Mastercard Inc. (NYSE:MA)

The analysis of the annual financial data reveals several notable trends in the intangible assets over the examined period.

Goodwill

The goodwill value increased substantially from 2,904 million US dollars at the end of 2018 to a peak of 7,662 million in 2021. However, a slight decrease to 7,522 million was observed in 2022, indicating a stabilization or mild reduction after years of significant growth.

Capitalized software

This category showed a consistent upward trend throughout the period, growing from 1,514 million in 2018 to 3,448 million in 2022. The steady increase suggests a continuous investment in software development or acquisition.

Customer relationships

Gross carrying amount of customer relationships rose notably from 439 million in 2018 to 2,272 million in 2021, followed by a slight decrease to 2,161 million in 2022. The net carrying amount related to this item remained relatively stable but low, ranging between 156 and 179 million, indicating ongoing amortization or diminishing net value.

Other finite-lived intangible assets

The gross carrying amount in the category labeled "Other" remained relatively flat, fluctuating slightly between 44 and 59 million across the years, which implies limited changes or investments in this subcategory.

Finite-lived intangible assets, gross and net carrying amounts

The gross carrying amount of finite-lived intangible assets saw a consistent increase from 1,999 million in 2018 to 5,663 million in 2022, more than doubling over the period. Meanwhile, accumulated amortization increased in magnitude from -1,175 million to -1,960 million, which reflects systematic amortization aligned with the growth in gross amounts. Consequently, the net carrying amount of these assets more than quadrupled, rising from 824 million to 3,703 million, indicating a growing base of finite-lived intangibles contributing to the asset pool.

Indefinite-lived intangible assets

This category remained relatively stable, fluctuating marginally between 156 and 179 million over the years, which suggests limited changes to indefinite-lived intangible assets outside of goodwill.

Net intangible assets, other than goodwill

There was a steady and significant increase in net intangible assets excluding goodwill, rising from 991 million in 2018 to 3,859 million in 2022. This trend highlights an increasing importance or acquisition of intangible assets aside from goodwill.

Goodwill and other intangible assets

The combined total of goodwill and other intangible assets exhibited pronounced growth, increasing from 3,895 million in 2018 to 11,381 million in 2022. This illustrates an overall expansion in the company's intangible asset base, with particularly rapid growth between 2020 and 2021.

In summary, the data indicates a strong growth trajectory in intangible assets, driven mainly by increases in goodwill, capitalized software, and customer relationships. The considerable rise in both gross and net finite-lived intangible assets, along with accumulated amortization, demonstrates active management and capitalization of intangible resources. The slight declines or stability in certain areas in the later years suggest a possible maturation of intangible asset accumulation or strategic reassessment. Overall, intangible assets have become an increasingly significant proportion of the asset composition throughout the period under review.

The analysis of the financial data over the five-year period reveals distinct trends in both reported and goodwill-adjusted figures for total assets and stockholders’ equity.

Total Assets

There is a consistent upward trend in reported total assets from 24,860 million US dollars in 2018 to 38,724 million US dollars in 2022. This represents an overall increase of approximately 56%, indicating growth in the company's asset base. Adjusted total assets, which exclude goodwill, also show steady growth from 21,956 million US dollars in 2018 to 31,202 million US dollars in 2022. Though lower in absolute terms compared to reported assets, adjusted assets increased by about 42%, reflecting expansion in tangible or non-goodwill assets.

Stockholders’ Equity

Reported stockholders’ equity increased from 5,395 million US dollars in 2018 to a peak of 7,312 million US dollars in 2021, before declining to 6,298 million US dollars in 2022. This indicates overall positive trends with a decrease in the final year.

In contrast, the adjusted stockholders’ equity, which removes the impact of goodwill, shows a markedly different pattern. It started at 2,491 million US dollars in 2018 but declined steadily each year, turning negative in 2021 at -350 million US dollars and further decreasing to -1,224 million US dollars by 2022. This negative adjusted equity suggests that intangible asset adjustments, likely goodwill impairments or write-downs, heavily impacted the equity base when goodwill is excluded.

Insights

The divergence between reported and adjusted equity figures highlights the significant role of goodwill and other intangible assets on the company's balance sheet. While total assets and reported equity suggest growth and financial strength, the negative adjusted equity in later years signals potential concerns about the sustainability or quality of those assets. The consistent increase in adjusted total assets suggests ongoing investments or asset growth excluding goodwill, but the impairment or reduction reflected in adjusted equity could raise questions about the company's intangible asset valuation practices or impairments recognized in recent years.

The analysis of the financial ratios over the reported periods reveals several noteworthy trends and variations in the operational efficiency, leverage, and profitability metrics when considering both reported and goodwill adjusted data.

Total Asset Turnover

The reported total asset turnover ratio shows a declining trend from 0.6 in 2018 to 0.46 in 2020, followed by a partial recovery to 0.57 by 2022. This suggests a decrease in the efficiency of asset use in the initial years, with an improvement towards the end of the period. The adjusted total asset turnover, which accounts for goodwill, follows a similar pattern but at consistently higher levels, starting at 0.68 in 2018 and rising to 0.71 in 2022. This adjustment indicates that excluding goodwill enhances the perception of asset utilization efficiency.

Financial Leverage

The reported financial leverage increased steadily from 4.61 in 2018 to 6.15 in 2022, indicating a gradual rise in the use of debt relative to equity. The adjusted financial leverage figures, which exclude goodwill effects, show a more pronounced and volatile increase from 8.81 in 2018, peaking at 20 in 2020, though the later years’ data are missing. This sharp rise suggests significant leverage adjustments when goodwill is excluded, possibly reflecting changes in capital structure or valuation methods impacting the equity base.

Return on Equity (ROE)

Reported ROE demonstrates considerable fluctuations, with a strong increase from 108.6% in 2018 to 137.76% in 2019, a dip to 100.31% in 2020, a subsequent rise to 118.8% in 2021, and a peak at 157.67% in 2022. Such high values indicate extraordinary profitability relative to shareholder equity, with variability across the years. The adjusted ROE, free from goodwill influence, exhibits even more extreme values, surging from 235.21% in 2018 to over 440% in the subsequent years until 2020, with no data available afterwards. This pattern underscores the significant impact of goodwill on the equity base, magnifying perceived returns.

Return on Assets (ROA)

The reported ROA fluctuates between 19.09% and 27.77%, showing a dip in 2020 followed by a recovery through 2022. The adjusted ROA, always higher than the reported figures, also declines in 2020 but rises thereafter reaching 31.82% in 2022. This indicates that the company maintains strong asset profitability, and the exclusion of goodwill assets typically improves ROA measurements, reflecting more effective use of tangible assets.

In summary, the data indicates improving asset turnover and sustained profitability recovery after the 2020 dip, with leverage steadily increasing as per reported figures. The adjustments for goodwill significantly influence both leverage and profitability metrics, amplifying returns on equity and assets and highlighting the importance of considering intangible assets in financial analysis. The missing adjusted financial leverage and ROE data for the final years limit full trend analysis but earlier values suggest heightened volatility when goodwill is excluded.

Total Assets

There is a consistent upward trend in both reported and adjusted total assets over the five-year period. Reported total assets increased from 24,860 million US dollars at the end of 2018 to 38,724 million US dollars by the end of 2022, reflecting significant growth. Adjusted total assets follow a similar trajectory, rising from 21,956 million US dollars in 2018 to 31,202 million US dollars in 2022. The adjusted figures are consistently lower than the reported ones, indicating the exclusion of goodwill or similar adjustments.

Total Asset Turnover Ratios

Both reported and adjusted total asset turnover ratios exhibit fluctuations over the years. The reported total asset turnover ratio shows a decline from 0.60 in 2018 to a low of 0.46 in 2020, followed by a gradual recovery to 0.57 in 2022. The adjusted total asset turnover ratio follows a parallel pattern but maintains higher values than the reported ratios throughout the period. It starts at 0.68 in 2018, decreases to 0.53 in 2020, then improves to 0.71 by 2022.

Insights on Efficiency and Asset Utilization

The declining asset turnover ratios until 2020 suggest a decrease in asset utilization efficiency, possibly due to increased asset bases outpacing revenue growth or other operational factors. The recovery in asset turnover ratios from 2021 onward indicates improvement in operational efficiency and better asset management. The consistently higher adjusted turnover ratios imply that when goodwill and similar adjustments are removed, the company demonstrates stronger asset productivity.

The analysis of the financial data over the period from 2018 to 2022 reveals several key trends in both reported and goodwill-adjusted figures.

Total Assets

Reported total assets demonstrate a consistent upward trend, increasing from $24,860 million in 2018 to $38,724 million in 2022. This growth indicates ongoing asset accumulation over the five-year span. Adjusted total assets, which exclude goodwill, also follow a similar upward trajectory, rising from $21,956 million in 2018 to $31,202 million in 2022, albeit at a lower scale compared to the reported figures.

Stockholders’ Equity

Reported stockholders’ equity increased steadily from $5,395 million in 2018 to a peak of $7,312 million in 2021, before declining notably to $6,298 million in 2022. In contrast, the goodwill-adjusted stockholders’ equity shows a different pattern, starting at $2,491 million in 2018 and sharply decreasing each year to reach a negative value by 2021 (-$350 million) and further declining to -$1,224 million in 2022. This indicates significant adjustments for goodwill that have reduced the net equity position substantially.

Financial Leverage

Reported financial leverage, calculated as the ratio of total assets to stockholders’ equity, remains relatively stable with minor fluctuations between 4.61 and 6.15 over the observed period, reaching the highest point in 2022. This suggests an increasing reliance on debt or liabilities to finance assets. Adjusted financial leverage displays a markedly different pattern, starting at 8.81 in 2018 and increasing rapidly to 20 by 2020. Data for this metric in 2021 and 2022 are missing, which limits analysis for those years, but the available figures indicate a significant rise in leverage when excluding goodwill effects.

Overall, the reported figures portray a company growing its asset base and maintaining solid equity, albeit showing signs of increased leverage in recent years. The adjustments for goodwill reveal a more leveraged and equity-constrained financial position, suggesting that goodwill significantly impacts the balance sheet strength and leverage ratios. The negative adjusted equity in the later years highlights potential concerns about the underlying tangible net worth after intangible assets are excluded.

The data reveals several key trends and changes in Mastercard Inc.'s financial position and performance over the period from the end of 2018 through the end of 2022. An analysis of both reported and goodwill adjusted items provides valuable insights.

Reported Total Stockholders’ Equity

Reported stockholders’ equity has shown an overall increasing trend from 2018 through 2021, rising steadily from US$5,395 million at the end of 2018 to a peak of US$7,312 million at the end of 2021. However, in 2022 there is a noticeable decrease, with equity falling to US$6,298 million. This suggests a potential decline in the net assets attributable to shareholders, which may warrant further investigation into underlying causes such as dividend payments, share buybacks, or other comprehensive income effects.

Adjusted Total Stockholders’ Equity

The adjusted stockholders’ equity, which accounts for goodwill adjustments, exhibits a starkly different pattern compared to the reported figures. Starting at US$2,491 million in 2018, the adjusted equity declines consistently each year, turning negative by 2021 (-US$350 million) and further decreasing to -US$1,224 million in 2022. This trend indicates significant goodwill impairments or reductions that are eroding the adjusted book value of the company’s equity, raising concerns about asset quality and the sustainability of reported earnings.

Reported Return on Equity (ROE)

The reported ROE is exceptionally high throughout the period, beginning at 108.6% in 2018, increasing to 137.76% in 2019, and showing some fluctuations with 100.31% in 2020, 118.8% in 2021, and peaking at 157.67% in 2022. Such elevated ROE levels suggest the company is generating substantial profits relative to its equity base. This may reflect high operational efficiency or strong profitability, but extremely high ROE might also be influenced by relatively low equity levels due to significant repurchasing or leverage.

Adjusted Return on Equity (ROE)

The adjusted ROE, calculated on the basis of goodwill-adjusted equity, is markedly higher than the reported ROE for the available years 2018 to 2020, with figures at 235.21%, 433.65%, and 448.01%, respectively. These extraordinary values correspond to the shrinking adjusted equity base, which amplifies the return on the remaining equity. However, adjusted ROE data is not available beyond 2020, limiting the ability to analyze trends for later periods.

In summary, the company’s reported equity and profitability metrics show strong performance with substantial returns on equity, although the decline in reported equity in 2022 deserves attention. The contrasting trend in adjusted equity highlights significant goodwill impairments or write-downs that substantially reduce the tangible equity base. The extreme values of adjusted ROE stem from this reduced equity denominator, emphasizing the need to consider both reported and adjusted figures when assessing the company’s financial health and performance sustainability.

Total Assets

The reported total assets have exhibited a consistent upward trend over the five-year period, increasing from $24,860 million in 2018 to $38,724 million in 2022. This represents a growth trajectory indicative of asset expansion and possibly increased operational scale. The adjusted total assets, which exclude goodwill, follow a similar pattern, rising steadily from $21,956 million in 2018 to $31,202 million in 2022. The gap between reported and adjusted total assets suggests the presence of goodwill that has remained relatively stable but with slight growth over time.

Return on Assets (ROA)

The reported ROA shows some fluctuations over the period, starting at 23.57% in 2018 and peaking at 27.77% in 2019 before declining to 19.09% in 2020. Subsequently, it recovers to 23.06% in 2021 and further increases to 25.64% in 2022. This variability may reflect changing profitability or asset utilization efficiency in different years.

Adjusted ROA, which accounts for asset base excluding goodwill, consistently remains higher than the reported ROA in all years. It starts at 26.69% in 2018, reaches a high of 32.20% in 2019, declines to 22.40% in 2020, and then demonstrates a strong rebound to 28.95% in 2021 and 31.82% in 2022. The higher adjusted ROA compared to reported ROA indicates that excluding goodwill improves the perceived asset efficiency and profitability metrics, suggesting that goodwill may dilute the return on assets figures when included.

Overall Insights

Over the analyzed period, total assets have clearly grown, reflecting expansion, while the exclusion of goodwill results in a lower but still steadily increasing asset base. ROA metrics indicate that profitability relative to assets has been somewhat volatile but generally strong, with 2020 being an outlier year marked by a decline in both reported and adjusted ROA. The adjusted ROA consistently outperforming the reported ROA suggests that the company’s core assets (excluding goodwill) have been more efficiently generating profit throughout the time frame.