MasterCard Reports Q3 Financial Results

Contacts
Barbara Gasper Investor Relations 914-249-4565
Chris Monteiro Media Relations 914-249-5826	Attached PDF

MasterCard Incorporated Reports Third-Quarter 2009 Financial Results

• Net income of $456 million, or $3.48 per diluted share, excluding special items

• Net income of $452 million, or $3.45 per diluted share, including special items

• Net revenue growth of 2.0%, to $1.4 billion

• Gross dollar volume and purchase volume relatively flat

• Total operating expenses declined 13.3%, excluding special items

Purchase, NY, November 03, 2009 - MasterCard Incorporated (NYSE:MA) today announced financial results for the third quarter of 2009. The company reported net income of $456 million, or $3.48 per diluted share, excluding special items, and net income of $452 million, or $3.45 per diluted share, including special items. The company's total operating expenses, other income, effective tax rate, 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 GAAP reconciliations.



Net revenue for the third quarter of 2009 was $1.4 billion, a 2.0% increase versus the same period in 2008. On a constant currency basis (excluding the movement of the euro and the Brazilian real relative to the U.S. dollar), net revenue increased 3.9% compared to the same period in 2008. The higher net revenue in the third quarter this year benefited from:

• Pricing changes that contributed approximately 6 percentage points of the net revenue growth; and


• A 7.6% increase in the number of transactions processed to 5.8 billion.

These factors were partially offset by the impact of slightly lower cross border volumes on third-quarter 2009 revenue, compared to the same period in 2008.



MasterCard’s gross dollar volume was relatively flat, up 0.3% on a local currency basis, versus the third quarter of 2008, to $633 billion. Worldwide purchase volume during the quarter was also relatively flat, up 0.4% on a local currency basis, versus the third quarter of 2008, to $480 billion. As of September 30, 2009, the company’s financial-institution customers had issued 964 million MasterCard cards, comparable to the number of cards issued at September 30, 2008.



“We are very pleased with our third-quarter financial results, specifically since we began to see signs of stabilization in parts of our business,” said Robert W. Selander, MasterCard chief executive officer. “Total processed transactions continued to grow at a high single-digit rate, with double-digit growth coming from our Asia Pacific/Middle East/Africa and Latin America regions. At the same time, our overall cross-border volumes are steadying with our Asia Pacific region demonstrating significant growth in the quarter, and the U.S. showing a lower rate of decline. We continued to aggressively manage costs and improve margins, while still investing in key growth areas across our business.



“Overall, our results once again underscore the global trend toward electronic payments, and the strength of our business model,” Selander added. “We continue to make life easier for consumers, businesses and governments, all of whom seek safer, more controllable and more efficient payment alternatives for everyday commerce.”



Special items for the third quarter of 2009 represented $6.2 million pre-tax litigation settlement charges. The special item for the third quarter of 2008 represented an $827.5 million net pre-tax charge related to an antitrust litigation settlement.



Excluding special items, total operating expenses decreased 13.3%, to $685 million, during the third quarter of 2009 compared to the same period in 2008. Currency fluctuations contributed 1.3 percentage points to the rate of decline. The decrease in total operating expenses was driven by:

• A 7.9% decrease in general and administrative expenses, primarily resulting from lower professional fees and travel expenses, along with a benefit from foreign exchange remeasurement, versus the comparable period in 2008. These factors were partially offset by increased personnel costs due to severance of $31 million in the third quarter of 2009. Excluding the impact of severance costs in both periods, general and administrative expenses declined 13.8% for the third quarter of 2009. A favorable foreign currency impact represented 1.1 percentage points of both rates of decline; and


• A 29.4% decrease in advertising and marketing expenses versus the year-ago period, primarily related to reduced investments and continued cost containment initiatives. Favorable currency fluctuations representing approximately 1.5 percentage points contributed to the rate of decline.

Including special items, total operating expenses decreased 57.3%, to $691 million, primarily due to the net litigation settlement that occurred in the third quarter of 2008.



Excluding special items, the operating margin was 49.8% for the third quarter of 2009, up 8.8 percentage points over the year-ago period. Including special items, the operating margin was 49.4% for the third quarter of 2009.



MasterCard's effective tax rate was 32.9% in the third quarter of 2009. For the third quarter of 2008, the effective tax rate was 39.7%, excluding special items, and 34.1% including the special items. The difference in the effective tax rate was primarily due to the charge for the net litigation settlement recorded in the third quarter of 2008.



Year-to-Date 2009 Results



For the nine months ended September 30, 2009, MasterCard reported net income of $1.2 billion, or $8.95 per diluted share, excluding the impact of special items, and net income of $1.2 billion, or $8.92 per diluted share, including special items*.



Net revenue for the nine months ended September 30, 2009, was $3.8 billion, a 0.9% increase versus the same period in 2008. On a constant currency basis, net revenue increased 4.4%. Increased processed transactions of 7.0% and pricing changes of approximately 6 percentage points contributed to the revenue growth in the year-to-date period. These factors were partially offset by the impact of slightly lower cross border volumes on revenue for the nine months ended September 30, 2009, relative to the comparable period last year.



Total operating expenses decreased 12.5%, to $2.0 billion, for the nine-month period compared to the same period in 2008, excluding special items for both periods. Currency fluctuations contributed 2.5 percentage points of this decrease. Including special items, operating expenses decreased 57.8%.



Total net other expense was $32 million for the nine-month period versus total net other income of $169 million for the same period in 2008, including special items. The decrease in other income was primarily driven by gains from the sale of Redecard securities and the termination of a customer business agreement in 2008.



MasterCard’s effective tax rate, excluding special items, was 33.6% in the nine months ended September 30, 2009, versus a rate of 36.7% in the comparable period in 2008. Including the special items, the effective tax rate was 33.6% for the 2009 period, and 40.4% for the 2008 period. The difference in the effective tax rate was primarily due to the impact of the charge for litigation settlements in 2008.



*Detailed Q3/2009 Financial Statements are attached above.



Third-Quarter 2009 Financial Results Conference Call Details



At 9:00 a.m. EST today, the company will host a conference call to discuss its third-quarter 2009 financial results.



The dial-in information for this call is 866-700-6293 (within the U.S.) and 617-213-8835 (outside the U.S.) and the passcode is 63207343. 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 88640718.



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.