MasterCard posts Q3 net income rise

Source: MasterCard

MasterCard Incorporated (MA) today announced financial results for the third quarter of 2015. Excluding a special item, the company reported net income of $1.0 billion, up 1%, or 9% after adjusting for currency, and earnings per diluted share of $0.91, up 5% or 11% adjusted for currency, versus the year-ago period.

Including the special item, a $50 million after-tax charge related to the termination of the U.S. employee pension plan, the company reported net income of $977 million, a decrease of 4%, or an increase of 3% after adjusting for currency, and earnings per diluted share of $0.86, a decrease of 1%, or an increase of 5% when adjusted for currency, versus the year-ago period. The net income and earnings per diluted share figures, excluding the special item, are reconciled to their comparable GAAP measures in the accompanying tables. Acquisitions had a $0.03 dilutive impact on earnings per diluted share in the quarter.

Net revenue for the third quarter of 2015 was $2.5 billion, a 2% increase versus the same period in 2014. Adjusted for currency, net revenue increased 8%. Net revenue growth was driven by the impact of the following:

  • An increase in cross-border volumes of 16%;
  • A 13% increase in gross dollar volume, on a local currency basis, to $1.2 trillion; and
  • An increase in processed transactions of 12%, to 12.3 billion.

These factors were partially offset by an increase in rebates and incentives, primarily due to new and renewed agreements and increased volumes. Acquisitions contributed 1 percentage point to total net revenue growth.

Worldwide purchase volume during the quarter was up 12% on a local currency basis versus the third quarter of 2014, to $852 billion. As of September 30, 2015, the company’s customers had issued 2.2 billion MasterCard and Maestro-branded cards.

“We are pleased with the results we delivered this quarter, in spite of the ongoing uncertainty in the global economy. We continue to see double-digit growth in both volume and transactions in most of our regions around the world,” said Ajay Banga, president and CEO, MasterCard. “As the world becomes more digitally driven, our innovations and investments in things such as MasterPass, EMV and biometrics are helping to redefine the way people shop and pay with convenience and security.”

Excluding the special item, total operating expenses increased 1%, or 5% when adjusted for currency, to $1.1 billion during the third quarter of 2015 compared to the same period in 2014. Acquisitions contributed 4 percentage points of the FX-adjusted growth. Including the special item, total operating expenses increased 9%, or 13% when adjusted for currency, from the year-ago period.

Operating income for the third quarter of 2015 increased 2%, or 10% adjusted for currency, versus the year-ago period, excluding the special item. The company delivered an operating margin of 57.2%.

MasterCard reported other expense of $17 million in the third quarter of 2015, versus $2 million in the third quarter of 2014. The change was mainly driven by our share of equity losses from equity method investments and lower interest income.

MasterCard’s effective tax rate was 28.2% in the third quarter of 2015, versus a rate of 28.5% in the comparable period in 2014, excluding the special item. The decrease was primarily due to a larger repatriation benefit and a more favorable mix of taxable earnings, offset by a reduction in discrete benefits.

During the third quarter of 2015, MasterCard repurchased approximately 10 million shares of Class A common stock at a cost of approximately $930 million. Quarter-to-date through October 22nd, the company repurchased an additional 1.5 million shares at a cost of approximately $144 million, with $1.2 billion remaining under the current repurchase program authorization.

Year-to-Date 2015 Results

For the nine months ended September 30, 2015, excluding this quarter’s special item, as well as the $44 million after-tax charge relating to a U.K. merchant litigation settlement recorded in the second quarter of 2015, MasterCard reported net income of $3.0 billion, an increase of 7%, or 15% after adjusting for currency, and earnings per diluted share of $2.64, up 10%, or 18% adjusting for currency versus the year-ago period. Including the special items, net income was $2.9 billion and earnings per diluted share was $2.56. Acquisitions had a $0.08 dilutive impact on earnings per diluted share in the year-to-date period.

Net revenue for the nine months ended September 30, 2015 was $7.2 billion, an increase of 2%, or 8% after adjusting for currency, versus the same period in 2014. Gross dollar volume growth of 13%, cross-border volume growth of 17% and transaction processing growth of 12% contributed to the net revenue growth in the year-to-date period. These factors were partially offset by an increase in rebates and incentives. Acquisitions contributed 2 percentage points to total net revenue growth.

Excluding the special items, total operating expenses increased 3%, or 7% after adjusting for currency, to $3.0 billion, for the nine months ended September 30, 2015, compared to the same period in 2014. The increase was due to the impact of acquisitions. Including the special items, total operating expenses increased 8%, or 12% after adjusting for currency.

Excluding the special items, operating income was $4.1 billion, an increase of 1% for the nine months of 2015 versus the same period in 2014 or an increase of 8% after adjusting for currency. The company delivered an operating margin of 57.5%.

MasterCard’s effective tax rate was 26.0% for the nine months ended September 30, 2015 versus a rate of 30.9% in the same period in 2014, excluding the special items. The decrease was primarily due to a larger repatriation benefit, the recognition of a discrete U.S. foreign tax credit benefit and a more favorable mix of taxable earnings. 

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