Mastercard (MA) 8-K Fourth-Quarter and Full-Year 2008 Financial Results

MasterCard Incorporated

Fourth-Quarter and Full-Year 2008

Financial Results Conference Call

February 5, 2009

Exhibit 99.2

2

Business Update

•

Economic Overview

•

Business Overview

•

Capital Structure

3

$

1.87

$     243

468

38.2%

756

$   1,225

4Q 2008

adjusted for

special items*

$       2.26

$

304

172

16.0%

901

$     1,073

4Q 2007

adjusted for

special items*

$

1.84

$

239

462

37.7%

762

$

1,225

4Q 2008

Actual

(17.3)

Diluted EPS

(20.1)

Net income

(16.0)

Total operating expenses

172.2

22.2ppts

Operating income

Operating margin

14.2

Net revenue

YOY

adjusted

Growth %

4th 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 months and twelve months ended December 31, 2007 and 2008

4

MasterCard Branded Volume (GDV) 

4th Quarter 2008

Note: Figures may not sum due to rounding

-

5.2

-5.2

256

United States

3.4

-

4.7

605

Worldwide

5.3

-15.1

23

Canada

30.6

9.3

14

South Asia/Middle East/Africa (SAMEA)

14.6

3.8

91

Asia Pacific

11.4

-

6.0

44

Latin America

8.3

-7.1

176

Europe

Local

Currency

U.S.

Dollar

GDV

($  billions)

YOY Growth

Rate %

5

4th Quarter Revenue -

Operations Fees

($

in

millions)

•

Net operations fees increased

16.5%, or $137, to $966

•

Gross operations fees increased

13.2%, or $122, to $1,046.  Key

drivers included:

–

Pricing changes

–

Processed transactions

growth of 6.0%

–

GDV growth of 3.4%

*

–

Cross-border volume

growth of 7.5%*

•

Net operations fees as a % of

gross improved 2.7%

* On a local currency basis

$966

$829

$0

$150

$300

$450

$600

$750

$900

$1,050

4Q07

4Q08

85%

88%

91%

94%

97%

100%

Net Operations Fees

Net Operations Fees as a % of Gross Operations Fees

6

4th Quarter Revenue -

Assessments

($ in millions)

•

Net assessments increased

6.1%, or $15, to $259

•

Gross assessments increased

6.3%, or $36, to $604

•

Net assessments as a % of

gross assessments was

essentially flat

$244

$259

$0

$50

$100

$150

$200

$250

$300

4Q07

4Q08

20%

30%

40%

50%

60%

70%

80%

Net Assessment Fees

Net Assessment Fees as a % of Gross Assessment Fees

7

4th Quarter Operating Expenses

($ in Millions)

*See Appendix A for a GAAP reconciliation of special items for the three months and twelve months ended December 31, 2007 and  2008

Excluding special items

*

:

•

Total operating expenses decreased

16.0%, or $145, to $756

•

G&A decreased 3.4%, or $17, to

$479 primarily due to:

–

cost-reduction initiatives to

reduce travel, personnel and

professional fee costs

–

Foreign currency contributed

~2.0 ppt

to the decrease

•

A&M decreased 32.8%, or $121, to

$248 primarily due to:

–

Cost-reduction initiatives

–

Foreign currency contributed

~1.9 ppt

to the decrease

$496

$479

$369

$248

$26

$30

$0

$100

$200

$300

$400

$500

4Q07

4Q08

General & Administrative

Advertising & Marketing

Depreciation & Amortization

8

Full-Year 2008 Highlights

•

Delivered full-year net income of $1.2 billion and earnings per share

of $9.45, on a diluted basis, of which $0.42 represented gains from

the sale

of

Redecard

securities*

•

Achieved full-year net revenue of $5.0 billion, representing growth of

22.7% primarily due to:

–

Gross dollar volume growth of 10.7%** to $2.5 trillion

–

Increase in processed transactions of 11.8% to 21.0 billion

–

Increase in cross-border volumes of 16.6%**

–

Pricing adjustments of approximately 6%

•

Significantly improved operating margin by 11.7 ppts., to 39.0% from

27.3% in 2007*

*   Excluding special items; see Appendix A for a GAAP reconciliation of special items for the three and twelve months ended   

December 31, 2007 and 2008

** 

On a local currency basis

9

Cash Flow Statement and

Balance Sheet Highlights

•

Generated $413 million in cash flow from operations for the year

ended December 31, 2008

•

Cash, cash equivalents and current available-for-sale securities of

$2.1 billion at December 31, 2008

•

Litigation settlement impact:

–

Decreased Stockholders’

Equity

–

Increased litigation liability, both short and long-term

–

Increased deferred income tax assets

•

Orbiscom

acquisition reflected as of year-end 2008

10

2009 Outlook

•

Thoughts for 2009

–

Net revenue growth will likely be lower than longer-term

objective range

–

Operating expenses will be essentially flat over 2008 levels

•

Assumptions:

–

Constant foreign exchange

–

Effective Tax Rate = 35%

–

Continue to monitor global economic and financial

environments

11

12

Appendix A:

GAAP Reconciliation

a-

Litigation settlements

NM = Not meaningful

Figures may not sum due to rounding

($ million except percentages)

YOY Growth

Actual

Special

Items

As

Adjusted

Actual

Special

Items

As

Adjusted

As Adjusted

Revenues, net

$     1,225

$        -

$      1,225

$1,073

-

$1,073

14.2%

Operating Expenses

General and administrative

479

-

479

496

-

496

(3.4%)

Advertising and marketing

248

-

248

369

-

369

(32.8%)

Litigation settlements

6

6

a

-

-

-

-

NM

Charitable contributions to the MasterCard

-

-

-

10

-

10

(100.0%)

Depreciation and amortization

30

-

30

26

-

26

14.9%

Total operating expenses

762

6

756

901

-

901

(16.0%)

Operating income

462

6

468

172

-

172

172.2%

Operating Margin

37.7%

-

38.2%

16.0%

-

16.0%

22.2 ppt.

Other Income (Expense)

Investment income, net

20

-

20

311

-

311

(93.6%)

Interest expense

(37)

-

(37)

(15)

-

(15)

138.5%

Other expense, net

-

-

-

(1)

-

(1)

NM

Total other income (expense)

(17)

-

(17)

295

-

295

(105.9%)

Income before income taxes

445

6

451

467

-

467

(3.4%)

Income tax expense

206

2

208

163

-

163

27.6%

Net Income

$        239

$         4

$         243

$304

-

$304

(20.1%)

Basic Net Income per Share

$       1.85

$    0.03

$        1.88

$2.28

-

$2.28

(17.5%)

Diluted Net Income per Share

$       1.84

$    0.03

$        1.87

$2.26

-

$2.26

(17.3%)

For the three months ended 12/31/08

For the three months ended 12/31/07

13

Depreciation and amortization

Appendix A (cont.):

GAAP Reconciliation

a-

Litigation settlements

b-

Gain from the termination of a customer business agreement

c-

Other income related to a settlement agreement to discontinue the company's sponsorship of the 2010 and 2014 World Cups

NM = Not meaningful

Figures may not sum due to rounding

($ million except percentages)

YOY Growth

Actual

Special

Items

As

Adjusted

Actual

Special

Items

As

Adjusted

As Adjusted

Revenues, net

$     4,992

$        -

$      4,992

$4,068

-

$4,068

22.7%

Operating Expenses

General and administrative

1,914

-

1,914

1,758

-

1,758

8.8%

Advertising and marketing

1,018

-

1,018

1,080

-

1,080

(5.8%)

Litigation settlements

2,483

2,483

a

-

3

3

a

-

NM

Charitable contributions to the MasterCard

-

-

-

20

-

20

(100.0%)

112

-

112

98

-

98

14.7%

Total operating expenses

5,526

2,483

3,043

2,959

3

2,956

2.9%

Operating income (loss)

(535)

2,483

1,948

1,108

3

1,111

75.3%

Operating Margin

(10.7%)

-

39.0%

27.2%

-

27.3%

11.7 ppt.

Other Income (Expense)

Investment income, net

183

-

183

530

-

530

(65.5%)

Interest expense

(104)

-

(104)

(57)

-

(57)

80.9%

Other income, net

72

75

b

(3)

90

90

c

-

NM

Total other income (expense)

151

75

76

563

90

473

(83.9%)

Income (loss) before income taxes

(383)

2,408

2,025

1,671

(87)

1,584

27.8%

Income tax expense (benefit)

(129)

914

785

586

30

556

41.2%

Net Income (Loss)

$       (254)

$  1,494

$      1,239

$1,086

($57)

$1,029

20.4%

Basic Net Income (Loss) per Share

$      (1.95)

$  11.47

$        9.52

$8.05

($0.42)

$7.63

24.8%

Diluted Net Income (Loss) per Share

$      (1.95)

$  11.40

$        9.45

$8.00

($0.42)

$7.58

24.7%

For the year ended 12/31/08

For the year ended 12/31/07

14

Appendix B:

4th Quarter Operations Fees Detail

16.5

$137

$829

$966

Net operations fees

(16.7)

(16)

(96)

(80)

Rebates

13.2

122

924

1,046

Gross operations fees

19.2

30

156

186

Other operations fees

10.3

3

29

32

Consulting and research fees

10.7

3

28

31

Connectivity

(5.6)

(1)

18

17

Warning bulletin fees

-

-

77

77

Acceptance development fees

16.2

38

234

272

Currency conversion and cross-border

12.6

48

$382

$430

Authorization, settlement and switch

2008 vs.

2007

2008 vs.

2007

2007

2008

Percent

Increase

(Decrease)

Dollar

Increase

(Decrease)

For the three months ended

December 31,

($ million except percentages)

Figures may not sum due to rounding

15

Appendix C:

4th Quarter G&A Detail

(3.4)

($17)

$496

$479

General and administrative expenses

32.5

13

40

53

Other

(48.0)

(12)

25

13

Travel and entertainment

29.4

5

17

22

Data processing

5.6

1

18

19

Telecommunications

(20.6)

(13)

63

50

Professional fees

(3.3)

(11)

$333

$322

Personnel

2008 vs.

2007

2008 vs.

2007

2007

2008

Percent

Increase

(Decrease)

Dollar

Increase

(Decrease)

For the three months ended

December 31,

($

million

except percentages)

Figures may not sum due to rounding