Mastercard Incorporated Q1 2010 Earnings Call Transcript

Mastercard Incorporated Q1 2010 Earnings Call Transcript
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Mastercard Incorporated (MA)

Q1 2010 Earnings Call

May 04, 2010 9:00 am ET

Executives

Ajay Banga - President, Chief Operating Officer, Director, Member of Executive Committee and President of Mastercard International

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Robert Selander - Chief Executive Officer, Director, Member of Executive Committee, Chief Executive Officer of MasterCard International and Director of MasterCard International Board

Barbara Gasper - IR

Martina Hund-Mejean - Chief Financial Officer and Member of Executive Committee

Analysts

Adam Frisch - Morgan Stanley

Julio Quinteros - Goldman Sachs Group Inc.

Robert Napoli - Piper Jaffray Companies

Tien-Tsin Huang - JP Morgan Chase & Co

David Parker - Lazard Capital Markets LLC

Christopher Mammone - Deutsche Bank AG

Rod Bourgeois - Sanford C. Bernstein & Co., Inc.

Andrew Jeffrey - SunTrust Robinson Humphrey Capital Markets

Craig Maurer - Calyon Securities (USA)

Jason Kupferberg - UBS Investment Bank

Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc.

Presentation

Operator

Good day, ladies and gentlemen, and welcome to MasterCard's First Quarter 2010 Earnings Conference Call. My name is Jeremy, and I will be your coordinator for today. [Operator Instructions] At this time, I'd like to turn the presentation over to your host for today's call, Ms. Barbara Gasper, Head of Investor Relations. Ma'am, you may proceed.

Barbara Gasper

Thank you, Jeremy. Good morning, and thank you all for joining us today either by phone or webcast for a discussion about our first quarter 2010 financial results. With me on the call this morning are Bob Selander, our Chief Executive Officer; Ajay Banga, President and Chief Operating Officer, who, as you know, will succeed Bob as MasterCard's CEO on July 1; as well as Martina Hund-Mejean, our Chief Financial Officer. Following some comments by Bob, Ajay and Martina, highlighting some key points about the business environment and our first quarter results, we will open up the call for your questions.

This morning’s earnings release and the slide deck that will be referenced on this call can be found in the Investor Relations section of our website, mastercard.com. The earnings release and the slide deck have also been attached to an 8-K that we filed with the SEC earlier this morning. A replay of this call will be posted on our website for one week through May 11.

Finally, as set forth in more detail in today's earnings release, I need to remind everyone that today’s call may include some forward-looking statements about MasterCard’s future performance. Actual performance could differ materially from what is suggested by our comments today. Information about the factors that could affect future performance are summarized at the end of our press release, as well as contained in our recent SEC filings. With that, I will now turn the call over to Bob Selander. Bob?

Robert Selander

Thanks, Barbara, and good morning, everyone. I'd like to start out by saying how pleased I am that we've been able to deliver another strong quarter of earnings results. This is indicative of both the underlying momentum of our business, as well as some encouraging signs of economic recovery in pockets around the world.

In the first quarter, we saw net revenue growth of 13.1% on an as-reported basis, and 10.2% on a constant-currency basis. Gross dollar volume, or GDV, grew 8.3% on a local-currency basis. We continue to see growth in processed transactions, and cross-border volumes have returned to double-digit growth. We maintained solid expense control, which allowed us to expand our operating margin nearly five percentage points from last year's first quarter. All of this helped fuel net income growth of almost 24% for the quarter, or approximately 19% on a constant-currency basis.

We believe that some of the improvements we saw in the quarter can be attributed to recent positive macroeconomic data points. For example, the stabilization of unemployment rates in United States as well as increased consumer confidence, although still at low levels, were likely contributors to increased spending in discretionary categories and to the improvement we saw in U.S. credit volume. While credit growth in the U.S. was still negative for the quarter, we've moved beyond the double-digit declines of 2009. During the month of March, we saw positive growth in processed U.S. credit volume for the first time in approximately 18 months. This trend continue through the first four weeks of April.

Given the challenges we've all faced over the last 18 months or so, it is encouraging to see signs that the global recovery is continuing across a number of countries, specifically in Russia, India, China and Brazil. As many of you are aware, many economists now observe that the global economy has reached a self-sustaining momentum. This is particularly evident across emerging market environments. I recently returned from a series of business meetings across Asia, and I was struck by the overwhelming sentiment of optimism that many of our customers have about their future business opportunities.

This is in contrast to some of my recent interaction with bankers in the U.S. and Western Europe, who have been more cautious. Nonetheless, we continue to see improvements across a number of economic indicators, which bode well for our business. Excluding the U.S. region, we saw strong GDV growth of approximately 15% on a local-currency basis for the quarter.

I'd now like to introduce Ajay Banga, MasterCard's next Chief Executive Officer and the newest member of the company's Board of Directors. Over the course of the succession planning process, our Board focused on identifying someone who possesses both leadership skills and proven results. Ajay has a career that is rich and bold. His industry knowledge, his deep background in financial services, his experience working in numerous geographies have all prepared him well for this role and make him the perfect CEO to lead MasterCard into the future. As we work together over the past eight months, I have been very impressed by his thoughtful and energetic approach to business.

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