Mastercard Incorporated · NYSE:MA
Mastercard — Investor Day (September 2012)
82 slides from Mastercard's investor day presentation, Sep 20, 2012
Slide 1: MasterCard Incorporated 2012 Investment Community Meeting
Exhibit 99.1 MasterCard Incorporated 2012 Investment Community Meeting ©2012 MasterCard. Proprietary.
Slide 2: Agenda
Agenda 8:30 a.m. Welcome Strategic Discussion Global Products & Solutions GP&S Panel Barbara Gasper Ajay Banga Gary Flood Alfredo Gangotena, Tim Murphy, Kevin Stanton and Ed McLaughlin 9:45 a.m. Break 10:10 a.m. U.S. Markets International Markets IMK Panel Chris McWilton Ann Cairns Michael Miebach,
Slide 3: Forward-Looking Statements
Forward-Looking Statements Today’s presentation may contain, in addition to historical information, forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current assumptions, expectations and projectio
Slide 4: Ajay Banga: Executing on the Strategy
Ajay Banga President and Chief Executive Officer Executing on the Strategy 2012 Investment Community Meeting
Slide 5: Recent Performance vs. Long-Term Objectives
Recent Performance vs. Long-Term Objectives Net Revenue Growth Operating Margin Earnings Per Share Growth 2011 Performance* 19% 52% 31% 2012-2013 Objectives* 12-14% CAGR Minimum 50% annually 20%+ CAGR First Half 2012 Performance* 16% 56% 26% * On a constant currency basis and excluding special items
Slide 6: Three Drivers of Growth
Three Drivers of Growth Personal Consumption Expenditure Cash & Check vs. Electronic Payments MasterCard Share of Electronic Payments Investment Community Meeting
Slide 7: Stakeholders
Stakeholders Consumers – B2B2C Merchants – Value-added partner Issuers – Complementary value propositions Governments & Opinion Leaders – Local engagement Solutions Driven by Data and Technology Investment Community Meeting
Slide 8: Executing on the Strategy
Executing on the Strategy GROW Core Business • Invest in Credit, Debit, Commercial and Prepaid products • Win key deals • Grow share DIVERSIFY Geographies & Customers • Engage with non-traditional customers and governments • Increase focus on emerging markets BUILD New Businesses • Invest in e-Comme
Slide 9: Company Evolution
Company Evolution Recent Past Customers primarily large Financial Institutions Growth driven by consumer credit Conventional product development Traditional role in value chain Questions about mobile disintermediation threat Current Direction Engagement with small FIs, telcos, merchants, governments
Slide 10: Gary Flood: Driving Growth through Products & Solutions
Gary Flood President, Global Products & Solutions Driving Growth through Products & Solutions 2012 Investment Community Meeting ©2012 MasterCard. Proprietary.
Slide 11: Driving Growth
Driving Growth GROW Core Businesses Faster than Market DIVERSIFY Customers and Geographies BUILD New, High-Growth Scalable Businesses …capitalizing on: Enormous Cash Conversion Opportunity Evolving Industry Landscape
Slide 12: Progress on Cash Penetration
Progress on Cash Penetration Developed Markets Emerging Markets 2.4 ppt 58.2% 56.7% 55.8% 2008 2009 2010 1.0 ppt 94.0% 94.0% 93.0% 2008 2009 2010 2008-2010 CAGR for Total Transactions 0.7% * 6.9% Cash usage has declined in both markets, but global figure remains at 85% due to greater growth in emerg
Slide 13: Levers to Continue Displacing Cash
Levers to Continue Displacing Cash More Merchants Acceptance Growth More Consumers Financial Inclusion More Volume Product Penetration More Transactions Small Ticket Transactions ©2012 MasterCard. Proprietary.
Slide 14: Driving Market Advantage in an Evolving Industry
Driving Market Advantage in an Evolving Industry Drive consumer preference Accelerate the Core business Leverage differentiated assets Drive convergence of physical / digital
Slide 15: Asset Breadth and Integration
Asset Breadth and Integration Creates Competitive Advantage Products and Channels Core Business (Credit, Debit, Prepaid, Commercial) Emerging Payments (e-Commerce, Mobile) New Businesses (Information Services) Value Chain Extenders (IPS, Access, DataCash, Truaxis) Capabilities Network Scale and Spee
Slide 16: Alfredo Gangotena: Brand Preference
Alfredo Gangotena Chief Marketing Officer Brand Preference: The Key to Business Growth 2012 Investment Community Meeting
Slide 17: Marketing Strategic Focus
Marketing Strategic Focus Transforming Consumer Insight Into Growth From brand awareness to brand preference Delivering a unique shopping experience Return on investment
Slide 18: Consumer Engagement to Build Brand Preference
Consumer Engagement to Build Brand Preference Consumer-led Virtuous Cycle Merchants Consumers Issuers Internal data and MasterCard SpendingPulse for “Restaurants” category, July-August 2012 “Dine and Be Generous” Campaign Engagement Restaurants 30 national associations Issuers 38 participating banks
Slide 19: MasterCard's Consumer Experience
MasterCard’s Consumer Experience Reward and Delight Affluent & Mass Affluent Segments Affluent & Mass Affluent represent a significant portion of our GDV Enhance consumer experience across the entire buying cycle Rewards as foundation; Enriched through Priceless Experiences Both “Home and Away” Expe
Slide 20: Priceless Cities – Global Expansion
Priceless Cities – Global Expansion Affluent & Mass Segments – Home and Away Connecting People to Their Passions Shopping Dining Sports Travel Attractions Arts & Culture Theater Music & Movies Toronto Chicago New York London Beijing Sydney
Slide 21: Priceless Cities – Global Expansion
Priceless Cities – Global Expansion Affluent & Mass Segments – Home and Away Connecting People to Their Passions Shopping Dining Sports Travel Attractions Arts & Culture Theater Music & Movies Toronto Chicago Los Angeles Mexico City London New York Miami Paris Rio de Janeiro Moscow Istanbul Singapor
Slide 22: Priceless Cities – Business Results
Priceless Cities– Business Results Brand Awareness* 66% ® 71% Brand Opinion* 64% ® 68% Card Spending** + 15% (early results / key segments) Digital Audience Growth + Engagement Consumers Merchants Issuers 100+ participating merchants 40 issuers globally 31 million consumers reached Key portfolios’ e
Slide 23: Advertising and Marketing
Advertising and Marketing Investment Efficiencies Global A&M Investment and Overall Brand Opinion Among Owners Brand Performance and Opinion improvement Advertising and Marketing (A&M) spending efficiencies Best practice execution • Rewards platform • Priceless Cities network expansion • Digital / S
Slide 24: Tim Murphy: Accelerating Growth Faster than Market: Commercial
Tim Murphy Chief Product Officer Accelerating Growth Faster than Market: Commercial 2012 Investment Community Meeting
Slide 25: Core Products
Core Products Consumer Credit 13% Core Products 1H 2012 GDV Growth Debit 20% Prepaid 40% Commercial 19% ©2012 MasterCard. Proprietary.
Slide 26: Commercial is a Big Untapped Opportunity
Commercial is a Big Untapped Opportunity $93T Commercial and Gov’t Spend Estimate1 Available to Capture1 $17T Total Commercial Card Spend1 $1.6T Who We Serve2 Large Market & Gov’t 48% 52% Small Business Less than 10% of cardable spend currently captured Sources: 1. Kaiser Associates and Glenbrook Pa
Slide 27: Investments in People
Investments in People Deepen Relationships …and with leading corporations around the world
Slide 28: Investments in Small Business
Investments in Small Business Drive Differentiation Services for emerging entrepreneurs Market-leading automatic savings program Purchasing platform that enhances small business buying power Partners
Slide 29: Investments in Large Market
Investments in Large Market Increase Penetration Key Wins Customized vertical payment products Specialized industry travel solutions Check & Wire Displacement Global expense management and reporting system Advanced analytic reporting capabilities Cross-border tool to manage employee per diems ©2012
Slide 30: Commercial Outperforms the Market
Commercial Outperforms the Market, Delivering Supercharged Results Growth 25% 20% 15% 10% 5% 0% -5% -10% -15% 2009 2010 2011 Q1-Q2 2012 Market MasterCard 126% higher ticket size 47% higher cross-border mix 13% greater revenue yield Products + People + Advisors = Advantage Source: Glenbrook Partners,
Slide 31: Kevin Stanton: MasterCard Advisors
Kevin Stanton President, MasterCard Advisors MasterCard Advisors: Proven Currency, Force Multiplier, Game Changer 2012 Investment Community Meeting ©2012 MasterCard. Proprietary.
Slide 32: A Proven Currency
A Proven Currency INFORMATION Market Vision reports MasterCard Audiences SpendingPulse reports CONSULTING Payment strategy Product development Customer segmentation IMPLEMENTATION Acquisition & Conversion Digital Channel optimization Customer reactivation … for reaching consumers, merchants, issuers
Slide 33: A Force Multiplier
A Force Multiplier … DEAL Credit Agreement Debit Agreement PRODUCT Debit Five Steps U.S. EMV Migration MARKET Sub-Saharan Programs SEGMENT Small Merchant e-Commerce Authorization Deutsche Telekom Mobile U.S. Affluent Credit Reactivation … to drive growth at the deal, product, market and segment leve
Slide 34: A Game Changer
A Game Changer … … to drive new value and reach new customers
Slide 35: Ed McLaughlin: Convergence 12
Ed McLaughlin Chief Emerging Payments Officer Convergence 2012 Investment Community Meeting
Slide 36: Emerging Payments Growth Opportunity
Emerging Payments Growth Opportunity Transforming the shopping experience Expanding our reach to new consumers Extending our network to new merchants Leading the transition to digital Investment Community Meeting
Slide 37: Physical and Digital Worlds are Converging
Physical and Digital Worlds are Converging Every connected device will become a commerce device Shop online Shop in-store Enhanced experiences Receive payments
Slide 38: Consumers are Transacting Anywhere
Consumers are Transacting Anywhere Online, Offline, Physical, Digital Receiving payroll and social benefits on mobile phone or card Paying bills or merchants via SMS on a mobile phone Accessing ATMs and merchants Consumer Experiences Emerging Market Developed Market Shopping on a mobile phone Commut
Slide 39: PayPass Wallet Brings it All Together
PayPass Wallet Brings it All Together Connected Digital Wallets Enabling Consumer Choice Digital Acceptance Network Partner Wallet
Slide 40: Working with Partners
Working with Partners Mitac (intel GrupoBBVA aan {eB ann __ BARNES NOBLE Citiba nk Westpac "*® Mrs SEB Ke } Conmonweatthiark CARDINAL CRD Commerce MONEYS ; Sovereign [ASSiitentlag APRPRIVA UMERCHANT . => __| beanstreamr a) msla PaySwyft Bcart32 TigerDirect oo ©) Bank of Montreal iiPrert§oox PSCU> Ha
Slide 41: Chris McWilton: U.S. Markets
Chris McWilton President, U.S. Markets Path to Partnership and Value: U.S. Markets 2012 Investment Community Meeting
Slide 42: Navigating the Regulatory and Legal Landscape
Navigating the Regulatory and Legal Landscape Maximizing market share/presence on debit cards Enhancing debit value proposition Continuing to solidify relationships and balance of ecosystem Serving all stakeholders through an amicable resolution Advocating on behalf of the consumer ©2012 MasterCard.
Slide 43: Focused on Our Core Business
Focused on Our Core Business Differentiated product suite Proven success in optimizing portfolio growth and management Strong platform to optimize consumer engagement ©2012 MasterCard. Proprietary.
Slide 44: Leading EMV Migration
Leading EMV Migration Clear roadmap that addresses securing all channels Creating the right dialogue as partners and counselors Playing a key role in bringing the market together Understanding product-specific implications to develop the right approach
Slide 45: Growing Merchant Relationships for Shared Value
Growing Merchant Relationships for Shared Value Insights and tools to optimize, streamline and grow operations Focus on programs that increase consumer preference and stickiness Open new acceptance channels ©2012 MasterCard. Proprietary.
Slide 46: Delivering Value and Growth to Governments
Delivering Value and Growth to Governments Strong programs and momentum Government – reduced costs; greater efficiency Recipient – greater access and empowerment ©2012 MasterCard. Proprietary.
Slide 47: Staying True to Our Course
Staying True to Our Course Investment Community Meeting
Slide 48: Ann Cairns: International Markets
Ann Cairns President, International Markets International Markets: Strength through Diversification 2012 Investment Community Meeting
Slide 49: Regional Overview – 1H 2012
Regional Overview – 1H 2012 4% of MA GDV 9% GDV growth 29% of MA GDV 17% GDV growth 55 countries 34 currencies 8% of MA GDV 21% GDV growth 47 countries 26 currencies 26% of MA GDV 23% GDV growth 112 countries 91 currencies International Markets account for 60% of MasterCard revenue ©2012 MasterCard.
Slide 50: Market Dynamics
Market Dynamics Opportunities Personal Consumption Expenditure Financial inclusion Urbanization Youth population Consumer affluence Mobile penetration Consumer adoption Challenges Macro-economic environment Regulation Competitive landscape Investment Community Meeting
Slide 51: Executing on Our Strategy
Executing on Our Strategy Invest and gain share in emerging and mature markets Drive increased acceptance Diversify with non-traditional partners Engage with governments Develop global and local strategic partnerships
Slide 52: Executing on Our Strategy
Executing on Our Strategy Acceptance Enabling Partners Merchants & Retailers Small merchants Telcos Bill Payment aggregators Mobile & e-Commerce Maestro On-Line PayPass PayPass Wallet Mobile POS Newer Categories Transit Tuition Parking Everyday spend Drive increased acceptance in the physical and di
Slide 53: Executing on Our Strategy
Executing on Our Strategy Governments Efficiency Social benefits T&E cards Transit Purchasing cards ID cards Financial Inclusion Agricultural payments Prepaid products Mobile Infrastructure Education Thought Leadership Cost of Cash studies Regulations Tax collection SpendingPulse World Beyond Cash S
Slide 54: Executing on Our Strategy
Executing on Our Strategy Mobile PayPass Mobile PayPass Strategic Partnerships Global investment and commitment to develop seamless payment experiences
Slide 55: International Markets Panel Discussion
International Markets Panel Discussion Michael Miebach President, Middle East & Africa Expanding in Emerging Markets: Partnering with Governments Hai Ling President, Greater China China: Partnering with Major Local Players Gilberto Caldart President, South Latin America Brazil: Innovative Growth Eng
Slide 56: IMK Panel
IMK Panel 2012 Investment Community Meeting
Slide 57: Expanding in Emerging Markets
Expanding in Emerging Markets Partnering with Governments… … to reach the next billion customers Cashless Nigeria Working with the Central Bank of Nigeria: • Encouraging a cashless environment 2,000% growth in acceptance, ~200,000 POS by end of 2012 Innovative South Africa Engagement with South Afri
Slide 58: China: Partnering with Major Local Players
China Partnering with Major Local Players MasterCard is special in Chinese: Everything is Attainable Significant Market Opportunity World’s 2nd largest economy, expected to grow at 7% - 8% (2011 GDP = $7.3 trillion) Rapid urbanization: 67% of population will be urban by 2020 (900 million) Sizable em
Slide 59: Brazil: Innovative Growth Engine
Brazil Innovative Growth Engine … to reach preference Expanding Beyond Core… Value chain expansion IPS – DataCash – APW – MPS – inControl Loyalty Surpreenda – 3 million consumers MRS to issuers – 14 million consumers Processing ~ 4 billion transactions Engagement to process local brands Driving Inno
Slide 60: Martina Hund-Mejean: Financial Perspective
Martina Hund-Mejean Chief Financial Officer Financial Perspective 2012 Investment Community Meeting
Slide 61: Topics for Today
Topics for Today 2012 Outlook Approach to FX Hedging Capital Structure Considerations Long-Term Growth Opportunity Long-Term Performance Targets
Slide 62: Worldwide Gross Dollar Volume Growth
Worldwide Gross Dollar Volume (GDV) Growth REPORTED PROCESSED 18.3% 18.3% 16.4% 15.2% Local Growth % 12% Processed 11% 0% 5% 10% 15% 20% Q3’11 Q4’11 Q1’12 Q2’12 Jul/Aug ©2012 MasterCard. Proprietary.
Slide 63: U.S. Gross Dollar Volume Growth
U.S. Gross Dollar Volume Growth REPORTED PROCESSED 13.7% 14.0% 12.1% 0% 5% 10% 15% Growth % 8.7% 9% Processed 8% Q3’11 Q4’11 Q1’12 Q2’12 Jul/Aug ©2012 MasterCard. Proprietary.
Slide 64: Rest of World Gross Dollar Volume Growth
Rest of World Gross Dollar Volume Growth REPORTED PROCESSED 25% 20% 15% 10% 5% 0% 20.6% 20.6% 18.6% 18.6% Local Growth % 15% Processed 14% Q3’11 Q4’11 Q1’12 Q2’12 Jul/Aug
Slide 65: Worldwide Processed Transactions
Worldwide Processed Transactions 30% 24% 18% 12% 6% 0% 20.5% 23.2% 29.2% 29.3% 24.9% Q3’11 Q4’11 Q1’12 Q2’12 Jul/Aug Growth % ©2012 MasterCard. Proprietary.
Slide 66: Worldwide Cross-Border Volume Growth
Worldwide Cross-Border Volume Growth Local Growth % 25% 20% 15% 10% 5% 0% 19.3% 17.5% 18.4% 16.8% 14.4% Q3’11 Q4’11 Q1’12 Q2’12 Jul/Aug
Slide 67: 2012 Financial Outlook
2012 Financial Outlook Net Revenue Operating Expenses Tax Rate FX Impact Euro and Real 2nd Half revenue growth lower than 2Q12 Small operating margin expansion Quarterly A&M cadence similar to 2011, but full-year spend lower Less than 31%, including discrete items Net headwind on Revenue, Net Income
Slide 68: Foreign Exchange
Foreign Exchange Exposure Types Translation exposure: EUR, BRL and GBP Transaction exposure: 150 currencies, but mainly due to CAD, EUR and GBP Hedging Approach and the P&L Only hedge cash flow (transaction) exposures on 12-month rolling basis: Target hedge ratio of 50-75% for material exposures Hed
Slide 69: Capital Structure Considerations
Capital Structure Considerations Guiding Principles Strong Balance Sheet Preserve strong balance sheet, liquidity & credit ratings $5 billion of cash* as of June 30, 2012 with no debt Long-Term Business Growth Investments in organic opportunities and M&A transactions Grow core businesses, diversify
Slide 70: Return of Capital – Historical Perspective
Return of Capital – Historical Perspective Share Repurchase Dividends Cash conservation mode given financial crisis and capital markets freeze $ billions $2.0 $1.5 $1.2 $0.1 $1.0 $1.0 $0.1 $0.7 $0.7 $0.1 $0.1 $0.5 $1.1 $0.9 $0.6 $0.6 $0.1 $0.1 $0.0 2007 2008 2009 2010 2011 1H12 % of Period Cash Flow
Slide 71: Liquidity
Liquidity $8 $2.8 ($3.0) $6 $5.0 $4 ($1.4) $ billions $2.2 Foreign Cash ($0.8) $2.6 $2 Foreign Cash $2.0 $2.8 $0.6 $0 Cash Balance (as of 6/30/12) Available Revolver… Operational Settlement… Share Repurchase* Litigation Excess Liquidity * Amount remaining to be executed under announced share repurch
Slide 72: Execution against Business and Financial Objectives
Execution against Business and Financial Objectives $6,714 $5,538 $4,992 $5,099 $4,068 $3,326 Net Revenue ($ millions) 13% 19% 20% 4% 10% 19% Constant Currency Growth 2006 2007 2008 2009 2010 2011 $18.70 $14.05 $9.45 $11.19 $7.58 $3.37 $ Earnings Per Share* Constant Currency Growth 43% 121% 23% 21%
Slide 73: Three Drivers of Growth
Three Drivers of Growth Personal Consumption Expenditure Cash & Check vs. Electronic Payments MasterCard Share of Electronic Payments ©2012 MasterCard. Proprietary.
Slide 74: Continued Penetration of Electronic Payments in PCE Offers Great Opportunity
Continued Penetration of Electronic Payments in PCE Offers Great Opportunity Debit / Credit EFT Cash & Check $53T $42T 43% 33% $30T 2011-2016E CAGR Global PCE 5% Card Purchase Volume 9%—11% Cash & Check ~0% 23% 15% 16% 13% EFT 7% 64% 52% 41% 2006 2011 2016 Source: EIU, Euromonitor and internal analy
Slide 75: Long-Term Revenue Growth
Long-Term Revenue Growth 2011-2016E CAGR (in %) Strategic Growth 4-6% Low-Mid Teens Secular Investments 9-11% (1%) MA Mix 8-10% 5% Global PCE Industry Purchase Volume MA Market Momentum MasterCard Long-Term Revenue Source: EIU, Euromonitor and internal estimates
Slide 76: Longer-Term Performance Objectives
Longer-Term 2013 – 2015 Performance Objectives* Net Revenue Growth 11-14% CAGR Operating Margin Minimum 50% annually Earnings Per Share Growth Rate At least 20% CAGR * On a constant currency basis and excluding future acquisitions
Slide 77: Investing in Our Strategy
Investing in Our Strategy GROW Core Business DIVERSIFY Geographies & Customers BUILD New Businesses Credit Government sector e-Commerce Debit Non-traditional customers Mobile Commercial Information services Emerging markets Prepaid Acquisitions and partnerships Wide variety of investment opportuniti
Slide 78: Question & Answer Session
Question & Answer Session 2012 Investment Community Meeting
Slide 79: Ed McLaughlin: Product Demo Overview
Ed McLaughlin Chief Emerging Payments Officer Product Demo Overview 2012 Investment Community Meeting
Slide 80: Ajay Banga: Closing Comments
Ajay Banga President and Chief Executive Officer Closing Comments 2012 Investment Community Meeting
Slide 81: Final Thoughts
Final Thoughts Execute through the Grow, Diversify, Build roadmap Capitalize on opportunities and address challenges Invest to drive growth through innovation Deliver on our commitments Investment Community Meeting
Slide 82: MasterCard Worldwide
MasterCard Worldwide The Heart of Commerce™