Mastercard Incorporated reports 49.7% Net Income growth in 2018 and 19.6% Revenue growth
01/31/2019 • About Mastercard Incorporated (
$MA) • By InTwits
Mastercard Incorporated reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- Mastercard Incorporated is a growth stock: 2018 revenue growth was 19.6%, 5 year revenue CAGR was 12.5% at 2018 ROIC 64.7%
- Mastercard Incorporated has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.1%. At the same time it's a lot of higher than industry average of 1.7%.
- In the last 5 years the company invested considerably less than D&A: $1,197m vs. $1,956m. In 2018 this situation was still the same: CAPEX was 330 while D&A was 459
- The company has highly profitable business model: ROIC is 64.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Mastercard Incorporated's Revenue surged on 19.6%. Revenue growth showed slowdown in 18Q4 - it was 14.9% YoY. During 2014-2018 Revenue growth bottomed in 2015 at 2.4% and was accelerating since that time. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.3 pp from 14.9% to 12.5% in FY2018.
SG&A as a % of Revenue decreased on 2.7 pp from 43.4% to 40.7% in 2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. SBC as a % of Revenue stuck to a growing trend at 0.35 pp per annum in the last 5 years.
Net Income margin increased on 7.9 pp from 31.3% to 39.2% in 2018. The efficient tax rate was 18.7% in 2018 while the average for the last five years was 27.7%.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 2.2%. The company showed almost no change in CAPEX/Revenue from 2015 to 2018. It's average CAPEX/Revenue for the last three years was 2.2%.
Accounts receivable as a % of Revenue decreased slightly on 0.53 pp from 15.8% to 15.2% in 2018. Accounts payable as a % of Revenue didn't change in 2018.
Return on investment
The company operates at high and attractive ROIC (64.7%) and ROE (107.9%). ROIC increased on 4.0 pp from 60.6% to 64.7% in 2018. ROE jumped on 37.5 pp from 70.4% to 108% in 2018. During 2014-2018 ROIC bottomed in 2015 at 57.5% and was growing since that time. ROE stuck to a growing trend at 12.5 pp per annum in the last 5 years.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.0x and Debt / EBITDA is 0.8x. Debt surged on 16.8% while cash jumped on 12.6%.
Mastercard Incorporated has good short term financial stability: Interest coverage ratio (ICR) is 39.2x. Mastercard Incorporated has no short term refinancing risk: cash is higher than short term debt (1,336.4%).
Average interest expence charged on company's debt was 2.9% in 2018.
Valuation and dividends
The company's trades at EV/EBITDA 28.1x and P/E 37.2x.
The company paid 17.8% of Net Income as dividends in 2018. Dividends grew on average at 15.2% per annum in the last 5 years).
Management team
Mastercard Incorporated's CEO is Ajaypal S Banga "Ajay". Ajaypal S Banga "Ajay" has 9 years tenure with the company. CEO total compensation was
$20,379,353 in 2018 which included
$1,250,000 salary.
0.11% of the company is owned by insiders. Insider ownership didn't change in 2018.
The company has 14,800 employees. The number of employees jumped on 10.4%. Average revenue per employee in 2018 was
$1,010,135 and it increased on 8.3%.
Financial and operational results
FY ended 12/31/2018
Mastercard Incorporated ($MA) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 9,441 | 9,667 | 10,776 | 12,497 | 14,950 | 19.6% |
| SG&A | 4,014 | 4,162 | 4,525 | 5,424 | 6,081 | 12.1% |
| EBITDA | 5,427 | 5,444 | 6,134 | 7,059 | 7,741 | 9.7% |
| EBIT | 5,106 | 5,078 | 5,761 | 6,622 | 7,282 | 10.0% |
| Interest expence | 48 | 61 | 95 | 154 | 186 | 20.8% |
| Tax | 1,462 | 1,150 | 1,587 | 2,607 | 1,345 | -48.4% |
| Net Income | 3,617 | 3,808 | 4,059 | 3,915 | 5,859 | 49.7% |
| Stock Based Compensation | -15 | 80 | 101 | 176 | 196 | 11.4% |
Balance Sheet
|
|---|
| Cash | 5,137 | 5,747 | 6,721 | 5,933 | 6,682 | 12.6% |
| Accounts Receivable | 1,109 | 1,079 | 1,416 | 1,969 | 2,276 | 15.6% |
| Accounts Payable | 419 | 472 | 609 | 933 | 537 | -42.4% |
| Short Term Debt | 0 | 0 | 0 | 0 | 500 | |
| Long Term Debt | 1,494 | 3,268 | 5,180 | 5,424 | 5,834 | 7.6% |
Cash flow
|
|---|
| Capex | 175 | 177 | 215 | 300 | 330 | 10.0% |
| Dividends | 515 | 727 | 837 | 942 | 1,044 | 10.8% |
| Acquisitions | 525 | 584 | | 1,175 | | |
Ratios
|
|---|
| Revenue growth | 13.6% | 2.4% | 11.5% | 16.0% | 19.6% | |
| EBITDA growth | 14.0% | 0.3% | 12.7% | 15.1% | 9.7% | |
|
|---|
| EBITDA Margin | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% | -4.7% |
| EBIT Margin | 54.1% | 52.5% | 53.5% | 53.0% | 48.7% | -4.3% |
| SG&A, % of revenue | 42.5% | 43.1% | 42.0% | 43.4% | 40.7% | -2.7% |
| SBC, % of revenue | -0.2% | 0.8% | 0.9% | 1.4% | 1.3% | -0.1% |
| Net Income Margin | 38.3% | 39.4% | 37.7% | 31.3% | 39.2% | 7.9% |
| CAPEX, % of revenue | 1.9% | 1.8% | 2.0% | 2.4% | 2.2% | -0.2% |
|
|---|
| ROIC | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% | 4.0% |
| ROE | 50.7% | 59.4% | 69.5% | 70.4% | 107.9% | 37.5% |
| Net Debt/EBITDA | -0.7x | -0.5x | -0.3x | -0.1x | -0.0x | 0.0x |
| Interest expence / Average debt | 3.2% | 2.6% | 2.2% | 2.9% | 2.9% | 0.0% |
People
|
|---|
| Insider ownership | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.0% |
| Employees | 10,300 | 11,300 | 11,900 | 13,400 | 14,800 | 10.4% |
| Revenue/Employee, th. $ | 917 | 855 | 906 | 933 | 1,010 | 8.3% |
Mastercard Incorporated ($MA) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 3,580 | 3,665 | 3,898 | 3,807 | | 30.9% | 20.0% | 14.7% | 14.9% |
| EBITDA | 1,945 | 2,051 | 2,398 | 1,347 | | 21.7% | 16.3% | 16.5% | -17.8% |
| Net Income | 1,492 | 1,569 | 1,899 | 899 | | 38.0% | 33.3% | 32.8% | 296.0% |
Balance Sheet
|
|---|
| Cash | 6,890 | 6,210 | 6,871 | 6,682 | | 14.7% | 20.0% | 23.6% | 12.6% |
| Short Term Debt | 0 | 0 | 500 | 500 | | | | | |
| Long Term Debt | 6,469 | 5,858 | 5,858 | 5,834 | | 24.0% | 10.0% | 8.6% | 7.6% |
Ratios
|
|---|
| EBITDA Margin | 54.3% | 56.0% | 61.5% | 35.4% | | -4.1% | -1.8% | 0.9% | -14.1% |
| Net Income Margin | 41.7% | 42.8% | 48.7% | 23.6% | | 2.1% | 4.3% | 6.6% | 16.8% |
Peers in Data Processing & Outsourced S
Below you can find Mastercard Incorporated benchmarking vs. other companies in Data Processing & Outsourced S industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | | 167.8% |
| StoneCo Ltd ($STNE) | | | | 74.3% | 106.0% |
| PagSeguro Digital Ltd. ($PAGS) | | 107.1% | 68.7% | 121.7% | 71.8% |
| Payment Data Systems, Inc. ($PYDS) | | 7.4% | -16.0% | 20.7% | 71.7% |
| StarTek, Inc. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
| |
|---|
| Median (55 companies) | | 7.1% | 7.6% | 10.1% | 7.4% |
|---|
| Mastercard Incorporated ($MA) | | 2.4% | 11.5% | 16.0% | 19.6% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | 97.4% | 97.5% |
| Everi Holdings Inc. ($EVRI) | 25.8% | 38.3% | 36.1% | 34.5% | 79.9% |
| StoneCo Ltd ($STNE) | | | 69.7% | 70.8% | 79.5% |
| Paychex, Inc. ($PAYX) | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% |
| Global Payments Inc. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
| |
|---|
| Median (45 companies) | 38.8% | 39.5% | 39.3% | 39.3% | 41.0% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Visa Inc. ($V) | 64.0% | 68.9% | 55.6% | 69.2% | 65.8% |
| FleetCor Technologies, Inc. ($FLT) | 56.1% | 50.4% | 52.0% | 50.8% | 55.9% |
| StoneCo Ltd ($STNE) | | | 31.4% | 26.0% | 53.0% |
| Everi Holdings Inc. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| Black Knight, Inc. ($BKI) | | | 43.0% | 44.6% | 43.3% |
| |
|---|
| Median (56 companies) | 20.4% | 21.0% | 21.2% | 20.6% | 19.2% |
|---|
| Mastercard Incorporated ($MA) | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crypto Co/The ($CRCW) | 0.0% | 0.0% | | 1,216.6% | 853.5% |
| Steel Connect, Inc. ($STCN) | 0.6% | 1.5% | 1.7% | 1.1% | 75.6% |
| Everi Holdings Inc. ($EVRI) | 3.0% | 9.3% | 9.4% | 9.9% | 21.9% |
| StoneCo Ltd ($STNE) | | | 7.2% | 18.4% | 8.9% |
| Cardtronics plc ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.2% |
|---|
| Mastercard Incorporated ($MA) | 1.9% | 1.8% | 2.0% | 2.4% | 2.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GreenSky, Inc. ($GSKY) | | | | 156.4% | 93.7% |
| Paychex, Inc. ($PAYX) | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% |
| NIC Inc. ($EGOV) | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% |
| Automatic Data Processing, Inc. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
| 3PEA International, Inc. ($TPNL) | 118.8% | -0.3% | 48.2% | 44.9% | 36.0% |
| |
|---|
| Median (62 companies) | 13.3% | 12.8% | 11.1% | 10.6% | 10.2% |
|---|
| Mastercard Incorporated ($MA) | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StarTek, Inc. ($SRT) | -0.1x | | 2.2x | 2.3x | 18.4x |
| Square, Inc. ($SQ) | | | | | 13.3x |
| Steel Connect, Inc. ($STCN) | -12.5x | | | | 12.6x |
| Exela Technologies Inc ($XELAU) | | | 8.1x | | 9.7x |
| Alliance Data Systems Corporation ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| |
|---|
| Median (54 companies) | 0.6x | 0.7x | 1.6x | 2.3x | 2.2x |
|---|
| Mastercard Incorporated ($MA) | -0.7x | -0.5x | -0.3x | -0.1x | -0.0x |
