MasterCard Incorporated Reports Third-Quarter 2013 Financial Results

  • Third-quarter net income of $879 million, or $7.27 per diluted share
  • Third-quarter net revenue increase of 16%, to $2.2 billion
  • Third-quarter gross dollar volume up 15% and purchase volume up 14%

Business Wire

PURCHASE, N.Y.--(BUSINESS WIRE)--

MasterCard Incorporated (MA) today announced financial results for the third quarter of 2013. The company reported net income of $879 million, up 14%, and earnings per diluted share of $7.27, up 18%, in each case versus the year-ago period.

Net revenue for the third quarter of 2013 was $2.2 billion, a 16% increase versus the same period in 2012. Adjusted for currency, net revenue increased 15%. Net revenue growth was driven by the impact of the following:

  • A 15% increase in gross dollar volume, on a local currency basis, to over $1 trillion;
  • An increase in processed transactions of 16%, to 10 billion; and
  • An increase in cross-border volumes of 19%.

These factors were partially offset by an increase in rebates and incentives.

Worldwide purchase volume during the quarter grew 14% on a local currency basis versus the third quarter of 2012, to $763 billion. As of September 30, 2013, the company’s customers had issued almost 2 billion MasterCard and Maestro-branded cards.

“We had another good quarter with growth across all geographies,” said Ajay Banga, MasterCard president and CEO. “A key component of our strategy involves using our technology and expertise to provide secure acceptance solutions that make it simpler and more convenient for people to pay and be paid. In the quarter, we partnered with technology companies and merchants to develop standards and solutions that ensure safer and more secure transactions and we launched services like Simplify Commerce, our developer-friendly solution which allows merchants to begin accepting mobile and e-Commerce payments, regardless of brand, in a matter of minutes.”

Total operating expenses increased 14%, to $970 million, during the third quarter of 2013 compared to the same period in 2012. Adjusted for currency, operating expenses increased 13%. The increase was primarily driven by higher investments in people and marketing to support strategic initiatives.

Operating income for the third quarter of 2013 increased 17% over the year-ago period and the company delivered an operating margin of 56.3%.

MasterCard reported other income of $6 million in the third quarter of 2013 versus other income of $2 million in the third quarter of 2012. The increase was primarily driven by an adjustment to interest expense related to the reversal of tax reserves.

MasterCard's effective tax rate was 29.9% in the third quarter of 2013, versus a rate of 27.6% in the comparable period in 2012. The increase in the effective tax rate for the period was primarily due to higher tax benefits recognized in the third quarter of 2012.

During the third quarter of 2013, MasterCard repurchased approximately 575,000 shares of Class A common stock at a cost of approximately $345 million, with $912 million remaining under the current repurchase program authorization.

Year-to-Date 2013 Results

For the nine months ended September 30, 2013, MasterCard reported net income of $2.5 billion, up 15% versus the year-ago period and excluding a special item representing a charge related to the U.S. merchant litigations taken in the second quarter of 2012. Including the special item, net income was up 16% versus the year-ago period. Earnings per diluted share was $20.46, up 19% excluding the special item and up 20% including the special item from the second quarter of 2012. These net income and earnings per share growth figures are reconciled to their comparable GAAP measures in the accompanying financial tables.

Net revenue for the nine months ended September 30, 2013 was $6.2 billion, an increase of 13% versus the same period in 2012, both as reported and adjusted for currency. Gross dollar volume growth of 14%, transaction processing growth of 13% and cross-border volume growth of 18% contributed to the net revenue growth in the year-to-date period. These factors were partially offset by an increase in rebates and incentives.

Excluding the special item, total operating expenses increased 8%, to $2.6 billion, for the nine months ended September 30, 2013, primarily due to higher investments in people related to strategic initiatives. Including the special item, total operating expenses increased 7%.

Excluding the special item, operating income increased 17% for the nine months ended September 30, 2013 versus the same period in 2012, delivering an operating margin of 57.6%.

MasterCard reported $6 million in other income for the nine months ended September 30, 2013 versus $1 million in the same period last year. The increase was primarily driven by an adjustment to interest expense related to the reversal of tax reserves.

MasterCard’s effective tax rate was 30.5% in the nine months ended September 30, 2013 versus a rate of 29.2%, excluding the special item, and 29.1% including the special item, in the comparable 2012 period. The increase was primarily due to higher tax benefits recognized during the nine-month period ending September 30, 2012.

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 888-771-4371 (within the U.S.) and 847-585-4405 (outside the U.S.), and the passcode is 35746584. A replay of the call will be available for one week and can be accessed by dialing 888-843-7419 (within the U.S.) and 630-652-3042 (outside the U.S.), and using passcode 35746584.

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 www.mastercard.com.

Non-GAAP Financial Information

The company’s total operating expenses, operating income, net income and earnings per share, excluding special items, are non-GAAP financial measures that are reconciled to their most directly comparable GAAP measures in the accompanying financial tables.

The presentation of growth rates adjusted for currency also represent a non-GAAP measure and are calculated by remeasuring the prior period’s results using the current period’s exchange rates.

About MasterCard

MasterCard (MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard’s products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MasterCardNews, join the discussion on the Cashless Pioneers Blog and subscribe for the latest news on the Engagement Bureau.

Forward-Looking Statements

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 the Company’s business prospects, including the Company’s ability to use its technology and expertise to make it simpler and more convenient for people to pay and be paid.

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, 2012, the company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that have been filed with the SEC during 2013, 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.

                 
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2013       2012 2013       2012
(in millions, except per share data)
Net Revenue $   2,218 $   1,918 $   6,220 $   5,496
Operating Expenses
General and administrative 701 620 1,930 1,790
Advertising and marketing 205 176 520 480
Depreciation and amortization 64 58 187 168
Provision for litigation settlement       20  
Total operating expenses 970   854   2,637   2,458  
Operating income 1,248 1,064 3,583 3,038
Other Income (Expense)
Investment income 11 9 30 27
Interest expense 3 (4 ) (7 ) (13 )
Other income (expense) (8 ) (3 ) (17 ) (13 )
Total other income (expense) 6   2   6   1  
Income before income taxes 1,254 1,066 3,589 3,039
Income tax expense 375   294   1,096   885  
Net Income $   879   $   772   $   2,493   $   2,154  
 
Basic Earnings per Share $   7.30   $   6.19   $   20.52   $   17.13  
Basic Weighted-Average Shares Outstanding 121   125   121   126  
Diluted Earnings per Share $   7.27   $   6.17   $   20.46   $   17.07  
Diluted Weighted-Average Shares Outstanding 121   125   122   126  
 
                   
MASTERCARD INCORPORATED
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
 

September 30, 2013

December 31, 2012
(in millions, except share data)
ASSETS
Cash and cash equivalents $ 3,413 $ 2,052
Restricted cash for litigation settlement 727 726
Investment securities available-for-sale, at fair value 2,594 2,951
Accounts receivable 990 925
Settlement due from customers 1,333 1,117
Restricted security deposits held for customers 878 777
Prepaid expenses and other current assets 502 681
Deferred income taxes 122   128  
Total Current Assets 10,559 9,357
Property, plant and equipment, net 474 472
Deferred income taxes 89 60
Goodwill 1,101 1,092
Other intangible assets, net of accumulated amortization of $716 and $596, respectively 655 672
Other assets 852   809  
Total Assets $ 13,730   $ 12,462  
LIABILITIES AND EQUITY
Accounts payable $ 280 $ 357
Settlement due to customers 1,218 1,064
Restricted security deposits held for customers 878 777
Accrued litigation 727 726
Accrued expenses 2,004 1,748
Other current liabilities 313   234  
Total Current Liabilities 5,420 4,906
Deferred income taxes 93 104
Other liabilities 549   523  
Total Liabilities 6,062 5,533
Commitments and Contingencies
Stockholders’ Equity

Class A common stock, $0.0001 par value; authorized 3,000,000,000 shares, 134,083,998 and

133,604,903 shares issued and 115,796,250 and 118,405,075 outstanding, respectively

Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares, 4,577,623 and

4,838,840 issued and outstanding, respectively

Additional paid-in-capital 3,733 3,641
Class A treasury stock, at cost, 18,287,748 and 15,199,828 shares, respectively (5,826 ) (4,139 )
Retained earnings 9,630 7,354
Accumulated other comprehensive income (loss) 120   61  
Total Stockholders’ Equity 7,657 6,917
Non-controlling interests 11   12  
Total Equity 7,668   6,929  
Total Liabilities and Equity $ 13,730   $ 12,462  
 
               
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
 
Nine Months Ended
September 30,
2013         2012  
(in millions)
Operating Activities  
Net income $   2,493 $   2,154
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 187 168
Share-based payments 27 (21 )
Deferred income taxes (34 ) (40 )
Other 48 34
Changes in operating assets and liabilities:
Accounts receivable (67 ) (112 )
Income taxes receivable 158 (53 )
Settlement due from customers (192 ) (213 )
Prepaid expenses (44 ) (122 )
Obligations under litigation settlements 20
Accounts payable (76 ) (36 )
Settlement due to customers 126 140
Accrued expenses 209 129
Net change in other assets and liabilities 101   34  
Net cash provided by operating activities 2,936   2,082  
Investing Activities
Purchases of investment securities available-for-sale (1,936 ) (2,123 )
Acquisition of businesses, net of cash acquired (70 )
Purchases of property, plant and equipment (65 ) (68 )
Capitalized software (88 ) (96 )
Proceeds from sales of investment securities available-for-sale 1,349 195
Proceeds from maturities of investment securities available-for-sale 959 576
Proceeds from maturities of investment securities held-to-maturity 36
Investment in nonmarketable equity investments (12 ) (25 )
Other investing activities (8 ) (1 )
Net cash provided by (used in) investing activities 235   (1,612 )
Financing Activities
Purchases of treasury stock (1,692 ) (1,135 )
Dividends paid (182 ) (94 )
Tax benefit for share-based compensation 23 46
Cash proceeds from exercise of stock options 22 28
Other financing activities (8 ) 4  
Net cash used in financing activities (1,837 ) (1,151 )
Effect of exchange rate changes on cash and cash equivalents 27   (8 )
Net increase (decrease) in cash and cash equivalents 1,361 (689 )
Cash and cash equivalents - beginning of period 2,052   3,734  
Cash and cash equivalents - end of period $   3,413   $   3,045  
 
           

MASTERCARD INCORPORATED OPERATING PERFORMANCE

 
For the 3 Months ended September 30, 2013
All MasterCard Credit, GDV   Growth   Growth   Purchase

Volume

  Growth   Purchase

Trans.

  Cash

Volume

  Growth Cash

Trans.

Accounts Cards
Charge and Debit Programs (Bil.)   (USD)   (Local)   (Bil.)   (Local)   (Mil.)   (Bil.)   (Local)   (Mil.)   (Mil.)   (Mil.)
APMEA $291 15.8% 21.7% $196 21.0% 2,126 $95 23.2% 794 381 410
Canada 34 4.3% 8.9% 31 9.6% 370 3 1.1% 6 45 55
Europe 322 18.8% 16.6% 218 13.6% 3,244 103 23.4% 597 293 310
Latin America

83

10.9% 16.6%

50

23.6%

1,150

33

7.1%

191

120

140

Worldwide less United States 729 15.9% 18.2% 496 17.1% 6,890 233 20.4% 1,588 840 914
United States

316

8.7% 8.7%

267

9.2%

4,840

49

6.2%

321

289

326

Worldwide 1,045 13.6% 15.2% 763 14.2% 11,730 282 17.7% 1,910 1,128 1,240
 
MasterCard Credit and Charge Programs

 

Worldwide less United States 439 12.3% 15.3% 387 15.9% 4,672 52 11.3% 213 492 557
United States

151

6.8% 6.8%

144

7.2%

1,642

7

-1.9%

7

143

176

Worldwide 590 10.8% 13.0% 532 13.4% 6,314 59 9.5% 220 635 734
 
MasterCard Debit Programs
Worldwide less United States 290 21.9% 22.8% 109 21.9% 2,218 181 23.3% 1,375 347 357
United States

164

10.6% 10.6%

123

11.6%

3,198

42

7.6%

315

146

150

Worldwide 454 17.5% 18.1% 231 16.2% 5,416 223 20.1% 1,690 494 506
 
 
For the 9 Months ended September 30, 2013
All MasterCard Credit, GDV Growth Growth Purchase

Volume

Growth Purchase

Trans.

Cash

Volume

Growth Cash

Trans.

Accounts Cards
Charge and Debit Programs (Bil.)   (USD)   (Local)   (Bil.)   (Local)   (Mil.)   (Bil.)   (Local)   (Mil.)   (Mil.)   (Mil.)
APMEA $837 18.1% 21.5% $559 19.7% 5,940 $279 25.4% 2,236 381 410
Canada 97 4.5% 6.7% 89 7.2% 1,030 8 1.5% 18 45 55
Europe 898 15.7% 14.6% 616 11.9% 9,017 282 21.2% 1,654 293 310
Latin America

246

12.8% 16.1%

147

20.4%

3,253

99

10.2%

565

120

140

Worldwide less United States 2,079 15.7% 17.1% 1,411 15.4% 19,241 668 20.8% 4,473 840 914
United States

921

6.4% 6.4%

777

7.0%

13,946

144

3.6%

940

289

326

Worldwide 3,000 12.7% 13.6% 2,188 12.3% 33,187 812 17.3% 5,412 1,128 1,240
 
MasterCard Credit and Charge Programs
Worldwide less United States 1,258 11.8% 13.9% 1,108 14.3% 13,180 150 11.4% 614 492 557
United States

432

3.9% 3.9%

412

4.6%

4,674

20

-8.1%

19

143

176

Worldwide 1,690 9.7% 11.2% 1,520 11.5% 17,853 170 8.7% 633 635 734
 
MasterCard Debit Programs
Worldwide less United States 821 22.2% 22.3% 303 19.8% 6,061 518 23.8% 3,858 347 357
United States

489

8.8% 8.8%

365

9.8%

9,273

124

5.7%

921

146

150

Worldwide 1,310 16.8% 16.9% 667 14.1% 15,333 642 19.8% 4,779 494 506
 
 
For the 3 Months ended September 30, 2012
All MasterCard Credit, GDV Growth Growth Purchase

Volume

Growth Purchase

Trans.

Cash

Volume

Growth Cash

Trans.

Accounts Cards
Charge and Debit Programs (Bil.)   (USD)   (Local)   (Bil.)   (Local)   (Mil.)   (Bil.)   (Local)   (Mil.)   (Mil.)   (Mil.)
APMEA $251 18.2% 21.4% $170 19.4% 1,762 $82 26.0% 618 329 357
Canada 32 4.0% 5.5% 30 5.9% 331 3 1.8% 6 40 48
Europe 271 4.6% 14.5% 188 10.9% 2,684 82 23.9% 493 248 263
Latin America

75

4.6% 17.2%

45

19.4%

975

30

14.1%

179

110

128

Worldwide less United States 629 9.6% 17.0% 432 14.5% 5,752 197 22.8% 1,296 726 796
United States

290

7.0% 7.0%

244

7.4%

4,404

46

5.0%

307

267

305

Worldwide 919 8.8% 13.7% 677 11.9% 10,156 243 18.9% 1,603 993 1,101
 
MasterCard Credit and Charge Programs
Worldwide less United States 391 7.4% 13.3% 344 13.8% 4,069 47 10.3% 192 465 526
United States

142

0.9% 0.9%

134

3.2%

1,576

7

-28.8%

7

141

175

Worldwide 533 5.6% 9.8% 479 10.6% 5,644 54 2.9% 199 607 701
 
MasterCard Debit Programs
Worldwide less United States 238 13.4% 23.5% 88 17.6% 1,683 150 27.3% 1,104 260 270
United States

149

13.6% 13.6%

110

13.1%

2,828

39

15.0%

300

126

130

Worldwide 387 13.5% 19.5% 198 15.1% 4,511 189 24.5% 1,404 386 400
 
 
For the 9 Months ended September 30, 2012
All MasterCard Credit, GDV Growth Growth Purchase

Volume

Growth Purchase

Trans.

Cash

Volume

Growth Cash

Trans.

Accounts Cards
Charge and Debit Programs (Bil.)   (USD)   (Local)   (Bil.)   (Local)   (Mil.)   (Bil.)   (Local)   (Mil.)   (Mil.)   (Mil.)
APMEA $709 20.8% 22.7% $479 21.5% 4,983 $230 25.4% 1,720 329 357
Canada 93 5.2% 7.8% 84 8.8% 944 8 -1.7% 17 40 48
Europe 777 7.4% 16.5% 546 12.4% 7,623 231 27.3% 1,390 248 263
Latin America

218

8.1% 19.9%

131

24.3%

2,823

87

13.9%

531

110

128

Worldwide less United States 1,797 12.3% 18.8% 1,241 16.7% 16,372 557 23.7% 3,658 726 796
United States

865

9.9% 9.9%

726

9.7%

12,977

139

11.4%

911

267

305

Worldwide 2,662 11.5% 15.8% 1,967 14.0% 29,349 695 21.0% 4,569 993 1,101
 
MasterCard Credit and Charge Programs
Worldwide less United States 1,125 10.3% 15.5% 990 16.2% 11,687 136 10.6% 549 465 526
United States

416

3.9% 3.9%

394

5.4%

4,608

21

-18.1%

21

 

141

175

Worldwide 1,541 8.5% 12.1% 1,384 12.9% 16,295 157 5.6% 570 607 701
 
MasterCard Debit Programs
Worldwide less United States 672 15.6% 24.7% 251 18.7% 4,686 421 28.6% 3,109 260 270
United States

449

16.2% 16.2%

332

15.2%

8,368

118

19.2%

890

126

130

Worldwide 1,121 15.9% 21.2% 583 16.7% 13,054 539 26.4% 3,999 386 400
 
APMEA = Asia Pacific / Middle East / Africa
Note that the figures in the preceding tables may not sum due to rounding; growth represents change from the comparable year-ago period
 

Footnote

The tables set forth the gross dollar volume (“GDV”), purchase volume, cash volume and the number of purchase transactions, cash transactions, accounts and cards 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 that do not generally have physical cards associated with them.

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. All data is subject to revision and amendment by MasterCard’s customers subsequent to the date of its release.

In 2012, certain MasterCard Debit and Credit Programs in the Europe region have changed due to a reclassification of programs. There is no impact at the All MasterCard Programs level. In addition, Purchase Transactions for certain Credit Programs in the Latin America region have been revised due to changes from several customers. MasterCard revenue is not impacted from these changes. Data for the comparable periods in 2012, 2011 and 2010 have been revised to be consistent with these approaches.

Performance information for prior periods can be found in the "Investor Relations" section of MasterCard's website at www.mastercard.com.

                         
GAAP Reconciliations
($ in millions, except per share data)
 

Nine Months Ended

September 30, 2013

Nine Months Ended

September 30, 2012

 
Actual   Actual   Special Item   Non-GAAP  
 
Provision for litigation settlement $   - $   20 $   (20 ) $   -
 
Total operating expenses 2,637 2,458 (20 ) 2,438
 
Operating income 3,583 3,038 20 3,058
 
Operating Margin 57.6 % 55.3 % 55.6 %
 
Income before income taxes 3,589 3,039 20 3,059
 
Income tax expense 1,096 885 7 a 892
 
Net Income 2,493 2,154 13 2,167
 
 
Basic Earnings per Share $ 20.52 $ 17.13 $ 0.10 $ 17.23
 
Diluted Earnings per Share $ 20.46 $ 17.07 $ 0.11 $ 17.18
 
a- Tax effect of provision for litigation settlement
 
 
Note: Figures may not sum due to rounding
 

Contact:
MasterCard
Investor:
Barbara Gasper, 914-249-4565
investor_relations@mastercard.com
or
Media:
Jim Issokson, 914-249-6286
james_issokson@mastercard.com

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