Jason Moser: Matt, let's dive into Earningspalooza.
It just keeps on coming, man. I tell you,
we've got more companies reporting this week.
We had a lot of companies
that reported last week.
Let's go ahead and
kick it off here talking about MasterCard.
Tell me what you saw
for their most recent quarter.
Matt Frankel: It was good.
The stock popped right after the earnings,
so you know everybody liked what they saw.
Earnings were up by 33% year
over year. Revenue grew by 15%.
Anyone who thinks companies like Visa and
MasterCard are maxed out, this proved them
wrong once again.
Moser: [laughs] Maxed out, I like that.
You probably didn't even mean to do that!
Frankel: [laughs] No pun intended!
The things that really were encouraging to
me were, one, cross border transactions,
meaning the international
revenues, were up by 17%.
That was the strongest of their main
areas of growth. That was very encouraging.
And not only that, but their
margins are getting better.
Their expenses only went up 11%
while their revenues went up by 15%.
As we've said many times, anytime your revenue is
growing faster than your expenses is a very good thing.
MasterCard’s margins
were higher by over 2%.
The other really big thing that stood out
to me was the aggressive buyback that they're using.
I know everyone's buying back stock right
now, it's kind of the buzzword of the day,
given the tax reform savings.
But MasterCard not only bought back $1.2 billion
worth of stock in the third quarter alone,
they came out with their earnings report
and said, "We took advantage of this big market
correction in October."
In the first 25 days of October, they bought
almost $360 million more on top of that $1.2 billion.
It's really nice to see them being proactive,
and saying, "We took advantage.
We thought our stock was dirt cheap in the
beginning of October, so we bought a lot more."
Moser: As a MasterCard shareholder,
I like everything you just said there.
Let's keep it going in that direction.
Let's take a look here at Fiserv.
This is an interesting business.
I think it flies under the radar for a lot
of people, but it's a really good business.
It's the company that provides the software
for a lot of these smaller financial institutions,
smaller banks and whatnot.
They provide the software for these banks
to get their work done -- the ledgers,
the payments, and whatnot.
Again, it's a good business.
The stock is having a decent year so far.
It's pulled back a little bit here, but obviously
is benefiting from the growth in electronic payments.
Generally speaking, from a business perspective,
they benefit from switching costs.
Banks don't typically like to
switch operating systems very often.
It's a pretty big undertaking.
So, what this means is, Fiserv is a partner
that grows with these banks and continues
to offer more services.
What this ultimately does is give Fiserv a
little bit of pricing power as time goes on.
We'll see them exercise that here and there.
But generally speaking, you're looking at
a business that's going to continue to grow
around 4-5% organic growth.
They really do a good job of
bringing it down to the bottom line.
When you talk about the share repurchases,
if we look at their share count going back
to 2013 to today, they have brought that share
count down 22% in that period of time.
They continue to do a really good job in buying
back shares and helping realize value for shareholders.
It's not something that's going to sit there
and double overnight, but I think it's going
to be a nice, slow grower for folks looking
for some financial exposure there.
Let's talk about Paycom. Matt, you went
through their quarter, what did you find?
Frankel: More good things. Revenue and earnings
were up by 32% and 33% respectively.
The reason I love Paycom, they just announced
that recurring revenue now makes up 98% of their total.
If you're not familiar, Paycom is the
payroll processing software company.
98% recurring revenue is a pretty nice moat.
This is a service that companies need.
Businesses need to process payroll.
This is a great recurring revenue stream.
It's growing, like I said,
at a 33% year over year clip right now.
They're not buying back
shares very aggressively.
They said they bought back about
30,000 shares, which is a drop in the bucket.
They're plowing all their money back into
growth, which is exactly what they should be doing.
If you can have 98% of your revenue be recurring,
and grow that at the same rate for another
few years, they're going
to be in really good shape.
Moser: Yeah, recurring revenue is a beautiful thing.
We'll wrap it up really quick with Markel,
another one of our Foolish favorites here.
We've talked about this
business for many, many years.
It's our baby Berkshire, as we like to call it.
Another very good quarter for the company.
We talked about the three main drivers of
the business in the insurance underwriting.
They stood at $4.5 billion
in insurance underwriting this quarter.
$4.5 billion for the first nine months of
the year, vs. $4.1 billion a year ago.
We also talk about their investment income, which was
up to $320 million from $304 million a year ago.
And then, there's the
Markel Ventures side of the business.
That's their investments in these smaller businesses.
They take meaningful stakes in these businesses.
I think they have somewhere in the
neighborhood of 17 or 18 and the portfolio now.
They brought in $1.4 billion in revenue on
the Markel Venture side, vs. $933 million
a year ago, for the first
nine months of the year.
So, seeing some very good performance there
on the Markel Venture side of the business.
They just keep on doing a lot of the same
things here, running a smart business.
Co-CEO there, Tom Gayner,
he's a leader we like.
We've had a chance to
speak with him a number of times.
As a Markel shareholder myself, I'm happy
to see that they're doing what they're doing.
I think shareholders should remain very
encouraged about where this business is headed.
