Yahoo Finance Mastercard Inc (MA) (Q1 2024) Earnings Call Transcript Highlights: Robust Growth and Strategic ...
Net Revenue: Increased by 11% on a non-GAAP currency-neutral basis.
Adjusted Net Income: Grew by 16% year-over-year on a non-GAAP currency-neutral basis.
Earnings Per Share (EPS): Rose by 19%, reaching $3.31, including a $0.07 contribution from share repurchases.
Cross-Border Volume Growth: Reported an 18% increase on a local currency basis.
Operating Expenses: Increased by 9%, including minimal impact from acquisitions.
Operating Income: Up by 12%, including minimal impact from acquisitions.
Worldwide Gross Dollar Volume (GDV): Increased by 10% year-over-year.
Switched Transactions: Grew by 13% year-over-year.
Value-Added Services & Solutions Net Revenue: Increased by 15% despite tougher comparisons from the previous year.
Tokenized Transactions: Grew over 50% year-over-year.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Mastercard Inc (NYSE:MA) reported a strong quarter with net revenues up 11% and adjusted net income up 16% year-over-year on a non-GAAP currency-neutral basis.
The company saw robust growth in consumer spending and cross-border volume, which increased by 18% year-over-year on a local currency basis.
Mastercard Inc (NYSE:MA) has successfully expanded its acceptance footprint globally, enhancing user experience for digital transactions and growing its contactless and Tap on Phone capabilities.
The company continues to innovate, with tokenized transactions growing over 50% year-over-year, and it is making significant inroads into new payment verticals like housing and health care.
Mastercard Inc (NYSE:MA) has secured several strategic partnerships and deal wins globally, strengthening its position in key markets and with major clients.
Negative Points
Persistent inflation in the United States could potentially delay rate cuts, posing a risk to economic conditions and consumer spending.
Geopolitical uncertainties in several countries remain a concern, which could impact global economic stability and consumer confidence.
The company faces intense competition in various markets, which could affect its market share and growth prospects.
Operating expenses increased by 9%, including minimal impact from acquisitions, indicating rising costs that could impact profitability.
Foreign exchange headwinds are expected to be a 1 to 2 percentage point drag on the year, primarily driven by the recent appreciation of the U.S. dollar.
Q & A Highlights
Q: Sachin, just a question on the guide. I mean, it seems like a lot of the guide lower on revenues is just FX, but I'm just confirming when we look at the volume and yield trends, those seem to be doing fairly well, if not slightly better than expectations. And you mentioned the conversion beginning, just trying to think through as we look ahead, it seems like those trends seem constructive. I just want to make sure that's the way you're looking at it. A: Sanjay, I think you said it exactly right. First of all, just to be very clear, like I said, our guide for the full year on a currency-neutral basis, excluding acquisitions, is unchanged relative to what we shared at the last earnings call. what we're seeing, generally speaking, is healthy consumer spending. These trends are very much in line with what we expected when we put the guide out in the first place. So nothing unusual to report from an overall spending trend standpoint. Obviously, the U.S. dollar has appreciated quarter-over-quarter. And what you're seeing is really our best reflection of what we think the impact of the strengthening U.S. dollar is going to be on our as reported numbers, which is what we shared with you. That's the only real update. Our guide otherwise is very much unchanged. And as it relates to your question on conversions, the conversions which are taking place are very much things which we had contemplated in our original guide. So that's very much part and parcel of what we had contemplated. So business as usual, I want to be very clear, there's nothing which has really changed from a guide standpoint, when you look at it on a currency-neutral basis, excluding acquisitions.
Q: Two questions. First, it looks in the April trends as if the most material slowdown was intra-Europe cross-border. Could you just confirm if that's the case and if that was really predominantly Easter like you suggested. Secondly, we should be coming up on the 6-month anniversary of your announcement of Chinese domestic market approval. When should we expect the first transaction to be processed? And have you been able to work out whether you'll be able to use existing issued cards in the domestic market after a workaround on the EMV code or will you have to reissue? A: Craig, I'll take the first question. Your observation on intra-Europe is exactly right. What you're seeing in the first 4 weeks of April is exactly what you said. It's related to the timing of Easter. Easter has actually a more pronounced impact in intra-Europe and that's why you're seeing a more exaggerated number out there. And then on your second question, as it relates to China, Michael is going to just take that right now.
Q: Michael, how would you characterize or how do you think about the penetration rate of existing customers when it comes to value-added services. It's more important part of the growth algorithm, how do you measure -- how do you think about how mature the long-term opportunity is when it comes to cross-selling value-added services into your base? A: Ramsey, you are hitting on a really important point. value-added services, a key differentiator for our payment solutions, payment solutions. The link is pretty clear, more volume, more data, and I talked about the whole growth algorithm earlier on the call. Now this doesn't just naturally have to us. It requires really focused execution. To your point, we are all at any point in time, very clear what our cross-sell ratios are, what value we can offer to our customers and who we have it offered to and who we haven't offered it to. I give you a stat earlier that talked about that you have 2 to 3x more services with our top 50 customers. So there is tremendous potential in there. And our teams are very focused on that. Across the company, we have our existing relationship manager, sales force out there across the whole world, but we're also having a set of very specific more hunter-oriented sales forces that drive very specific new products with deep value that we drive into separate selling centers into these customers. So it's a pretty broad approach. At any point in time, we see that data, and we drive that because as you said, this is a near-term growth opportunity that we should leverage and we will.
Q: Michael, can you talk about the U.S. merchant class action settlement. I know this still needs to be approved by the courts, but how should we think about the implications from the changes proposed on surcharging for specific brands? And how do you think you stay down? A: Right. Thanks, Harshita. So the first word, I would say, relief. This has been long standing, and we are happy that there was an agreement found with the merchant community as well as with Visa and this is behind us. So what this was about is the U.S. merchant rules class. So what was in focus here was the business rules that make up the Mastercard promise. And the conversation was around how can we provide opportunities to merchants to manage their cost of acceptance on 1 hand, at the same time, how do we keep the major promise to consumers of the Mastercard brand and that is, you can pay anywhere and you will not be discriminated against your payment. So that was the toggle over the years and an agreement was reached. And basically, what happens is we're going to have a mild reduction of interchange rates, number one. and we're providing more clarity and simplification around surcharging rules and discounting rules on the 1 hand. At the same time, we retain the promise of [to] honor all card rule out there. So that is what is out there. We don't expect any dramatic impact on the business from the interchange changes. And for merchants, they -- we will see what the choices they make on surcharging and on discounting. We've seen in the past that surcharging is not always clear to consumers. It's not always prepared, so we'll see what choices will come up. So broadly speaking, I don't expect a major impact on our business. In terms of financial impact, we have accounted for the legal fees associated with that. Otherwise, there is no impact directly on Mastercard. So all in, a very good outcome, and it proves 1 point. It proves the point that there is a lot of momentum and a lot of competition in the payments market and yet again another moving item and merchants agreed to this, and this is a good step forward for everybody.
Q: So rebates and incentives were a little bit higher than what we had expected in the first quarter. How should we think about the remainder of the year? And do we expect it to cool off a little bit? A: So on rebates and incentives, very much in line with what I kind of shared in terms of our thoughts at the last earnings call, very much
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
