MasterCard Incorporated Reports Second-Quarter 2011 Financial Results
- Second-quarter net income of $608 million, or $4.76 per diluted share
- Second-quarter net revenue increase of 22.1%, to $1.7 billion
- Second-quarter gross dollar volume up 16.4% and purchase volume up 16.3%
- Second-quarter operating income increase of 23.3%
PURCHASE, N.Y.--(BUSINESS WIRE)--MasterCard Incorporated (NYSE: MA) today announced financial results for the second quarter of 2011. The company reported net income of $608 million, up 32.8%, and earnings per diluted share of $4.76, up 36.4%, in each case versus the year-ago period.
“Solid global performance, including strong increases in volume and processed transactions, fueled double-digit revenue growth this quarter”
Net revenue for the second quarter of 2011 was $1.7 billion, a 22.1% increase versus the same period in 2010. On a constant currency basis, net revenue increased 18.0%. Net revenue growth was primarily driven by the impact of the following:
- A 16.4% increase in gross dollar volume on a local currency basis, to $811 billion;
- An increase in cross-border volumes of 19.3%; and
- An increase in processed transactions of 17.4%.
These factors were partially offset by an increase in rebates and incentives primarily due to new and renewed customer agreements and increased volumes.
Worldwide purchase volume during the quarter was up 16.3% on a local currency basis versus the second quarter of 2010, to $608 billion. As of June 30, 2011, the company’s customers had issued 1.7 billion MasterCard and Maestro-branded cards.
“Solid global performance, including strong increases in volume and processed transactions, fueled double-digit revenue growth this quarter,” said Ajay Banga, MasterCard president and chief executive officer. “While payment volumes have risen across our base customers, we’re also seeing new business such as the portfolio conversions of SunTrust and Sovereign, as well as new processing relationships in the Netherlands and in Brazil, contribute to growth.”
Banga said, “During the quarter, work continued in the mobile commerce category highlighted by an agreement with Google and multiple partners to launch the Google Wallet, as well as our alliance with Isis, in the U.S. Additionally, the previously announced Orange and Barclaycard contactless mobile payment service became available to U.K. consumers in May. Other notable agreements we executed include a commercial alliance with China Union Pay to enable its cards for cross-border e-Commerce, and a new, multi-product agreement with Swedbank in the Nordics and Baltics region.”
Total operating expenses increased 20.8%, to $782 million, during the second quarter of 2011 compared to the same period in 2010. Excluding currency fluctuations, operating expenses were up 17.1%. The increase in total operating expenses was driven by:
- An increase in general and administrative expenses of 24.8%, or 21.3% on a constant currency basis, primarily due to higher personnel expenses and other expenses related to the inclusion of acquisitions and other strategic opportunities;
- An increase in advertising and marketing of 7.1%, or 2.4% on a constant currency basis, driven by sponsorships, as well as customer-specific and strategic initiatives; and
- An increase in depreciation and amortization of 43.2%, or 41.6% on a constant currency basis, primarily due to the amortization of intangible assets from our recent acquisitions and continued investments in technology.
In the second quarter of 2011, excluding acquisitions, net revenue grew approximately 19% and operating expenses grew approximately 14%.
Operating income increased 23.3%, or 18.9% on a constant currency basis, over the year-ago quarter. Operating margin was 53.1%, up from 52.6% in the second quarter of 2010.
MasterCard reported other income of $7 million in the second quarter of 2011 versus other expense of $4 million in the second quarter of 2010. This change was mainly driven by a decrease in interest expense due to lower interest accretion related to litigation settlements and lower interest on uncertain tax positions.
MasterCard's effective tax rate was 31.8% in the second quarter of 2011, versus a rate of 35.7% in the comparable period in 2010. This decrease was primarily driven by a more favorable geographic mix of earnings in 2011 and discrete adjustments in the second quarter of 2010.
In April 2011, MasterCard’s board of directors amended its share repurchase program authorizing the company to repurchase an incremental $1 billion of class A common stock, bringing the authorization to an aggregate of $2 billion. During the second quarter, MasterCard repurchased approximately 1.5 million shares at a cost of approximately $387 million. Quarter-to-date through July 28, the company repurchased an additional 77,700 shares of class A common stock at a cost of approximately $24 million, with $935 million remaining under the current repurchase program authorization.
Year-to-Date 2011 Results
For the six months ended June 30, 2011, MasterCard reported net income of $1.2 billion, up 28.2%, and earnings per diluted share of $9.05, up 30.2%, in each case versus the year-ago period.
Net revenue for the six months ended June 30, 2011 was $3.2 billion, an increase of 18.5% versus the same period in 2010, or 16.4% on a constant currency basis. Cross-border volume growth of 18.9%, gross dollar volume growth of 14.7%, transaction processing growth of 14.3% and the net impact of pricing changes of approximately 3 percentage points contributed to the net revenue growth in the year-to-date period. These factors were partially offset by an increase in rebates and incentives primarily due to new and renewed customer agreements and increased volumes.
Total operating expenses increased 15.3%, to $1.4 billion, for the six-month period compared to the same period in 2010. Excluding currency fluctuations, total operating expenses increased 13.5%.
Operating margin was 54.3% for the six months ending June 30, 2011, up from 53.0% in the first half of 2010.
Total other income was $7 million for the six-month period versus other expense of $9 million for the same period in 2010. This change was primarily driven by a decrease in interest expense due to lower interest accretion related to litigation settlements and lower interest on uncertain tax positions.
MasterCard’s effective tax rate was 32.3% in the six months ended June 30, 2011, versus a rate of 35.1% in the comparable period in 2010. This decrease was primarily due to a more favorable geographic mix of earnings in 2011.
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 800-299-9630 (within the U.S.) and 617-786-2904 (outside the U.S.) and the passcode is 14526215. A replay of the call will be available for one week following the meeting. 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 71099631.
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.
About MasterCard Incorporated
MasterCard (NYSE: MA) is a global payments and technology company. It operates 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. Learn more at mastercard.com.
