- Net Revenue: Up 13% year-over-year on a currency-neutral basis.
- Adjusted Net Income: Increased 24% year-over-year on a currency-neutral basis.
- Cross-Border Volume Growth: Up 17% year-over-year on a local currency basis.
- Value-Added Services and Solutions Net Revenue: Grew 19% year-over-year on a currency-neutral basis.
- Operating Expenses: Increased 10% year-over-year.
- Operating Income: Up 15% year-over-year.
- EPS: $3.59, including a $0.07 contribution from share repurchases.
- Share Repurchases: $2.6 billion worth of stock repurchased during the quarter.
- Worldwide Gross Dollar Volume (GDV): Increased 9% year-over-year.
- US GDV: Increased 6% year-over-year.
- Cross-Border Volume: Increased 17% globally for the quarter.
- Switch Transactions: Grew 11% year-over-year.
- Card Growth: 7%, with 3.4 billion MasterCard and Maestro branded cards issued globally.
- Domestic Assessments: Up 7% year-over-year.
- Cross-Border Assessments: Increased 21% year-over-year.
- Transaction Processing Assessments: Up 13% year-over-year.
- Other Network Assessments: $244 million for the quarter.
- Q3 2024 Net Revenue Growth Forecast: Expected to be at the high end of a low double-digit range on a currency-neutral basis excluding acquisitions.
- Q3 2024 Operating Expense Growth Forecast: Expected to be at the low double-digit range year-over-year on a currency-neutral basis excluding acquisitions and special items.
- Full Year 2024 Net Revenue Growth Forecast: Expected to grow at the high end of a low double-digit range on a currency-neutral basis excluding acquisitions.
- Full Year 2024 Operating Expense Growth Forecast: Expected to grow at the low end of a low double-digit range on a currency-neutral basis excluding acquisitions and special items.
- Non-GAAP Tax Rate: Expected to be between 17% and 18% for Q3 and 17% to 17.5% for the full year.
Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mastercard Inc (MA, Financial) reported a 13% increase in net revenues and a 24% rise in adjusted net income year-over-year on a non-GAAP currency-neutral basis.
- Strong cross-border volume growth of 17% year-over-year, driven by healthy consumer spending.
- Value-added services and solutions net revenue grew 19% year-over-year on a currency-neutral basis.
- Mastercard Inc (MA) continues to expand its footprint in emerging markets, particularly in Africa, with significant investments and new partnerships.
- The company is leveraging AI to enhance its products and services, particularly in data analytics, fraud, and cybersecurity.
Negative Points
- The macroeconomic environment remains mixed, with inflation and interest rates still elevated, impacting consumer spending.
- Mastercard Inc (MA) expects to incur a one-time restructuring charge in the third quarter due to organizational realignment.
- Rebates and incentives came in lower than expected for Q2, primarily due to the timing of planned deal activity.
- The company faces ongoing competitive pressures in the payments market, requiring continuous investment in new solutions and services.
- The recent rejection of a merchant litigation settlement by the court introduces uncertainty and potential legal challenges.
Q & A Highlights
Q: Can you talk about US merchant litigation, the settlement rejection, and the path forward from here? How should we think about the range of outcomes?
A: Michael Miebach, CEO: We're disappointed with the court's ruling to reject the settlement. This has been negotiated over many years across many parties. We are ready to take all efforts to ensure a solution is found, even if it goes to trial. It's difficult to speculate on outcomes at this point, but we aim to provide more security and predictability to merchants and banks.
Q: I wanted to ask on rebates and incentives growth. I think that came in a little bit better than you guys had been expecting for 2Q. Can you unpack some of the upside there relative to expectations?
A: Sachin Mehra, CFO: Our rebates and incentives came in slightly lower than our expectations for the second quarter due to the timing of planned deal activity. We expect our rebates and incentives as a percentage of our payment network assessments to be higher in Q3 compared to Q2, driven by a rich deal pipeline.
Q: Can we just spend a second on the realignment of the organization? How should we think about that and driving new constituencies and expansion of data analytics?
A: Michael Miebach, CEO: The idea is to accelerate growth, not reposition our strategy. We are focusing on markets with high cash penetration and strengthening our frontline. On the services side, we continue to be guided by strong secular trends, particularly in data analytics and cybersecurity.
Q: In Europe, which continues to be your largest geo by GDV, what are your thoughts on cash digitization, consumer trends, and the outlook for cross-border travel?
A: Michael Miebach, CEO: Europe has been a strong growth story for us. We see significant cash in higher double digits in economies like Germany and Italy, which we will continue to target. We are also well-positioned in fintech partnerships. On cross-border travel, a strong dollar helps with inbound travel to Europe, and we feel good about the cross-border opportunity globally.
Q: Can you help us understand the stability in US volume trends into July and the factors driving portfolio wins?
A: Sachin Mehra, CFO: We see general stability in drivers across the board. Weather had a muted impact. Michael Miebach, CEO: The market remains incredibly competitive. We continue to broaden our payment solutions and service offerings, focusing on helping our customers run their businesses better. Financial competitiveness always matters, but we aim to have a top-line outcome conversation with our customers.
Q: On the cross-border line, why does it continue to show a positive divergence between constant currency revenues and volumes?
A: Sachin Mehra, CFO: The positive divergence is driven by favorable mix and a bit of pricing. The mix piece is significant, with other cross-border volumes growing faster than intra-Europe volumes, which are lower yielding.
Q: Could you talk about the share gain benefits in the quarter and what's on the horizon?
A: Sachin Mehra, CFO: The share gain benefits in the quarter were driven by the conversion of the US debit portfolio from Citizens. We have other multiyear conversions underway, such as UniCredit and Deutsche Bank, which will play out over time.
Q: Any interesting trends in terms of the composition of growth within value-added services and solutions?
A: Michael Miebach, CEO: The usual drivers are cybersecurity and data analytics. We continue to see great interest in test-and-learn capabilities. We are also investing in newer aspects like open banking, which still have to scale up significantly.
Q: Can you give us more color on the cadence of rebates and incentives this year?
A: Sachin Mehra, CFO: Rebates and incentives came in lower than expected in Q2 due to the timing of deal activity. We expect them to be higher in Q3 compared to Q2. We haven't shared much beyond that.
Q: Can you discuss the future of open banking, particularly in the US?
A: Michael Miebach, CEO: In the US, we see good momentum in services like account opening, account linking, and data aggregation. Payments side of open banking still has challenges compared to the card ecosystem, particularly in fraud protection and chargebacks. We continue to invest in evolving these technologies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
