The FINANCIAL -- MasterCard Incorporated last week reported quarterly net income of $314 million, or $2.31 per share on a diluted basis, which includes after-tax gains of $70 million or $0.51 per share on a diluted basis from the partial sale of the company’s investment in Redecard S.A. in Brazil. Net revenues for the quarter were a record, at $1.08 billion, a 20.1% increase versus the same period in 2006. Currency fluctuation (driven by the movement of the euro relative to the US dollar) contributed approximately 2.3% of the increase in revenues for the quarter.
Fueling the higher revenue in the third quarter versus the same period in 2006 was growth in MasterCard’s gross dollar volume (GDV), which increased 12.8% on a local currency basis, to $577 billion; a 13.3% increase in the number of transactions processed to 4.8 billion; and, an increase in cross-border volumes of 20.6%.
Worldwide purchase volume rose 14.1%, on a local currency basis, during the quarter to $430 billion, driven by increased cardholder spending on a growing number of MasterCard cards. As of September 30, 2007, the company’s customers had issued 878 million MasterCard cards, an increase of 11.3% over the cards issued at September 30, 2006.
“Our solid performance illustrates the strength of our diverse, global business,” said Robert W. Selander, MasterCard president and chief executive officer. “We continue to benefit from positive secular trends and outstanding growth in international and emerging markets such as South Asia/Middle East/Africa and Latin America.
“As a unified global company, one of our strongest assets is our ability to align with our customers anywhere worldwide. As our business continues to grow, we are committed to delivering best-in-class dedicated customer account teams, and to finding the right talent to help MasterCard, and our customers, win in the marketplace,” said Selander.
Total operating expenses increased 16.3%, to $730 million, in the third quarter of 2007 compared to the same period in 2006. This increase was primarily driven by higher advertising and market development expenses in the quarter, which increased 26.4%, to $264 million, resulting from a change in the timing of 2007 initiatives compared to the same period last year. The first half of 2006 had significant World Cup sponsorship activity versus this year, where a planned shift in spending to the second half of 2007 had been anticipated.
General and administrative expenses increased 10.2%, to $433 million, in the third quarter. This increase was primarily driven by personnel costs related to hiring of additional staff and contractors to support the company’s customers as well as increased performance incentive accruals. The increase in total operating expenses was also driven by a $10 million cash contribution to the MasterCard Foundation.
Currency fluctuation contributed 1.6% of the growth in total operating expenses for the quarter.
Total other income was $129 million in the third quarter of 2007 versus $17 million in the same period in 2006. The improvement was driven by a $112 million increase in investment income primarily due to gains realized from the sale of 25% of the company’s investment in Redecard S.A. in Brazil. Redecard gains contributed $0.51 per share on a diluted basis to the quarterly earnings per share of $2.31.