• Third-quarter net income of $1 billion, or $0.87 per diluted share
  • Third-quarter net revenue increase of 13%, to $2.5 billion
  • Third-quarter gross dollar volume up 12% and purchase volume up 11%

PURCHASE, N.Y.-Oct. 30, 2014- MasterCard Incorporated (NYSE:MA) today announced financial results for the third quarter of 2014. The company reported net income of $1 billion, up 15%, and earnings per diluted share of $0.87, up 19%. In each case, growth rates are reflective of both as-reported and adjusted for currency, and are versus the year-ago period. Acquisitions had a $0.02 dilutive impact on earnings per diluted share.

Net revenue for the third quarter of 2014 was $2.5 billion, a 13% increase versus the same period in 2013, both as-reported and adjusted for currency. Net revenue growth was driven by the impact of the following:

  • A 12% increase in gross dollar volume, on a local currency basis, to $1.2 trillion;
  • An increase in cross-border volume of 15%; and
  • An increase in processed transactions of 10%, to 11 billion.

These factors were partially offset by an increase in rebates and incentives. Acquisitions contributed 3 percentage points to total net revenue growth.

Worldwide purchase volume during the quarter was up 11% on a local currency basis versus the third quarter of 2013, to $843 billion. As of September 30, 2014, the company’s customers had issued 2.1 billion MasterCard and Maestro-branded cards.

“We delivered strong results for the quarter, reporting double-digit revenue and net income growth, despite a mixed economic environment,” said Ajay Banga, president and CEO, MasterCard. “We also continue to invest and partner to make payments safer, easier and faster. Within the past two months alone, we opened our new technology hub in New York City, delivered our technology and security protocols as part of the launch of Apple Pay and partnered with the Transport for London to deliver contactless payments system-wide. Through our commitment to innovation, we are making it safer and simpler for people to pay and get paid – today and in the future.”

Total operating expenses increased 12%, both as-reported and adjusted for currency, to $1.1 billion, during the third quarter of 2014 compared to the same period in 2013. The increase was primarily driven by investments in strategic initiatives including acquisitions, which contributed 9 percentage points to the growth.

Operating income for the third quarter of 2014 increased 14% over the year-ago period, or 13% adjusted for currency, and the company delivered an operating margin of 56.7%.

MasterCard reported other expense of $2 million in the third quarter of 2014 versus other income of $6 million in the third quarter of 2013. The change was mainly driven by higher interest expense related to the company’s inaugural debt issuance in late March.

MasterCard’s effective tax rate was 28.5% in the third quarter of 2014 versus a rate of 29.9% in the comparable period in 2013. The decrease was primarily due to the impact of higher discrete tax benefits recognized in this year’s quarter.

During the third quarter of 2014, MasterCard repurchased approximately 5.3 million shares of Class A common stock at a cost of $404 million. Quarter-to-date through October 23, the company repurchased an additional 1.7 million shares at a cost of $121 million, with $310 million remaining under the current repurchase program authorization.

Year-to-Date 2014 Results

For the nine months ended September 30, 2014, MasterCard reported net income of $2.8 billion, up 13%, both as-reported and adjusted for currency, versus the year-ago period. Earnings per diluted share was $2.40, up 17%. Acquisitions had a $0.02 dilutive impact on earnings per diluted share.

Net revenue for the nine months ended September 30, 2014 was $7.1 billion, an increase of 13% versus the same period in 2013, both as-reported and adjusted for currency. Gross dollar volume growth of 13%, transaction processing growth of 12% and cross-border volume growth of 16% 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 1 percentage point to total net revenue growth.

Total operating expenses increased 13%, or 12% after adjusting for currency, to $3 billion, for the nine months ended September 30, 2014, compared to the same period in 2013. The increase was primarily due to higher personnel costs related to strategic initiatives. Acquisitions contributed 5 percentage points to total operating expense growth.

Operating income increased 14% for the nine months of 2014 versus the same period in 2013, resulting in an operating margin of 57.9%.

MasterCard’s effective tax rate was 30.9% in the nine months ended September 30, 2014 versus a rate of 30.5% in the same period in 2013. The increase was primarily due to a less favorable geographic mix of taxable earnings, partially offset by the impact of higher discrete benefits.

Third-Quarter Financial Results Conference Call Details

At 9:00 a.m. ET today, the company will host a conference call to discuss its third-quarter financial results.

The dial-in information for this call is 800-708-4540 (within the U.S.) and 847-619-6397 (outside the U.S.), and the passcode is 38167441. A replay of the call will be available for one week and can be accessed by dialing 888-843-7419 (within the U.S.) and 630-652-3042 (outside the U.S.), and using passcode 38167441.

This call can also be accessed through the Investor Relations section of the company’s website at www.mastercard.com.

Non-GAAP Financial Information

The presentation of growth rates adjusted for currency represent a non-GAAP measure and are calculated by remeasuring the prior period’s results using the current period’s exchange rates.

About MasterCard Incorporated

MasterCard (NYSE:MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard’s products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MasterCardNews, join the discussion on the Cashless Pioneers Blog and subscribe for the latest news on the Engagement Bureau.

Forward-Looking Statements

Statements in this press release which are not historical facts, including statements about MasterCard’s plans, strategies, beliefs and expectations, are forward-looking and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date they are made. Accordingly, except for the company’s ongoing obligations under the U.S. federal securities laws, the company does not intend to update or otherwise revise the forward-looking information to reflect actual results of operations, changes in financial condition, changes in estimates, expectations or assumptions, changes in general economic or industry conditions or other circumstances arising and/or existing since the preparation of this press release or to reflect the occurrence of any unanticipated events. Such forward-looking statements include, without limitation, statements related to the Company’s ability to simplify payments through innovation.

Actual results may differ materially from such forward-looking statements for a number of reasons, including those set forth in the company’s filings with the Securities and Exchange Commission (SEC), including the company’s Annual Report on Form 10-K for the year ended December 31, 2013, the company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that have been filed with the SEC during 2014, as well as reasons including difficulties, delays or the inability of the company to achieve its strategic initiatives set forth above. Factors other than those listed above could also cause the company’s results to differ materially from expected results.

MASTERCARD INCORPORATED

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2014 2013 2014 2013
(in millions, except per share data)
Net Revenue $ 2,503 $ 2,218 $ 7,057 $ 6,220
Operating Expenses
General and administrative 797 701 2,207 1,930
Advertising and marketing 203 205 525 520
Depreciation and amortization 83 64 237 187
Total operating expenses 1,083 970 2,969 2,637
Operating income 1,420 1,248 4,088 3,583
Other Income (Expense)
Investment income 8 11 21 30
Interest expense (11 ) 3 (32 ) (7 )
Other income (expense), net 1 (8 ) (5 ) (17 )
Total other income (expense) (2 ) 6 (16 ) 6
Income before income taxes 1,418 1,254 4,072 3,589
Income tax expense 403 375 1,256 1,096
Net Income $ 1,015 $ 879 $ 2,816 $ 2,493
Basic Earnings per Share $ 0.88 $ 0.73 $ 2.41 $ 2.05
Basic Weighted-Average Shares Outstanding 1,157 1,205 1,169 1,215
Diluted Earnings per Share $ 0.87 $ 0.73 $ 2.40 $ 2.05
Diluted Weighted-Average Shares Outstanding 1,160 1,209 1,172 1,219

MASTERCARD INCORPORATED

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

September 30,

2014

December 31,

2013

(in millions, except share data)
ASSETS
Cash and cash equivalents $ 4,462 $ 3,599
Restricted cash for litigation settlement 540 723
Investment securities available-for-sale, at fair value 1,857 2,696
Accounts receivable 1,071 966
Settlement due from customers 1,188 1,351
Restricted security deposits held for customers 953 911
Prepaid expenses and other current assets 602 471
Deferred income taxes 283 233
Total Current Assets 10,956 10,950
Property, plant and equipment, net of accumulated depreciation of $433 and $394, respectively 553 526
Deferred income taxes 102 70
Goodwill 1,456 1,122
Other intangible assets, net of accumulated amortization of $651 and $534, respectively 705 672
Other assets 887 902
Total Assets $ 14,659 $ 14,242
LIABILITIES AND EQUITY
Accounts payable $ 319 $ 338
Settlement due to customers 1,226 1,433
Restricted security deposits held for customers 953 911
Accrued litigation 789 886
Accrued expenses 2,098 2,101
Other current liabilities 464 363
Total Current Liabilities 5,849 6,032
Long-term debt 1,494
Deferred income taxes 119 117
Other liabilities 649 598
Total Liabilities 8,111 6,747
Commitments and Contingencies
Stockholders’ Equity

Class A common stock, $0.0001 par value; authorized 3,000,000,000 shares, 1,349,345,980 and 1,341,541,110 shares issued and
1,114,440,917 and 1,148,838,370 outstanding, respectively

Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares, 40,060,155 and
45,350,070 issued and outstanding, respectively

Additional paid-in-capital 3,843 3,762
Class A treasury stock, at cost, 234,905,063 and 192,702,740 shares, respectively (9,803) (6,577)
Retained earnings 12,553 10,121
Accumulated other comprehensive income (loss) (92) 178
Total Stockholders’ Equity 6,501 7,484
Non-controlling interests 47 11
Total Equity 6,548 7,495
Total Liabilities and Equity $ 14,659 $ 14,242

MASTERCARD INCORPORATED

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

Nine Months Ended September 30,

2014 2013
(in millions)
Operating Activities
Net income $ 2,816 $ 2,493
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 237 187
Share-based payments (43 ) 27
Deferred income taxes (80 ) (34 )
Other 24 48
Changes in operating assets and liabilities:
Accounts receivable (96 ) (67 )
Income taxes receivable (12 ) 158
Settlement due from customers 86 (192 )
Prepaid expenses (156 ) (44 )
Accrued litigation and legal settlements (97 )
Accounts payable (39 ) (76 )
Settlement due to customers (124 ) 126
Accrued expenses 60 209
Net change in other assets and liabilities 106 101
Net cash provided by operating activities 2,682 2,936
Investing Activities
Purchases of investment securities available-for-sale (1,977 ) (1,936 )
Acquisition of businesses, net of cash acquired (336 )
Purchases of property, plant and equipment (97 ) (65 )
Capitalized software (75 ) (88 )
Proceeds from sales of investment securities available-for-sale 1,444 1,349
Proceeds from maturities of investment securities available-for-sale 1,322 959
Decrease (increase) in restricted cash for litigation settlement 184 (1 )
Proceeds from maturities of investment securities held-to-maturity 36
Other investing activities (17 ) (19 )
Net cash provided by investing activities 448 235
Financing Activities
Purchases of treasury stock (3,231 ) (1,692 )
Proceeds from debt 1,487
Dividends paid (388 ) (182 )
Tax benefit for share-based payments 53 23
Cash proceeds from exercise of stock options 23 22
Other financing activities (39 ) (8 )
Net cash used in financing activities (2,095 ) (1,837 )
Effect of exchange rate changes on cash and cash equivalents (172 ) 27
Net increase in cash and cash equivalents 863 1,361
Cash and cash equivalents – beginning of period 3,599 2,052
Cash and cash equivalents – end of period $ 4,462 $ 3,413
Non-Cash Investing and Financing Activities
Fair value of assets acquired, net of cash acquired $ 574 $
Fair value of liabilities assumed related to acquisitions $ 134 $

MASTERCARD INCORPORATED OPERATING PERFORMANCE

For the 3 Months ended September 30, 2014

All MasterCard Credit,

Charge and Debit Programs

GDV

(Bil.)

Growth

(USD)

Growth

(Local)

Purchase

Volume

(Bil.)

Growth

(Local)

Purchase

Trans.

(Mil.)

Cash

Volume

(Bil.)

Growth

(Local)

Cash

Trans.

(Mil.)

Accounts

(Mil.)

Cards

(Mil.)

APMEA $340 16.2% 16.4% $228 15.7% 2,576 $112 17.9% 980 435 466
Canada 34 0.4% 5.2% 32 6.5% 393 2 -11.2% 6 41 50
Europe 353 9.8% 12.1% 238 9.4% 3,762 115 18.4% 680 343 360
Latin America 91 9.4% 14.5% 57 20.0% 1,293 34 6.5% 206 133 152
Worldwide less United States 818 11.9% 13.8% 554 12.8% 8,025 264 16.1% 1,873 951 1,028
United States 339 7.5% 7.5% 288 8.2% 5,157 50 3.7% 334 314 349
Worldwide 1,157 10.6% 11.9% 843 11.1% 13,182 314 14.0% 2,207 1,265 1,377
MasterCard Credit and Charge Programs
Worldwide less United States 477 8.7% 10.1% 427 11.4% 5,175 50 0.0% 205 504 569
United States 161 6.6% 6.6% 155 7.4% 1,723 6 -10.4% 8 147 177
Worldwide 638 8.2% 9.2% 582 10.3% 6,898 56 -1.3% 213 652 746
MasterCard Debit Programs
Worldwide less United States 341 16.7% 19.5% 127 17.7% 2,850 214 20.7% 1,668 447 459
United States 178 8.3% 8.3% 133 9.1% 3,435 44 6.1% 326 166 172
Worldwide 519 13.7% 15.4% 260 13.1% 6,285 258 17.9% 1,994 613 631
For the 9 Months ended September 30, 2014

All MasterCard Credit,

Charge and Debit Programs

GDV

(Bil.)

Growth

(USD)

Growth

(Local)

Purchase

Volume

(Bil.)

Growth

(Local)

Purchase

Trans.

(Mil.)

Cash

Volume

(Bil.)

Growth

(Local)

Cash

Trans.

(Mil.)

Accounts

(Mil.)

Cards

(Mil.)

APMEA $963 14.5% 17.8% $644 17.2% 7,195 $319 18.9% 2,778 435 466
Canada 96 -0.9% 5.7% 89 7.3% 1,110 7 -11.8% 17 41 50
Europe 1,009 12.3% 13.2% 683 10.1% 10,585 326 20.3% 1,944 343 360
Latin America 262 5.7% 14.4% 160 20.8% 3,728 102 5.7% 609 133 152
Worldwide less United States 2,330 11.8% 14.8% 1,577 13.8% 22,618 753 17.2% 5,348 951 1,028
United States 996 8.3% 8.3% 845 9.0% 15,014 150 4.7% 971 314 349
Worldwide 3,326 10.8% 12.8% 2,422 12.1% 37,632 904 14.9% 6,320 1,265 1,377
MasterCard Credit and Charge Programs
Worldwide less United States 1,366 8.5% 11.2% 1,219 12.4% 14,782 147 1.9% 614 504 569
United States 467 8.1% 8.1% 448 8.6% 4,946 19 -1.4% 21 147 177
Worldwide 1,833 8.4% 10.4% 1,667 11.3% 19,728 167 1.5% 635 652 746
MasterCard Debit Programs
Worldwide less United States 964 16.8% 20.5% 358 18.7% 7,835 606 21.6% 4,734 447 459
United States 529 8.5% 8.5% 398 9.5% 10,069 131 5.6% 951 166 172
Worldwide 1,493 13.7% 16.0% 756 13.7% 17,904 737 18.4% 5,685 613 631
For the 3 Months ended September 30, 2013

All MasterCard Credit,

Charge and Debit Programs

GDV

(Bil.)

Growth

(USD)

Growth

(Local)

Purchase

Volume

(Bil.)

Growth

(Local)

Purchase

Trans.

(Mil.)

Cash

Volume

(Bil.)

Growth

(Local)

Cash

Trans.

(Mil.)

Accounts

(Mil.)

Cards

(Mil.)

APMEA $292 16.4% 22.3% $197 21.1% 2,138 $96 25.0% 807 378 408
Canada 34 4.3% 8.9% 31 9.6% 370 3 1.1% 6 38 46
Europe 322 18.8% 16.6% 218 13.7% 3,243 103 23.4% 596 293 309
Latin America 83 11.0% 16.7% 50 23.9% 1,151 33 7.3% 196 117 137
Worldwide less United States 731 16.2% 18.5% 496 17.2% 6,901 235 21.2% 1,605 827 900
United States 315 8.6% 8.6% 267 9.1% 4,833 49 6.2% 322 288 322
Worldwide 1,046 13.8% 15.3% 763 14.2% 11,735 284 18.3% 1,927 1,115 1,222
MasterCard Credit and Charge Programs
Worldwide less United States 439 12.3% 15.3% 387 15.9% 4,680 52 11.4% 214 482 545
United States 151 6.9% 6.9% 144 7.4% 1,645 7 -1.9% 7 142 172
Worldwide 590 10.9% 13.0% 531 13.4% 6,325 59 9.6% 221 624 718
MasterCard Debit Programs
Worldwide less United States 292 22.5% 23.5% 109 22.3% 2,221 183 24.2% 1,391 345 354
United States 164 10.3% 10.3% 122 11.2% 3,188 42 7.7% 315 146 150
Worldwide 456 17.8% 18.4% 231 16.2% 5,409 225 20.8% 1,706 491 504
For the 9 Months ended September 30, 2013

All MasterCard Credit,

Charge and Debit Programs

GDV

(Bil.)

Growth

(USD)

Growth

(Local)

Purchase

Volume

(Bil.)

Growth

(Local)

Purchase

Trans.

(Mil.)

Cash

Volume

(Bil.)

Growth

(Local)

Cash

Trans.

(Mil.)

Accounts

(Mil.)

Cards

(Mil.)

APMEA $841 18.6% 22.1% $559 19.9% 5,974 $282 26.6% 2,265 378 408
Canada 97 4.5% 6.7% 89 7.2% 1,026 8 1.5% 18 38 46
Europe 898 15.6% 14.6% 616 11.9% 9,015 282 21.2% 1,653 293 309
Latin America 248 12.9% 16.1% 147 20.6% 3,253 101 10.2% 579 117 137
Worldwide less United States 2,084 15.9% 17.3% 1,411 15.5% 19,268 673 21.3% 4,515 827 900
United States 919 6.3% 6.3% 775 6.8% 13,921 144 3.5% 939 288 322
Worldwide 3,003 12.8% 13.7% 2,187 12.2% 33,189 816 17.7% 5,455 1,115 1,222
MasterCard Credit and Charge Programs
Worldwide less United States 1,259 11.9% 14.0% 1,109 14.3% 13,203 150 11.6% 617 482 545
United States 432 4.0% 4.0% 412 4.6% 4,675 20 -8.1% 19 142 172
Worldwide 1,691 9.8% 11.3% 1,521 11.5% 17,878 170 8.9% 636 624 718
MasterCard Debit Programs
Worldwide less United States 825 22.6% 22.7% 303 19.8% 6,065 522 24.4% 3,899 345 354
United States 487 8.4% 8.4% 363 9.4% 9,246 124 5.6% 920 146 150
Worldwide 1,312 16.9% 16.9% 666 13.9% 15,311 646 20.3% 4,819 491 504
APMEA = Asia Pacific / Middle East / Africa
Note that the figures in the preceding tables may not sum due to rounding; growth represents change from the comparable year-ago period

Footnote

The tables set forth the gross dollar volume (“GDV”), purchase volume, cash volume and the number of purchase transactions, cash transactions, accounts and cards on a regional and global basis for MasterCard®-branded and MasterCard Electronic™-branded cards. Growth rates over prior periods are provided for volume-based data.

Debit transactions on Maestro® and Cirrus®-branded cards and transactions involving brands other than MasterCard are not included in the preceding tables.

For purposes of the table: GDV represents purchase volume plus cash volume and includes the impact of balance transfers and convenience checks; “purchase volume” means the aggregate dollar amount of purchases made with MasterCard-branded cards for the relevant period; and “cash volume” means the aggregate dollar amount of cash disbursements obtained with MasterCard-branded cards for the relevant period. The number of cards includes virtual cards, which are MasterCard-branded payment accounts that do not generally have physical cards associated with them.

The MasterCard payment product is comprised of credit, charge and debit programs, and data relating to each type of program is included in the tables. Debit programs include MasterCard-branded debit programs where the primary means of cardholder validation at the point of sale is for cardholders either to sign a sales receipt or enter a PIN. The tables include information with respect to transactions involving MasterCard-branded cards that are not processed by MasterCard and transactions for which MasterCard does not earn significant revenues.

Information denominated in U.S. dollars is calculated by applying an established U.S. dollar/local currency exchange rate for each local currency in which MasterCard volumes are reported. These exchange rates are calculated on a quarterly basis using the average exchange rate for each quarter. MasterCard reports period-over-period rates of change in purchase volume and cash volume on the basis of local currency information, in order to eliminate the impact of changes in the value of foreign currencies against the U.S. dollar in calculating such rates of change.

The data set forth in the GDV, purchase volume, purchase transactions, cash volume and cash transactions columns is provided by MasterCard customers and is subject to verification by MasterCard and partial cross-checking against information provided by MasterCard’s transaction processing systems. The data set forth in the accounts and cards columns is provided by MasterCard customers and is subject to certain limited verification by MasterCard. A portion of the data set forth in the accounts and cards columns reflects the impact of routine portfolio changes among customers and other practices that may lead to over counting of the underlying data in certain circumstances. All data is subject to revision and amendment by MasterCard’s customers subsequent to the date of its release.

In 2013 Q4, a large Maestro customer revised their number of Maestro cards to exclude inactive cards. Data for the comparable periods in 2013 and 2012 have been revised to be consistent with this approach. In 2014 Q2, a large customer revised their number of MasterCard credit cards to exclude inactive cards. Data for the comparable periods in 2013 have been revised to be consistent with this approach. MasterCard revenue is not impacted from these historical changes.

Performance information for prior periods can be found in the “Investor Relations” section of the MasterCard website at www.mastercard.com.

MasterCard Incorporated

Investor Relations:
Barbara Gasper / Catherine Murchie, 914-249-4565
investor_relations@mastercard.com
or
Media Relations:
Seth Eisen, 914-249-3153
Seth_Eisen@mastercard.com