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MasterCard Incorporated Reports Third-Quarter 2013 Financial Results

MasterCard Incorporated (NYSE: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.

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