisor, processor and advisor to the payments industry, and makes commerce happen by providing a critical economic link among financial institutions, governments, businesses, merchants, and cardholders worldwide. In 2009, $2.5 trillion in gross dollar volume was generated on its products by consumers around the world. Powered by the MasterCard Worldwide Network – the fastest payment processing network in the world – MasterCard processes over 22 billion transactions each year and has the capacity to handle 140 million transactions per hour, with an average network response time of 140 milliseconds and with 99.99 percent reliability. MasterCard advances global commerce through its family of brands, including MasterCard®, Maestro®, and Cirrus®; its suite of core products such as credit, debit, and prepaid; and its innovative platforms and functionalities, such as MasterCard PayPass™ and MasterCard inControl™. MasterCard serves consumers, governments, and businesses in more than 210 countries and territories. For more information, please visit us at http://www.mastercard.com.
Statements in this press release which are not historical facts, including statements about MasterCard’s plans, strategies, beliefs and expectations, are forward-looking and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date they are made. Accordingly, except for the company’s ongoing obligations under the U.S. federal securities laws, the company does not intend to update or otherwise revise the forward-looking information to reflect actual results of operations, changes in financial condition, changes in estimates, expectations or assumptions, changes in general economic or industry conditions or other circumstances arising and/or existing since the preparation of this press release or to reflect the occurrence of any unanticipated events. Such forward-looking statements include, without limitation, statements related to:
Actual results may differ materially from such forward-looking statements for a number of reasons, including those set forth in the company’s filings with the Securities and Exchange Commission (SEC), including the company’s Annual Report on Form 10-K for the year ended December 31, 2009, the company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that have been filed with the SEC during 2010, as well as reasons including difficulties, delays or the inability of the company to achieve its strategic initiatives set forth above. Factors other than those listed above could also cause the company’s results to differ materially from expected results.
Note that columns in the tables above may not add due to rounding; growth represents change from the comparable year-ago period.
The tables set forth the gross dollar volume (“GDV”), purchase volume, cash volume and the number of purchase transactions, cash transactions, accounts, cards and acceptance locations on a regional and global basis for MasterCard®-branded and MasterCard Electronic™-branded cards. Growth rates over prior periods are provided for volume-based data.
Debit transactions on Maestro® and Cirrus®-branded cards, Mondex® transactions and transactions involving brands other than MasterCard are not included in the preceding tables.
For purposes of the table: GDV represents purchase volume plus cash volume and includes the impact of balance transfers and convenience checks; “purchase volume” means the aggregate dollar amount of purchases made with MasterCard-branded cards for the relevant period; and “cash volume” means the aggregate dollar amount of cash disbursements obtained with MasterCard-branded cards for the relevant period. The number of cards includes virtual cards, which are MasterCard-branded payment accounts in connection with which functional cards are not generally issued. Acceptance locations include merchant locations, ATMs and other locations where cash may be obtained.
The MasterCard payment product is comprised of credit, charge and debit programs, and data relating to each type of program is included in the tables. Debit programs include MasterCard-branded debit programs where the primary means of cardholder validation at the point of sale is for cardholders either to sign a sales receipt or enter a PIN. The tables include information with respect to transactions involving MasterCard-branded cards that are not processed by MasterCard and transactions for which MasterCard does not earn significant revenues.
Information denominated in U.S. dollars is calculated by applying an established U.S. dollar/local currency exchange rate for each local currency in which MasterCard volumes are reported. These exchange rates are calculated on a quarterly basis using the average exchange rate for each quarter. MasterCard reports period-over-period rates of change in purchase volume and cash volume on the basis of local currency information, in order to eliminate the impact of changes in the value of foreign currencies against the U.S. dollar in calculating such rates of change.
The data set forth in the GDV, purchase volume, purchase transactions, cash volume and cash transactions columns is provided by MasterCard customers and is subject to verification by MasterCard and partial cross-checking against information provided by MasterCard’s transaction processing systems. The data set forth in the accounts and cards columns is provided by MasterCard customers and is subject to certain limited verification by MasterCard. A portion of the data set forth in the accounts and cards columns reflects the impact of routine portfolio changes among customers and other practices that may lead to over counting of the underlying data in certain circumstances. In order to provide a true indication of how broadly our cards can be used, MasterCard seeks to provide the most accurate acceptance figures possible and to maintain that MasterCard acceptance is unsurpassed worldwide by periodically validating our results with third parties. The data set forth in the acceptance locations column is derived through a proprietary methodology designed to minimize the impact of multiple acquiring in certain markets. This data is based on information provided by our customers and other third parties and is subject to certain limited verification by MasterCard and partial cross-checking against information provided by MasterCard’s transaction processing systems. All data is subject to revision and amendment by MasterCard’s customers subsequent to the date of its release.
Performance information for prior periods can be found in the "Investor Relations" section of MasterCard's website at http://www.mastercard.com.