MasterCard Incorporated 3 rd Quarter 2007 Financial Results Conference Call October 31, 2007 |
2 3 rd Quarter Financial Results • Delivered quarterly net income of $314 million and earnings per share of $2.31, on a diluted basis (including $0.51 from gains on partial sale of Redecard investment) • Achieved record quarterly net revenue of $1.08 billion, growth of 20.1% primarily due to: – Gross dollar volume growth (12.8% * to $577 billion) – Increase in processed transactions (13.3% to 4.8 billion) – Increase in cross-border volumes (20.6%) – Pricing adjustments (2%) • Improved operating margin by 2.1 ppts. to 32.6% from 30.5% in Q3 2006 * On a local currency basis |
3 3 rd Quarter Highlights • Announcing incremental $750 million Class A share repurchase program and a second 2007 Class B share conversion program • Repurchased approximately 2 million shares of Class A common stock for $277 million as of 9/30/07 – Completed $500 million Class A share repurchase plan in October • Converted approximately 5 million shares of Class B to Class A common stock as of 9/30/07 – Total of 7.6 million shares converted in first conversion program • Realized gain from sale of 25% of Redecard investment |
4 $ 2.31 $ 314 (168) (1) (16) 146 353 32.6% 22 10 _ 264 433 $ 1,083 Actual 3Q 07 _ _ Litigation 69.4 (99) Tax Expense 1.9 (17) Interest Expense (11.4) 25 Depreciation and Amortization NM _ Charitable Contribution $ 1.42 $ 193 _ 34 275 30.5% 209 393 $ 902 Actual 3Q 06 NM Other Income 62.7 Diluted EPS 62.9 Net Income 26.4 Advertising and Marketing 325.4 Investment Income 10.2 General and Administrative 28.6 2.1 ppts Operating Income Operating Margin 20.1 Net Revenue Growth % 3 rd Quarter Selected Financial Performance ($ in millions, except percentages and per share data) Note: Figures may not sum due to rounding |
5 MasterCard Branded Volume (GDV) 3 rd Quarter 2007 Note: Figures may not sum due to rounding 7.7 7.7 256 United States 12.8 16.6 577 Worldwide 13.3 21.2 23 Canada 36.8 41.3 11 South Asia/Middle East/Africa (SAMEA) 17.1 22.3 78 Asia Pacific 20.2 24.2 39 Latin America 16.1 25.8 171 Europe Local Currency U.S. Dollar GDV ($ billions) YOY Growth Rate % |
6 3 rd Quarter Revenue - Assessments ($ in millions) • Net assessments increased 20.7%, or $50 to $291 • Gross assessments increased 15.4%, or $70 to $525 due to strong GDV growth of 12.8%* • Net assessments as a % of gross assessments improved slightly Net Assessment Fees Net Assessment Fees as a % of Gross Assessments * On a local currency basis $0 $50 $100 $150 $200 $250 $300 $350 3Q06 3Q07 20% 30% 40% 50% 60% 70% 80% $241 $291 |
7 3 rd Quarter Revenue - Operations Fees ($ in millions) • Net operations fees up 19.8%, or $131 to $792 • Gross operations fees increased 20.6%, or $150 to $879. Key drivers include: – Processed transactions growth: 13.3% – GDV growth: 12.8%* – Cross-border volume growth of 20.6% – Pricing adjustments and new programs • Net operations fees as a % of gross operations fees decreased slightly Net Operations Fees Net Operations Fees as a % of Gross Operations Fees * On a local currency basis $0 $100 $200 $300 $400 $500 $600 $700 $800 3Q06 3Q07 85% 88% 91% 94% 97% 100% $661 $792 |
8 3 rd Quarter Operating Expenses ($ in millions) • Total operating expenses increased 16.3% to $730 • G&A increased 10.2%, or $40, driven by: – Higher personnel costs for additional staff/contractors – Increased employee performance incentives • A&M increased 26.4%, or $55, due to: – Initiatives to support company strategy – Planned shift in spending to the second half of 2007 • Charitable cash contribution of $10 to MasterCard Foundation $0 $100 $200 $300 $400 $500 3Q07 3Q06 General & Administrative Advertising & Marketing Depreciation & Amortization Charitable Contribution $393 $209 $22 $433 $264 $25 $10 |
9 3 rd Quarter Cash Flow Statement and Balance Sheet Highlights • Generated $718 million in cash flow from operations during the nine months ended 9/30/07 • Cash, cash equivalents and available-for-sale securities of $3.3 billion and stockholders’ equity of $3.2 billion at 9/30/07 • Repurchased approximately 2 million Class A shares for $277 million; classified as treasury stock • Prepaid expenses increased $66 million primarily due to higher customer incentives and advertising and marketing expenses • Accrued expenses increased $32 million mainly due to customer and merchant incentives • Investment securities, available for sale, increased $299 million mainly due to mark-to-market adjustment of Redecard investment |
10 4 th Quarter 2007 Items for Consideration • Special items – Litigation settlements of $2 million in 4Q 2006 • G&A – now expect: – Second half growth to be slightly lower than first half – 4Q will have highest sequential and YOY growth rate in 2007 • A&M - continue to expect: – Low single-digit growth for the full-year – Highest spend in 4Q, but more evenly distributed between 3Q and 4Q than in prior years • Will provide update on second Class B share conversion program and incremental $750 million Class A share repurchase on 4Q 2007 earnings call Income Statement |