MasterCard Incorporated Reports First-Quarter 2013 Financial Results

Wed May 1, 2013 8:00am EDT

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MasterCard Incorporated Reports First-Quarter 2013 Financial Results

  • First-quarter net income of $766 million, or $6.23 per diluted share
  • First-quarter net revenue increase of 8%, to $1.9 billion
  • First-quarter gross dollar volume up 12% and purchase volume up 10%

MasterCard Incorporated (NYSE: MA) today announced financial results for the first quarter of 2013. The company reported net income of $766 million, up 12%, and earnings per diluted share of $6.23, up 16%, in each case versus the year-ago period.

Net revenue for the first quarter of 2013 was $1.9 billion, an 8% increase versus the same period in 2012. Adjusted for currency, net revenue increased 9%. Net revenue growth was driven by the impact of the following:

  • A 12% increase in gross dollar volume, on a local currency basis, to $947 billion;
  • An increase in cross-border volumes of 16%; and
  • An increase in processed transactions of 12%, to 8.7 billion.

These factors were partially offset by an increase in rebates and incentives, primarily due to increased volumes and new and renewed agreements.

Worldwide purchase volume during the quarter was up 10% on a local currency basis versus the first quarter of 2012, to $690 billion. As of March 31, 2013, the company’s customers had issued 1.9 billion MasterCard and Maestro-branded cards.

“We are pleased with our first-quarter results as we delivered solid performance that met our expectations despite the mixed global economic environment,” said Ajay Banga, MasterCard president and CEO. “Since the start of the year, we have had steady momentum in new business, as well as product innovations. We signed new consumer credit agreements with Bank of America and TD Bank and secured significant wins in our APMEA region with Qantas, South Africa’s NedBank, and Japan’s Rakuten. We also signed an alliance with the Alibaba Group to explore opportunities in the Chinese market. In addition, we advanced our mobile and digital strategy with the commercial launch of MasterPass.”

Total operating expenses increased 6%, to $799 million, during the first quarter of 2013 compared to the same period in 2012. The increase was primarily driven by higher personnel expenses.

Operating income for the first quarter of 2013 increased 11% over the year-ago period and the company delivered an operating margin of 58.1%.

MasterCard's effective tax rate was 30.5% in the first quarter of 2013, versus a rate of 31.8% in the comparable period in 2012. The decrease was primarily due to a more favorable geographic mix of earnings and a benefit from a deduction related to the company’s authorization software.

During the first quarter of 2013, MasterCard repurchased approximately 1,480,000 shares of Class A common stock at a cost of approximately $766 million. Quarter-to-date through April 25, the company repurchased an additional 341,500 shares at a cost of approximately $182 million, with $1.7 billion remaining under the current repurchase program authorization.

First-Quarter Financial Results Conference Call Details

At 9:00 a.m. ET today, the company will host a conference call to discuss its first-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 34404423. 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 34404423.

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 mastercard.com.

Non-GAAP Financial Information

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

About MasterCard Incorporated

MasterCard (NYSE: 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 Conversations Blog and subscribe for the latest news.

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 ability to advance its mobile and digital payments strategy through the commercial launch of MasterPass.

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
March 31,
  2013           2012  
(in millions, except per share data)
 
Net Revenue $ 1,906 $ 1,758
Operating Expenses
General and administrative 608 579
Advertising and marketing 129 125
Depreciation and amortization   62     54  
Total operating expenses   799     758  
Operating income 1,107 1,000
Other Income (Expense)
Investment income 8 9
Interest expense (5 ) (6 )
Other income (expense)   (8 )   (3 )
Total other income (expense)   (5 )   -  
Income before income taxes 1,102 1,000
Income tax expense   336     318  
Net Income $ 766   $ 682  
 
Basic Earnings per Share $ 6.25   $ 5.38  
Basic Weighted-Average Shares Outstanding   123     127  
Diluted Earnings per Share $ 6.23   $ 5.36  
Diluted Weighted-Average Shares Outstanding   123     127  
 
           
MASTERCARD INCORPORATED
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
 
March 31, 2013 December 31, 2012
(in millions, except share data)
ASSETS
Cash and cash equivalents $ 1,984 $ 2,052
Restricted cash for litigation settlement 724 726
Investment securities available-for-sale, at fair value 3,036 2,951
Accounts receivable 941 925
Settlement due from customers 670 1,117
Restricted security deposits held for customers 812 777
Prepaid expenses and other current assets 488 681
Deferred income taxes   128     128  
Total Current Assets 8,783 9,357
Property, plant and equipment, net 468 472
Deferred income taxes 59 60
Goodwill 1,042 1,092
Other intangible assets, net 637 672
Other assets   820     809  
Total Assets $ 11,809   $ 12,462  
LIABILITIES AND EQUITY
Accounts payable $ 262 $ 357
Settlement due to customers 624 1,064
Restricted security deposits held for customers 812 777
Accrued litigation 724 726
Accrued expenses 1,703 1,748
Other current liabilities   289     234  
Total Current Liabilities 4,414 4,906
Deferred income taxes 99 104
Other liabilities   540     523  
Total Liabilities 5,053 5,533
Commitments and Contingencies
Stockholders’ Equity

Class A common stock, $0.0001 par value; authorized 3,000,000,000 shares,
133,837,376 and 133,604,903 shares issued and 117,171,534 and 118,405,075 outstanding, respectively

Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares,
4,736,468 and 4,838,840 issued and outstanding, respectively

Additional paid-in-capital 3,648 3,641
Class A treasury stock, at cost, 16,665,842 and 15,199,828 shares, respectively (4,902 ) (4,139 )
Retained earnings 8,047 7,354
Accumulated other comprehensive income (loss)   (50 )   61  
Total Stockholders’ Equity 6,743 6,917
Non-controlling interests   13     12  
Total Equity   6,756     6,929  
Total Liabilities and Equity $ 11,809   $ 12,462  
 
     
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
 
Three Months Ended
March 31,
  2013           2012  
(in millions)
Operating Activities
Net income $ 766 $ 682
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 62 54
Share-based payments (23 ) (53 )
Deferred income taxes (5 ) (14 )
Other 16 8
Changes in operating assets and liabilities:
Accounts receivable (25 ) 7
Income taxes receivable 149
Settlement due from customers 433 (43 )
Prepaid expenses (7 ) (53 )
Accounts payable (93 ) (88 )
Settlement due to customers (423 ) (88 )
Accrued expenses (30 ) 1
Net change in other assets and liabilities   52     14  
Net cash provided by operating activities   872     427  
Investing Activities
Purchases of investment securities available-for-sale (934 ) (398 )
Purchases of property, plant and equipment (20 ) (12 )
Capitalized software (22 ) (39 )
Proceeds from sales of investment securities available-for-sale 576 43
Proceeds from maturities of investment securities available-for-sale 257 111
Proceeds from maturities of investment securities held-to-maturity 36
Investment in nonmarketable equity investments (2 ) (7 )
Other investing activities   2      
Net cash used in investing activities   (107 )   (302 )
Financing Activities
Purchases of treasury stock (766 ) (248 )
Dividends paid (37 ) (19 )
Tax benefit for share-based compensation 14 33
Cash proceeds from exercise of stock options 5 14
Other financing activities   1      
Net cash used in financing activities   (783 )   (220 )
Effect of exchange rate changes on cash and cash equivalents   (50 )   45  
Net decrease in cash and cash equivalents (68 ) (50 )
Cash and cash equivalents - beginning of period   2,052     3,734  
Cash and cash equivalents - end of period $ 1,984   $ 3,684  
 
         

MASTERCARD INCORPORATED OPERATING PERFORMANCE

 
For the 3 Months ended March 31, 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 $ 269 20.2 % 22.2 % $ 178 19.1 % 1,827 $ 91 28.7 % 720 358 388
Canada 30 3.9 % 4.6 % 27 5.1 % 308 3 -0.2 % 6 43 52
Europe 275 13.3 % 13.0 % 191 10.2 % 2,727 84 19.9 % 494 269 284
Latin America   80 10.5 % 14.7 %   48 17.7 % 1,015   32 10.6 % 181 115 134
Worldwide less United States 653 15.2 % 16.4 % 443 14.1 % 5,878 210 21.6 % 1,400 785 859
United States   294 3.7 % 3.7 %   246 4.6 % 4,363   48 -0.4 % 302 291 329
Worldwide 947 11.4 % 12.1 % 690 10.5 % 10,241 257 16.8 % 1,702 1,076 1,188
 
MasterCard Credit and Charge Programs
Worldwide less United States 400 10.9 % 12.5 % 351 12.8 % 4,095 49 10.5 % 202 481 544
United States   134 1.5 % 1.5 %   127 2.4 % 1,440   6 -13.7 % 6 143 178
Worldwide 534 8.4 % 9.6 % 479 9.8 % 5,535 55 7.1 % 208 624 722
 
MasterCard Debit Programs
Worldwide less United States 253 22.7 % 23.0 % 92 19.0 % 1,782 161 25.4 % 1,199 304 314
United States   160 5.7 % 5.7 %   119 7.0 % 2,923   41 2.0 % 296 148 151
Worldwide 413 15.5 % 15.6 % 211 11.9 % 4,706 202 19.8 % 1,494 451 465
 
For the 3 Months ended March 31, 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 $ 223 25.2 % 23.7 % $ 151 23.6 % 1,551 $ 72 24.0 % 525 307 333
Canada 29 8.5 % 10.2 % 26 12.2 % 290 3 -5.3 % 6 39 47
Europe 242 13.4 % 18.7 % 173 14.6 % 2,364 70 30.4 % 421 229 245
Latin America   72 16.8 % 23.6 %   44 29.4 % 907   28 15.6 % 174 107 130
Worldwide less United States 567 18.0 % 20.8 % 394 19.3 % 5,112 173 24.3 % 1,125 682 755
United States   283 14.1 % 14.1 %   235 13.2 % 4,176   48 19.1 % 301 279 312
Worldwide 850 16.7 % 18.5 % 629 16.9 % 9,289 221 23.2 % 1,425 961 1,067
 
MasterCard Credit and Charge Programs
Worldwide less United States 361 16.0 % 17.9 % 317 19.0 % 3,702 44 10.7 % 181 451 512
United States   132 7.4 % 7.4 %   124 8.2 % 1,458   7 -4.6 % 7 147 176
Worldwide 493 13.6 % 14.9 % 441 15.7 % 5,160 52 8.2 % 187 598 688
 
MasterCard Debit Programs
Worldwide less United States 206 21.6 % 26.1 % 77 20.4 % 1,410 129 29.8 % 944 231 243
United States   152 20.7 % 20.7 %   111 19.3 % 2,719   41 24.7 % 294 132 135
Worldwide 358 21.2 % 23.8 % 188 19.8 % 4,128 170 28.6 % 1,238 362 379
 
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.

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

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