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How Mastercard Beat Earnings, Revenue Estimates in 3Q17

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Part 4
How Mastercard Beat Earnings, Revenue Estimates in 3Q17 PART 4 OF 8

Behind Mastercard’s Total Operating Expenses

Various components

Mastercard (MA) saw a YoY (year-over-year) rise of 20% in total operating expenses in 3Q17. The components of total operating expenses are provisions for litigation settlements, advertising expenses, general and administrative expenses, and depreciation.

Behind Mastercard’s Total Operating Expenses

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Its general and administrative expenses were $1.1 billion in 3Q17, compared to $933 million in 3Q16, reflecting a YoY rise of 22%. Expenses related to foreign exchange activity, professional fees, personnel expenses, data processing, telecommunications, and other expenses come under general and administrative expenses.

Mastercard has a market capitalization of $158.1 billion. Its peers (XLF) Visa (V), Euronet Worldwide (EEFT), and Western Union (WU) have market capitalizations of $253.4 billion, $4.9 billion, and $9.0 billion, respectively.

The YoY rise in general and administrative expenses was mainly due to the rise in personnel expenses. In 3Q17, the company reported personnel expenses of $723 million compared to $575 million in 3Q16. The rise can also be attributed to acquisitions.

Other components

Mastercard saw a YoY rise in depreciation and amortization expenses. In 3Q17, those expenses were $118 million, compared to $93 million in 3Q16, reflecting a YoY rise of 27%. The rise was mainly due to acquisitions.

The company also saw a rise in its advertising and marketing expenses, from $184 million in 3Q16 to $203 million in 3Q17. That’s a YoY rise of 11%. Mastercard expects that spending more on advertising and marketing will, in turn, create awareness.

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