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MasterCard Incorporated Reports Second-Quarter 2014 Financial Results

Companies mentioned in this article: MasterCard Incorporated

PURCHASE, N.Y. -- (BUSINESS WIRE) -- MasterCard Incorporated (NYSE:MA) today announced financial results for the second quarter of 2014. The company reported net income of $931 million, up 10%, or 9% adjusted for currency, and earnings per diluted share of $0.80, up 14%, in each case versus the year-ago period. Acquisitions had no impact on earnings per diluted share.

Net revenue for the second quarter of 2014 was $2.4 billion, a 13% increase versus the same period in 2013, both as-reported and adjusted for currency. Net revenue growth was driven by the impact of the following:

  • A 13% increase in gross dollar volume, on a local currency basis, to $1.1 trillion;
  • An increase in cross-border volumes of 16%; and
  • An increase in processed transactions of 12%, to 10.6 billion.

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

Worldwide purchase volume during the quarter was up 13% on a local currency basis versus the second quarter of 2013, to $821 billion. As of June 30, 2014, the company’s customers had issued 2 billion MasterCard and Maestro-branded cards.

“We are pleased with another quarter of solid performance, driven by healthy volume and revenue growth,” said Ajay Banga, president and CEO, MasterCard. “We continue to invest in our strategic initiatives, including acquisitions, while strengthening partnerships with banks, merchants, governments and mobile operators to grow and improve our business and theirs.”

Total operating expenses increased 15%, or 14% after adjusting for currency, to $994 million, during the second quarter of 2014 compared to the same period in 2013. Excluding the impact of acquisitions, total operating expenses increased 12%, or 11% after adjusting for currency. The increase was primarily driven by higher investments in people to support strategic initiatives.

Operating income for the second quarter of 2014 increased 13% over the year-ago period and the company delivered an operating margin of 58.2%.

MasterCard reported other expense of $10 million in the second quarter of 2014 versus other income of $5 million in the second quarter of 2013. The change was mainly driven by higher interest expense related to the company’s inaugural debt issuance in late March.

MasterCard's effective tax rate was 32.2% in the second quarter of 2014, versus a rate of 31.2% in the comparable period in 2013. The increase was primarily due to a less favorable geographic mix of taxable earnings.

During the second quarter of 2014, MasterCard repurchased approximately 15.7 million shares of Class A common stock at a cost of approximately $1.2 billion. Quarter-to-date through July 24, the company repurchased an additional 1.4 million shares at a cost of approximately $106 million, with $728 million remaining under the current repurchase program authorization.

Year-to-Date 2014 Results

For the six months ended June 30, 2014, MasterCard reported net income of $1.8 billion, up 12%, or 11% adjusted for currency, compared to the first half of 2013. Earnings per diluted share was $1.53, up 16%, from the first half of 2013, both including and excluding the impact of acquisitions.

Net revenue for the six months ended June 30, 2014 was $4.6 billion, an increase of 14%, or 13% adjusted for currency, versus the same period in 2013. Gross dollar volume growth of 13%, transaction processing growth of 13% and cross-border volume growth of 16% contributed to the net revenue growth in the year-to-date period. These factors were partially offset by an increase in rebates and incentives.

Total operating expenses increased 13%, both before and after adjusting for currency, to $1.9 billion, for the six months ended June 30, 2014, compared to the same period in 2013. Excluding the impact of acquisitions, total operating expenses increased 11%, or 10% after adjusting for currency. The increase was primarily due to higher personnel costs related to strategic initiatives.

Operating income increased 14% for the first half of 2014 versus the first half of 2013, delivering an operating margin of 58.6%.

MasterCard’s effective tax rate was 32.1% in the six months ended June 30, 2014, versus a rate of 30.9% in the same period in 2013. The increase was primarily due to a less favorable geographic mix of taxable earnings.

Second-Quarter Financial Results Conference Call Details

At 9:00 a.m. ET today, the company will host a conference call to discuss its second-quarter financial results.

The dial-in information for this call is 800-708-4540 (within the U.S.) and 847-619-6397 (outside the U.S.), and the passcode is 37600138. 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 37600138.

This call can also be accessed through the Investor Relations section of the company’s website at www.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. In addition, the presentation of certain growth rates are adjusted for the impact of the current year acquisitions.

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 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 investments in strategic initiatives and its business prospects, including partnerships with banks, merchants, governments and mobile operators.

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, 2013, the company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that have been filed with the SEC during 2014, 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
June 30,

Six Months Ended
June 30,

2014   2013 2014   2013
(in millions, except per share data)
Net Revenue $ 2,377 $ 2,096 $ 4,554 $ 4,002
Operating Expenses
General and administrative 740 621 1,410 1,229
Advertising and marketing 173 186 322 315
Depreciation and amortization 81   61   154   123  
Total operating expenses 994   868   1,886   1,667  
Operating income 1,383 1,228 2,668 2,335
Other Income (Expense)
Investment income 6 11 13 19
Interest expense (15 ) (5 ) (21 ) (10 )
Other income (expense), net (1 ) (1 ) (6 ) (9 )
Total other income (expense) (10 ) 5   (14 )  
Income before income taxes 1,373 1,233 2,654 2,335
Income tax expense 442   385   853   721  
Net Income $ 931   $ 848   $ 1,801   $ 1,614  
 
Basic Earnings per Share $ 0.80   $ 0.70   $ 1.53   $ 1.32  
Basic Weighted-Average Shares Outstanding 1,165   1,214   1,175   1,220  
Diluted Earnings per Share $ 0.80   $ 0.70   $ 1.53   $ 1.32  
Diluted Weighted-Average Shares Outstanding 1,169   1,217   1,179   1,223  
 
       
MASTERCARD INCORPORATED
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
 
June 30, 2014 December 31, 2013
(in millions, except share data)
ASSETS
Cash and cash equivalents $ 2,878 $ 3,599
Restricted cash for litigation settlement 540 723
Investment securities available-for-sale, at fair value 2,836 2,696
Accounts receivable 1,134 966
Settlement due from customers 1,343 1,351
Restricted security deposits held for customers 918 911
Prepaid expenses and other current assets 641 471
Deferred income taxes 287   233  
Total Current Assets 10,577 10,950
Property, plant and equipment, net of accumulated depreciation of $422 and $394, respectively 539 526
Deferred income taxes 86 70
Goodwill 1,527 1,122
Other intangible assets, net of accumulated amortization of $629 and $534, respectively 759 672
Other assets 887   902  
Total Assets $ 14,375   $ 14,242  
LIABILITIES AND EQUITY
Accounts payable $ 420 $ 338
Settlement due to customers 1,335 1,433
Restricted security deposits held for customers 918 911
Accrued litigation 799 886
Accrued expenses 1,903 2,101
Other current liabilities 415   363  
Total Current Liabilities 5,790 6,032
Long-term debt 1,494
Deferred income taxes 125 117
Other liabilities 652   598  
Total Liabilities 8,061 6,747
Commitments and Contingencies
Stockholders’ Equity

Class A common stock, $0.0001 par value; authorized 3,000,000,000 shares, 1,345,233,452 and 1,341,541,110 shares issued and 1,115,642,807 and 1,148,838,370 outstanding, respectively

Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares, 43,614,765 and 45,350,070 issued and outstanding, respectively

 

Additional paid-in-capital 3,811 3,762
Class A treasury stock, at cost, 229,590,645 and 192,702,740 shares, respectively (9,399 ) (6,577 )
Retained earnings 11,666 10,121
Accumulated other comprehensive income 188   178  
Total Stockholders’ Equity 6,266 7,484
Non-controlling interests 48   11  
Total Equity 6,314   7,495  
Total Liabilities and Equity $ 14,375   $ 14,242  
 
 
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
 

Six Months Ended
June 30,

2014   2013
(in millions)
Operating Activities
Net income $ 1,801 $ 1,614
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 154 123
Share-based payments (46 ) (1 )
Deferred income taxes (77 ) (32 )
Other 22 29
Changes in operating assets and liabilities:
Accounts receivable (121 ) (36 )
Income taxes receivable 158
Settlement due from customers 1 444
Prepaid expenses (162 ) (112 )
Accrued litigation and legal settlements (87 )
Accounts payable 29 (97 )
Settlement due to customers (90 ) (451 )
Accrued expenses (209 ) (87 )
Net change in other assets and liabilities 82   62  
Net cash provided by operating activities 1,297   1,614  
Investing Activities
Purchases of investment securities available-for-sale (1,473 ) (1,311 )
Acquisition of businesses, net of cash acquired (341 )
Purchases of property, plant and equipment (39 ) (48 )
Capitalized software (63 ) (55 )
Proceeds from sales of investment securities available-for-sale 426 855
Proceeds from maturities of investment securities available-for-sale 887 644
Decrease in restricted cash for litigation settlement 183 2
Proceeds from maturities of investment securities held-to-maturity 36
Other investing activities (12 ) (5 )
Net cash provided by (used in) investing activities (432 ) 118  
Financing Activities
Purchases of treasury stock (2,827 ) (1,347 )
Proceeds from debt 1,487
Dividends paid (260 ) (110 )
Tax benefit for share-based compensation 42 20
Cash proceeds from exercise of stock options 16 16
Other financing activities (43 )  
Net cash used in financing activities (1,585 ) (1,421 )
Effect of exchange rate changes on cash and cash equivalents (1 ) (15 )
Net increase (decrease) in cash and cash equivalents (721 ) 296
Cash and cash equivalents - beginning of period 3,599   2,052  
Cash and cash equivalents - end of period $ 2,878   $ 2,348  
 
Non-Cash Investing and Financing Activities
Fair value of assets acquired, net of cash acquired $ 572   $  
Fair value of liabilities assumed related to acquisitions $ 128   $  
 
         

MASTERCARD INCORPORATED OPERATING PERFORMANCE

 
For the 3 Months ended June 30, 2014
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 $320 14.5% 17.8% $214 17.6% 2,419 $106 18.1% 916 421 453
Canada 33 -0.9% 5.4% 31 7.2% 382 2 -14.4% 6 40 49
Europe 344 14.0% 13.0% 233 10.2% 3,578 111 19.4% 667 328 345
Latin America

88

4.5% 13.2%

54

20.7%

1,240

34

2.9%

204

129

148

Worldwide less United States 785 12.3% 14.6% 532 13.9% 7,619 253 16.0% 1,793 918 995
United States

339

9.2% 9.2%

289

10.1%

5,135

50

4.1%

325

308

344

Worldwide 1,124 11.4% 12.9% 821 12.5% 12,754 302 13.9% 2,118 1,226 1,339
 
MasterCard Credit and Charge Programs
Worldwide less United States 461 9.4% 11.3% 412 12.8% 4,992 49 0.5% 211 500 565
United States

161

9.8% 9.8%

155

10.3%

1,713

6

-0.8%

7

146

178

Worldwide 623 9.5% 10.9% 567 12.1% 6,705 56 0.4% 217 645 742
 
MasterCard Debit Programs
Worldwide less United States 324 16.8% 19.5% 120 17.9% 2,627 204 20.5% 1,582 419 430
United States

177

8.5% 8.5%

134

9.8%

3,422

43

4.9%

318

162

166

Worldwide 501 13.7% 15.4% 254 13.5% 6,049 247 17.4% 1,900 581 596
 
 
For the 6 Months ended June 30, 2014
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 $622 13.5% 18.3% $416 18.0% 4,619 $206 18.9% 1,787 421 453
Canada 62 -1.4% 6.3% 58 8.1% 718 5 -12.1% 11 40 49
Europe 656 13.8% 13.8% 445 10.5% 6,825 210 21.3% 1,263 328 345
Latin America

171

3.7% 14.3%

104

21.2%

2,434

67

5.1%

402

129

148

Worldwide less United States 1,511 11.7% 15.3% 1,023 14.4% 14,596 488 17.4% 3,464 918 995
United States

658

8.9% 8.9%

557

9.5%

9,852

101

5.8%

636

308

344

Worldwide 2,168 10.8% 13.3% 1,580 12.6% 24,448 589 15.2% 4,100 1,226 1,339
 
MasterCard Credit and Charge Programs

Worldwide less United States

890 8.6% 11.9% 793 13.1% 9,619 98 2.8% 409 500 565
United States

306

9.0% 9.0%

293

9.2%

3,223

13

3.6%

13

146

178

Worldwide 1,196 8.7% 11.1% 1,086 12.1% 12,842 111 2.9% 422 645 742
 
MasterCard Debit Programs
Worldwide less United States 620 16.5% 20.6% 230 18.8% 4,977 390 21.7% 3,055 419 430
United States

352

8.8% 8.8%

264

9.7%

6,629

87

6.1%

623

162

166

Worldwide 972 13.6% 16.1% 494 13.7% 11,606 478 18.6% 3,678 581 596
 
 
For the 3 Months ended June 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 $279 19.2% 21.4% $185 19.1% 1,996 $95 26.1% 751 366 396
Canada 34 6.1% 7.5% 31 7.9% 353 3 3.5% 6 37 45
Europe 302 14.5% 14.1% 206 11.5% 3,044 95 20.1% 564 279 295
Latin America

84

17.0% 16.7%

49

19.6%

1,083

35

12.7%

197

114

134

Worldwide less United States

699 16.2% 16.9% 472 14.9% 6,476 227 21.1% 1,518 797 869
United States

310

6.5% 6.5%

263

6.7%

4,727

48

5.1%

316

283

320

Worldwide 1,009 13.0% 13.4% 734 11.8% 11,203 275 18.0% 1,835 1,079 1,189
 
MasterCard Credit and Charge Programs

Worldwide less United States

422 12.2% 13.7% 371 13.9% 4,439 51 12.2% 210 475 538
United States

147

3.3% 3.3%

141

3.9%

1,591

6

-8.6%

6

142

176

Worldwide 569 9.7% 10.8% 512 11.0% 6,030 57 9.4% 217 618 714
 
MasterCard Debit Programs

Worldwide less United States

277 22.9% 22.0% 101 18.8% 2,037 176 23.9% 1,308 322 331
United States

163

9.5% 9.5%

122

10.1%

3,136

41

7.6%

310

140

144

Worldwide 441 17.6% 17.0% 223 13.9% 5,173 218 20.4% 1,618 462 475
 
 
For the 6 Months ended June 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 $548 19.8% 21.9% $363 19.3% 3,836 $185 27.3% 1,456 366 396
Canada 63 4.5% 5.6% 58 6.0% 657 6 1.6% 12 37 45
Europe 576 14.0% 13.6% 398 10.9% 5,772 179 20.0% 1,057 279 295
Latin America

165

13.9% 15.8%

97

18.9%

2,102

68

11.7%

383

114

134

Worldwide less United States

1,352 15.7% 16.6% 915 14.6% 12,367 437 21.3% 2,907 797 869
United States

604

5.1% 5.1%

509

5.6%

9,087

95

2.1%

618

283

320

Worldwide 1,956 12.2% 12.8% 1,424 11.2% 21,455 532 17.3% 3,525 1,079 1,189
 
MasterCard Credit and Charge Programs

Worldwide less United States

820 11.7% 13.3% 721 13.5% 8,523 99 11.6% 403 475 538
United States

281

2.4% 2.4%

268

3.2%

3,029

13

-11.2%

12

142

176

Worldwide 1,101 9.2% 10.3% 989 10.5% 11,552 111 8.4% 415 618 714
 
MasterCard Debit Programs

Worldwide less United States

533 22.5% 22.2% 194 18.5% 3,845 339 24.4% 2,504 322 331
United States

323

7.4% 7.4%

241

8.5%

6,058

82

4.5%

605

140

144

Worldwide 856 16.4% 16.2% 435 12.7% 9,903 421 19.9% 3,110 462 475
 
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 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 2013 Q4, a large Maestro customer revised their number of Maestro cards to exclude inactive cards. Data for the comparable periods in 2013 and 2012 have been revised to be consistent with this approach. In 2014 Q2, a large customer revised their number of MasterCard credit cards to exclude inactive cards. Data for the comparable periods in 2013 have been revised to be consistent with this approach. MasterCard revenue is not impacted from these historical changes.

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


Copyright © Business Wire 2014
Contact:

MasterCard Incorporated
Investor Relations:
Barbara Gasper or Catherine Murchie, 914-249-4565
investor_relations@mastercard.com
or
Media Relations:
Seth Eisen, 914-249-3153
Seth_Eisen@mastercard.com