MasterCard Incorporated (NYSE:MA) today announced financial results for the first quarter 2011. The company reported net income of $562 million, up 23.6%, and earnings per diluted share of $4.29, up 24.0%, in each case versus the year-ago period.
Net revenue for the first quarter of 2011 was $1.5 billion, a 14.8% increase versus the same period in 2010. Foreign currency fluctuations had essentially no impact on net revenue growth which was driven by the impact of the following:
- A 12.8% increase in gross dollar volume on a local currency basis, to $728 billion;
- An increase in cross-border volumes of 18.5%; 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 12.9% on a local currency basis versus the first quarter of 2010, to $545 billion. The number of processed transactions increased 11.1% compared to the same period in 2010, to 6.0 billion. As of March 31, 2011, the company's customers had issued 1.7 billion MasterCard and Maestro-branded cards.
"We had a strong start to 2011 despite the hardships experienced by many consumers and businesses due to natural disasters and political turmoil in several markets. Our solid volume and processed transaction growth helped to drive a double-digit revenue increase. This growth is reflective of the strong fundamentals and globality of our business," said Ajay Banga, MasterCard president and chief executive officer.
"We continue to launch new products, enter new geographies and open new acceptance channels. We launched Travelex Cash Passport in Brazil and South Africa and recently completed our acquisition of the Card Program Management assets of Travelex, allowing us to further build our global prepaid presence. During the quarter, we also signed a long-term debit renewal with Poste Italiane, one of our largest debit issuers in Europe."
Total operating expenses increased 9.4%, to $665 million, during the first quarter of 2011 compared to the same period in 2010. Foreign currency fluctuations had a minimal impact on overall operating expenses. The increase in total operating expenses was driven by:
A 7.9% increase in general and administrative expenses, primarily due to increased investments in support of strategic growth initiatives and the inclusion of DataCash's expenses.
A 12.1% increase in advertising and marketing, to $129 million, primarily due to customer-specific initiatives and sponsorships.
In the first quarter of 2011, operating income increased 19.4% over the year-ago period and the company delivered an operating margin of 55.7%.
MasterCard reported no other income or expense in the first quarter of 2011 versus other expense of $5 million in the first quarter of 2010. The change was driven by a decrease in interest expense due to lower interest accretion related to a litigation settlement.
MasterCard's effective tax rate was 32.8% in the first quarter of 2011, versus a rate of 34.6% in the comparable period in 2010. The decrease was primarily due to a more favorable geographic mix of earnings.
Through quarter end, the company had repurchased approximately 2.6 million shares of class A common stock at a cost of $654 million under the $1 billion share repurchase program authorized on September 14, 2010. On April 12, 2011, MasterCard's board of directors amended its share repurchase program authorizing the company to repurchase an incremental $1 billion of class A common stock, bringing the authorization to an aggregate of $2 billion. As of April 28, 2011, the company had completed the repurchase of approximately 3.9 million shares of class A common stock at a cost of $1 billion.