MasterCard Incorporated 4 th Quarter and Full-Year 2007 Financial Results Conference Call January 31, 2008 Exhibit 99.2 |
2 4 th Quarter Financial Results • Delivered quarterly net income of $304 million and earnings per share of $2.26, on a diluted basis (including $1.37 from gains on additional sales of Redecard investment) • Achieved quarterly net revenue of $1.07 billion, representing growth of 27.8% primarily due to: – Gross dollar volume growth (15.2% * to $634 billion) – Increase in processed transactions (17.2% to 5.2 billion) – Increase in cross-border volumes (27.7%) – Pricing adjustments (2%) • Improved operating margin by 10.3 ppts. to 16.0% from 5.7% in Q4 2006** * On a local currency basis ** Excluding special items; see Appendix A for a GAAP reconciliation of special items for the three and twelve months ended December 31, 2006 and 2007 |
3 Impact of U.S. Economic Uncertainty MasterCard‘s distinct business drivers help to weather U.S. economic slowdown: • Despite change in spending patterns, consumers continue to transact • About half of business outside the U.S. • Continued secular shift from paper to electronic payments • No direct consumer credit exposure |
4 Business Update • EC Decision • SEPA Update • Litigation Update • Redecard Investment • Share Conversion and Repurchase |
5 $ 0.30 $ 41 46 5.5% 793 $ 839 4Q 2006 Actual $ 2.26 $ 304 172 16.0% 901 $ 1,073 4Q 2007 Actual $ 0.31 $ 42 48 5.7% 791 $ 839 4Q 2006 adjusted for special items* 629.0 Diluted EPS 623.8 Net income 13.9 Total operating expenses 258.3 10.3 ppts Operating income Operating margin 27.8 Net revenue YOY Adjusted Growth % 4 th Quarter Selected Financial Performance ($ in millions, except percentages and per share data) Note: Figures may not sum due to rounding *See Appendix A for a GAAP reconciliation of special items for the three and twelve months ended December 31, 2006 and 2007 |
6 MasterCard Branded Volume (GDV) 4 th Quarter 2007 Note: Figures may not sum due to rounding 10.0 10.0 268 United States 15.2 20.9 634 Worldwide 16.6 35.1 27 Canada 34.1 43.6 12 South Asia/Middle East/Africa (SAMEA) 19.0 26.4 88 Asia Pacific 22.0 28.2 47 Latin America 18.4 31.7 190 Europe Local Currency U.S. Dollar GDV ($ billions) YOY Growth Rate % |
7 4 th Quarter Revenue - Operations Fees ($ in millions) • Net operations fees up 25.2%, or $167 to $829 • Gross operations fees increased 25.2%, or $186 to $925. Key drivers included: – Processed transactions growth: 17.2% – Cross-border volume growth of 27.7% – GDV growth: 15.2%* – Pricing adjustments of 2% • Net operations fees as a % of gross operations fees remained unchanged * On a local currency basis $662 $829 $0 $150 $300 $450 $600 $750 $900 4Q06 4Q07 85% 88% 91% 94% 97% 100% Net Operations Fees Net Operations Fees as a % of Gross Operations Fees |
8 4 th Quarter Revenue - Assessments ($ in millions) • Net assessments increased 37.9%, or $67 to $244 • Gross assessments increased 18.5%, or $89 to $569 due to strong GDV growth of 15.2%* • Net assessments as a % of gross assessments improved * On a local currency basis $177 $244 $0 $50 $100 $150 $200 $250 $300 4Q06 4Q07 20% 30% 40% 50% 60% 80% Net Assessment Fees Net Assessment Fees as a % of Gross Assessment Fees |
9 4 th Quarter Operating Expenses ($ in millions) • Total operating expenses increased 13.5%, or $107 to $901 • G&A increased 24.1%, or $96, to $496 driven by: – Higher personnel costs for additional staff – Increased employee performance incentives – Severance expense for staff realignment – Professional fees for legal costs to defend outstanding litigation • A&M increased 4.5%, or $16, to $369 primarily due to currency fluctuations • Charitable cash contribution of $10 to MasterCard Foundation |
10 Full-Year 2007 Highlights • Delivered full-year net income of $1.09 billion and earnings per share of $8.00, on a diluted basis (including $1.87 from gains on sale of a significant portion of Redecard investment) • Achieved full-year net revenue of $4.1 billion, representing growth of 22.3% primarily due to: – Gross dollar volume growth (14.4% * to $2.3 trillion) – Increase in processed transactions (16.2% to 18.8 billion) – Increase in cross-border volumes (21.1%) – Pricing adjustments (2%) • Improved operating margin by 7.8 ppts., to 27.3% from 19.5% in the full- year 2006** * On a local currency basis ** Excluding special items; see Appendix A for a GAAP reconciliation of special items for the three and twelve months ended December 31, 2006 and 2007 |
11 Cash Flow Statement and Balance Sheet Highlights • Generated $770 million in cash flow from operations during the year ended 12/31/07 • Cash, cash equivalents and available-for-sale securities of $3 billion at 12/31/07 • Capital expenditures increased to $156 million • Repurchased approximately 4 million Class A shares for $601 million – As of January 25, 2008, repurchased additional 657 thousand shares for $124 million • Accrued expenses increased $135 million mainly due to customer and merchant incentives and higher personnel costs |
12 2008 Outlook • Evaluating existing 3-5 year, long-term performance objectives – Will address at Investment Community meeting in Spring 2008 • Thoughts for 2008: – Net revenue growth: slower than 2007, but still double-digit – G&A growth: slower than net revenue growth and below 2007 G&A growth rate – A&M growth: continued modest growth • Assume current F/X rates, no global recession and no event which significantly disrupts cross-border travel |
14 Appendix A: GAAP Reconciliation a Litigation settlements b Contribution of cash to the MasterCard Foundation c Contribution of stock to the MasterCard Foundation d Interest income on IPO proceeds held for redemption e Other income related to a settlement agreement to discontinue the company's sponsorship of the 2010 and 2014 World Cup soccer events NM = Not meaningful Figures may not sum due to rounding ($ million) YOY Growth Actual Special Items As Adjusted Actual Special Items As Adjusted As Adjusted Revenues, net $1,073 - $1,073 $839 - $839 27.8% Operating Expenses General and administrative 496 - 496 399 - 399 24.3% Advertising and marketing 369 - 369 353 - 353 4.5% Litigation settlements - - - 2 2 a - - Charitable contributions to the MasterCard Foundation 10 - 10 b 14 - 14 b (28.6%) Depreciation and amortization 26 - 26 25 - 25 4.0% Total operating expenses 901 - 901 793 2 791 13.9% Operating income 172 - 172 46 2 48 258.3% Operating Margin 16.0% - 16.0% 5.5% - 5.7% 10.3 ppts. Other Income (Expense) Investment income, net 311 - 311 41 - 41 658.5% Interest expense (15) - (15) (17) - (17) (11.8%) Other income, net (1) - (1) - - - NM Total other income 295 - 295 24 - 24 NM Income before income taxes 467 - 467 70 2 72 548.6% Income tax expense 163 - 163 29 1 30 443.3% Net Income (loss) $304 - $304 $41 1 $42 623.8% Basic Net Income (Loss) per Share $2.28 - $2.28 $0.30 $0.01 $0.31 635.5% Diluted Net Income (Loss) per Share $2.26 - $2.26 $0.30 $0.01 $0.31 629.0% For the three months ended 12/31/07 For the three months ended 12/31/06 |
15 Appendix A (cont.): GAAP Reconciliation a Litigation settlements b Contribution of cash to the MasterCard Foundation c Contribution of stock to the MasterCard Foundation d Interest income on IPO proceeds held for redemption e Other income related to a settlement agreement to discontinue the company's sponsorship of the 2010 and 2014 World Cup soccer events NM = Not meaningful Figures may not sum due to rounding ($ million) YOY Growth Actual Items As Adjusted Actual Items Adjusted As Adjusted Revenues, net $4,068 - $4,068 $3,326 - $3,326 22.3% Operating Expenses General and administrative 1,758 - 1,758 1,505 - 1,505 16.8% Advertising and marketing 1,080 - 1,080 1,052 - 1,052 2.7% Litigation settlements 3 3 a - 25 25 a - - Charitable contributions to the MasterCard Foundation 20 - 20 b 415 395 c 20 b - Depreciation and amortization 98 - 98 100 - 100 (2.0%) Total operating expenses 2,959 3 2,956 3,097 420 2,677 10.4% Operating income 1,108 3 1,111 229 420 649 71.2% Operating Margin 27.2% - 27.3% 6.9% - 19.5% 7.8 ppt. Other Income (Expense) Investment income, net 530 - 530 125 (7) d 118 349.2% Interest expense (57) - (57) (61) - (61) (6.6%) Other income, net 90 90 e - 1 - 1 NM Total other income (expense) 563 90 473 65 (7) 58 715.5% Income before income taxes 1,671 (87) 1,584 294 413 707 124.0% Income tax expense 586 30 556 244 6 250 122.4% Net Income $1,086 ($57) $1,029 $50 $407 $457 125.2% Basic Net Income per Share $8.05 ($0.42) $7.63 $0.37 $3.00 $3.37 126.4% Diluted Net Income per Share $8.00 ($0.42) $7.58 $0.37 $3.00 $3.37 124.9% For the year ended 12/31/06 For the year ended 12/31/07 |
16 Appendix B: 4 Quarter Operations Fees Detail 25.2 $167 $662 $829 Net operations fees 24.7 (19) (77) (96) Rebates 25.0 186 739 924 Gross operations fees 30.0 36 120 156 Other operations fees 31.8 7 22 29 Consulting and research fees 21.7 5 23 28 Connectivity - - 18 18 Warning bulletin fees 28.3 17 60 77 Acceptance development fees 30.0 54 180 234 Currency conversion and cross-border 20.9 66 $316 $382 Authorization, settlement and switch 2007 vs. 2006 2007 vs. 2006 2006 2007 Percent Increase (Decrease) Dollar Increase (Decrease) For the three months ended December 31, 2007 (In millions, except percentages) Note: Figures may not sum due to rounding th |
17 Appendix C: 4 Quarter G&A Detail 24.1 $96 $399 $496 General and administrative expenses 11.1 4 36 40 Other (3.8) (1) 26 25 Travel and entertainment 13.3 2 15 17 Data processing - - 18 18 Telecommunications 19.2 10 52 63 Professional fees 32.2 81 $252 $333 Personnel 2007 vs. 2006 2007 vs. 2006 2006 2007 Percent Increase (Decrease) Dollar Increase (Decrease) For the three months ended December 31, 2007 (In millions, except percentages) Note: Figures may not sum due to rounding th |