This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Mastercard Inc. (MA: chart) on Janaury 31, 2008.

Management:

- Investor Relations: Barbara Gasper
- President and CEO: Robert W. Selander
- CFO: Martina Hund-Mejean

Key Investors Issues

- The firm delivered net income of $304 million or $2.26 per share, up 643% from $40.9 million or 30 cents a share in the prior year.
- Revenue was up 28% to $1.1 billion.
- A total of 4 million shares of Class A common stock were repurchased at a cost of $601 million.

Full Year Highlights:

- Net income was $1.1 billion or $8 per share, including after-tax gains of $254 million or $1.87 per share from gains on the sale of an investment in Redecard.
- Net revenues of $4.1 billion, represented growth of 22.3%, driven primarily by strong growth in GDV and process transactions.
- Operating margin improve 7.8 percentage points to 27.3% from 19.5%.

Fourth Quarter Highlights

The firm delivered net income of $304 million or $2.26 per share, up 643% from $40.9 million or 30 cents a share in the prior year, including after-tax gains of $185 million or $1.37 per share from additional sales of investments in Redecard.

- Revenue of $1.1 billion, were up nearly 27.8% from $839 million in 2006, driven by strong growth in gross dollar volume and process transactions.
- Additionally, currency fluctuations of the euro and the Brazilian Real, relative to the US dollar contributed 4.7 percentage points of the net revenue increase, resulting in organic growth of 23.1% and pricing adjustments contributed 2%.
- Operating margin improved 10.3 percentage points, 16% from 5.7%, excluding special items, demonstrating the continued leveragability of the business model.

GDV grew 15.2% on a local currency basis and 20.9% on a U.S. dollar converted basis to $634 billion.

- Despite the economic downturn in the U.S., U.S. GDV growth was 10% and U.S. purchase volume growth was even stronger at 11.1%.
- Worldwide purchase volume was up 16.1% and cash volume was up 12.3%, both on a local currency basis.
- Additionally, cross border volume or the volume that is generated from card holders who travel outside of the country where their card is issued, was up 27.7%.
- Processed transactions, or the actions processed across the firm’s network, increased 17.2% to $5.2 billion as the global diversification of the business enables the firm to generate significant volume, transactions and revenue from economies outside of the U.S.

Because of the pricing arrangements, lower issue of volumes can result in lower rebates and incentives.

- Net operations fees increased 25.2%, $167 million to $829 million driven by growth in process transactions, first quarter volumes, and gross dollar volume.
- Further, fees were positively influenced by the continued impact of pricing adjustments in new programs such as higher utilization and pricing changes for stand-in authorization services.
- Gross assessments increased 18.5% or $89 million to $569 million due to strong GDV growth.
- Net assessments as a percentage of growth assessments also improved, primarily due to lower growth in incentives volume as well as the timing and lower growth of merchant incentives.

Total operating expenses increased 13.5% of which 3.3 percentage points were related to currency fluctuations, an increase in personnel cost, legal costs and advertising and marketing expenses.

- Personnel costs were also driven by an increase in performance incentive accruals, as well as severance expenses resulting from a corporate resource alignment, which occurred later in the quarter.
- The 4.5% increase in advertising costs was due to foreign exchange.
- The firm made an additional $10 million cash contribution to the MasterCard Foundation.

In October of 2007, the Board approved a $750 million Class A common stock repurchase program, which was incremental to the $500 million program announced last April bringing the aggregate repurchase program to $1.25 billion.

- As of December 31st, 2007, 4 million shares of Class A common stock had been repurchased at a cost of $601 million.
- The firm also implemented and completed two separate conversion programs in which 11.4 million shares out of an eligible 13.4 million shares of Class B common stock were converted into Class A common stock and subsequently sold to public investors.
- The firm generated $52 million in cash flow from operations and ended the year with $3 billion in cash, cash equivalents and available-for-sale securities.
- Capital expenditures increased $156 million to accommodate the increased workforce as well as to develop new services and increase capability.

Macroeconomic Impact:

- Although the firm has not been adversely affected by the slowdown in the US economy, continued weakness has the potential to slow the rate of US growth in the future.
- A significant portion of the business is transaction driven, thus while consumer spend might be slowing data indicates that transactions grew to rates that exceeded volume growth.
- A mix shift in consumer spending is occurring as consumers have moved away from discretionary items for everyday purchases including gasoline, grocery, and personal healthcare items.