MasterCard Incorporated (NYSE:MA) today announced financial results for the fourth quarter 2010.
The company reported net income of $415 million, up 41.2%, and earnings per diluted share of $3.16, up 41.1%, in each case versus the year-ago period.
Net revenue for the fourth quarter of 2010 was $1.4 billion, a 10.7% increase versus the same period in 2009. On a constant currency basis, net revenue increased 13.0% compared to the same period in 2009. Net revenue growth was driven by the impact of the following:
* An increase in cross-border volumes of 18.7%;
* An 11.0% increase in gross dollar volume on a local currency basis, to $752 billion; and
* Pricing changes of approximately 5 percentage points.
These factors were partially offset by an increase in rebates and incentives primarily due to new and renewed agreements and increased volumes.
Worldwide purchase volume during the quarter was up 10.8% on a local currency basis versus the fourth quarter of 2009, to $567 billion. The number of processed transactions increased 6.3% compared to the same period in 2009, to 6.2 billion. As of December 31, 2010, the company's customers had issued 1.6 billion MasterCard and Maestro-branded cards.
"2010 proved to be a good year for MasterCard. Our business momentum was fueled by products and solutions that create efficiencies for cardholders, businesses and governments while driving future growth," said Ajay Banga, MasterCard president and chief executive officer. "Importantly, our strategic investments-including the acquisition of DataCash, our pending acquisition of Travelex's program management business and the Telefónica joint venture-will continue to enhance our e-Commerce, prepaid, and mobile capabilities, positioning us at the forefront of global payments innovation."
Banga continued, "We are pleased to have ended the year with a strong fourth quarter. Our net revenue was up almost 11%, with underlying growth showing quarter-over-quarter improvement in all regions, and our operating income grew nearly 22%."
Total operating expenses increased 4.6%, to $869 million, during the fourth quarter of 2010 compared to the same period in 2009. Excluding currency fluctuations, operating expenses were up 6.1%. The increase in total operating expenses was driven by:
* A 6.8% increase in advertising and marketing to $305 million, primarily due to customer-specific initiatives and sponsorships. Advertising and marketing spend grew 8.2% on a constant currency basis.
* A 2.3% increase in general and administrative expenses, primarily due to increased investments in support of strategic growth initiatives and the inclusion of DataCash's expenses, partially offset by lower severance costs. General and administrative expenses grew 3.9% on a constant currency basis.
In the fourth quarter of 2010, operating income increased 21.6% over the year-ago period and the company delivered an operating margin of 39.6%.
MasterCard reported other income of $13 million in the fourth quarter of 2010 versus other expense of $10 million in the fourth quarter of 2009. The change was driven by a decrease in interest expense due to lower interest accretion related to a litigation settlement, lower interest on tax liabilities and an increase in investment income.
MasterCard's effective tax rate was 28.7% in the fourth quarter of 2010, versus a rate of 35.8% in the comparable period in 2009. The decrease was primarily due to a benefit recorded in connection with the repatriation of foreign earnings.
Full-Year 2010 Results
For the year ended December 31, 2010, MasterCard reported net income of $1.8 billion, or $14.05 per diluted share.
Net revenue for the full-year 2010 was $5.5 billion, an increase of 8.6% versus 2009. On a constant currency basis, net revenue increased 9.5%. Cross-border volume growth of 15.2% and gross dollar volume growth of 9.1%, contributed to the net revenue growth in the full-year period. In addition, a pricing contribution of approximately 5 percentage points was offset by an increase in rebates and incentives due to new and renewed customer agreements and increased volumes.
Total operating expenses decreased 1.8%, to $2.8 billion, for 2010 compared to 2009, primarily due to lower personnel costs, partially offset by increased expense related to strategic initiatives, marketing and travel and entertainment. Excluding currency fluctuations, total operating expenses decreased 1.1%.
Operating income increased 21.8% for 2010 versus 2009. The company's operating margin was 49.7% for the full-year period.
Total other income was $5 million for the full-year 2010 versus total other expense of $42 million in 2009. This was driven by a decrease in interest expense primarily due to lower interest accretion related to previous litigation settlements.
MasterCard's effective tax rate was 33.0% for the full-year 2010, versus a rate of 34.1% for the full-year 2009. The decrease was primarily due to benefits recorded in connection with the repatriation of foreign earnings.