MA MasterCard Incorporated

• Third-quarter net income of $1.2 billion, or $1.08 per diluted share
• Third-quarter net revenue increase of 14%, to $2.9 billion
• Third-quarter gross dollar volume up 7%, or 11% adjusting for the impact of recent EU regulatory changes
• Third-quarter purchase volume up 5%, or 9% adjusting for the impact of recent EU regulatory changes

Mastercard Incorporated (NYSE:MA) today announced financial results for the third quarter of 2016. The company reported net income of $1.2 billion, an increase of 21% versus the year-ago period, or 15% excluding a special item related to the termination of the U.S. employee pension plan taken in last year’s third quarter. Earnings per diluted share were $1.08, up 26%, or 19% excluding the special item. There was no currency impact on the reported growth rates for the third quarter, except where noted below.

Net revenue for the third quarter of 2016 was $2.9 billion, a 14% increase versus the same period in 2015. Net revenue growth was driven by the impact of the following:

• An increase in processed transactions of 18%, to 14.5 billion;
• An increase in cross-border volumes of 12%; and
• An 11% increase in gross dollar volume, on a local currency basis and adjusting for the impact of recent EU regulatory changes, to $1.2 trillion.

These factors were partially offset by an increase in rebates and incentives, primarily due to increased volumes and new and renewed agreements.

As a result of the June 2016 implementation of new EU regulations, the company no longer charges fees on domestic EEA co-badged volume and thus excludes that volume from its metrics. The impact on net revenue is de minimis (see page 11 for explanation of adjusted growth rates).

Worldwide purchase volume during the quarter was up 9% on a local currency basis, adjusting for the impact of recent EU regulatory changes, versus the third quarter of 2015, to $882 billion. As of September 30, 2016, the company’s customers had issued 2.3 billion Mastercard and Maestro-branded cards.

“Our business continues to perform well, and we are pleased with our strong growth in revenue and earnings per share this quarter,” said Ajay Banga, Mastercard president and CEO. “We are executing on our strategy, deepening issuer relationships and delivering our customers and partners digital-first solutions. As a result, consumers benefit from seamless and secure purchase experiences everywhere and every way they shop.”

Total operating expenses increased 4%, or 5% on a currency-neutral basis, to $1.2 billion during the third quarter of 2016 compared to the same period in 2015. Excluding the special item taken in the year-ago period, total operating expenses increased 12%. The increase was primarily due to continued investments in strategic initiatives, foreign exchange activity and higher data processing expenses.

Operating income for the third quarter of 2016 increased 22% versus the year-ago period. Compared to the third quarter of 2015 and excluding that quarter’s special item, operating income for the third quarter of 2016 increased 15%. The company delivered an operating margin of 58.0%.

Mastercard reported other expense of $37 million in the third quarter of 2016, versus $17 million in the third quarter of 2015. The increase was mainly due to an impairment charge taken on an investment.

Mastercard’s effective tax rate was 27.5% in the third quarter of 2016, versus a rate of 27.7% in the comparable period in 2015, or 28.2% excluding last year’s special item. The decrease was primarily due to the recognition of discrete tax benefits during the quarter, partially offset by a lower repatriation benefit.

During the third quarter of 2016, Mastercard repurchased approximately 6 million shares of Class A common stock at a cost of $591 million. Quarter-to-date through October 25, the company repurchased an additional 2.6 million shares at a cost of $263 million, which leaves $1.8 billion remaining under the current repurchase program authorization.

Year-to-Date 2016 Results

For the nine months ended September 30, 2016, Mastercard reported net income of $3.1 billion, an increase of 7%, or 9% on a currency-neutral basis, and earnings per diluted share of $2.83, up 11%, or 12% on a currency-neutral basis, versus the year-ago period. Excluding special items taken in the second quarters of both 2015 and 2016 related to separate U.K. merchant litigations, as well as the third quarter 2015 special item related to the U.S. pension plan termination, net income was $3.2 billion, up 6%, or 8% on a currency-neutral basis. Earnings per diluted share were $2.90, up 10%, or 12% on a currency-neutral basis, compared to the same period in 2015.

Net revenue for the nine months ended September 30, 2016 was $8.0 billion, an increase of 12%, or 14% on a currency-neutral basis, versus the same period in 2015. Processed transactions growth of 15%, cross-border volume growth of 12% and gross dollar volume growth of 12%, on a local currency basis and adjusting for the impact of recent EU regulatory changes, contributed to the net revenue growth in the year-to-date period. These factors were partially offset by an increase in rebates and incentives.

Total operating expenses were $3.6 billion, an increase of 14%, or 16% on a currency-neutral basis, for the nine months ended September 30, 2016, compared to the same period in 2015. Excluding special items, total operating expenses were $3.5 billion, an increase of 16%, or 17% on a currency-neutral basis, compared to the same period in 2015. The increase was primarily due to continued investments to support strategic initiatives in digital, services, data analytics and geographic expansion, as well as higher legal costs. Also, the impact from foreign exchange activity and balance sheet remeasurement had a negative impact of approximately 4 percentage points on operating expense growth, compared to the same period in 2015.

Operating income for the nine months ended September 30, 2016 was $4.4 billion, an increase of 11%, or 13% on a currency-neutral basis, versus the same period in 2015. Excluding special items, operating income was $4.5 billion, an increase of 10%, or 11% on a currency-neutral basis, compared to the same period in 2015. The company delivered an operating margin of 54.8%, or 56.2% excluding this year’s special item.

Mastercard’s effective tax rate was 27.9% for nine months ended September 30, 2016, versus a rate of 25.8% in the comparable period in 2015, or 26.0% excluding special items. The increase was primarily due to the recognition of larger discrete benefits in 2015 and lower repatriation benefits in 2016, partially offset by a more favorable geographic mix of taxable earnings in 2016.

Third-Quarter Financial Results Conference Call Details

At 9:00 a.m. ET today, the company will host a conference call to discuss its third-quarter financial results.

The dial-in information for this call is 877-201-0168 (within the U.S.) and 647-788-4901 (outside the U.S.), and the passcode is 89677548. A replay of the call will be available for 30 days and can be accessed by dialing 855-859-2056 (within the U.S.) and 404-537-3406 (outside the U.S.), and using passcode 89677548.

This call can also be accessed through the Investor Relations section of the company’s website at www.mastercard.com/investor. Presentation slides used on this call are also available on the website.

Non-GAAP Financial Information

The company has presented certain financial data that are considered non-GAAP financial measures that are reconciled to their most directly comparable GAAP measures in the accompanying tables.

The presentation of growth rates on a currency-neutral basis represent a non-GAAP measure and are calculated by remeasuring the prior period’s results using the current period’s exchange rates for both the translational and transactional impacts in our operating results.

About Mastercard Incorporated

Mastercard (NYSE: MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. Mastercard products and solutions make everyday commerce activities - such as shopping, traveling, running a business and managing finances - easier, more secure and more efficient for everyone. Follow us on Twitter @MastercardNews, join the discussion on the Beyond the Transaction Blog and subscribe for the latest news on the Engagement Bureau.

Forward-Looking Statements

This press release contains forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts may be forward-looking statements. When used in this press release, the words “believe”, “expect”, “could”, “may”, “would”, “will”, “trend” and similar words are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements that relate to the Mastercard’s future prospects, developments and business strategies. We caution you to not place undue reliance on these forward-looking statements, as they speak only as of the date they are made. Except for the company’s ongoing obligations under the U.S. federal securities laws, the company does not intend to update or otherwise revise the forward-looking information to reflect actual results of operations, changes in financial condition, changes in estimates, expectations or assumptions, changes in general economic or industry conditions or other circumstances arising and/or existing since the preparation of this press release or to reflect the occurrence of any unanticipated events.

Many factors and uncertainties relating to our operations and business environment, all of which are difficult to predict and many of which are outside of our control, influence whether any forward-looking statements can or will be achieved. Any one of those factors could cause our actual results to differ materially from those expressed or implied in writing in any forward-looking statements made by Mastercard or on its behalf, including, but not limited to, the following factors:

• payments system-related legal and regulatory challenges (including interchange fees, surcharging and the extension of current regulatory activity to additional jurisdictions or products);
• the impact of preferential or protective government actions;
• regulation to which we are subject based on our participation in the payments industry;
• regulation of privacy, data protection and security;
• the impact of competition in the global payments industry (including disintermediation and pricing pressure);
• the challenges relating to rapid technological developments and changes;
• the impact of information security failures, breaches or service disruptions on our business;
• issues related to our relationships with our customers (including loss of substantial business from significant customers, competitor relationships with our customers and banking industry consolidation);
• the impact of our relationships with stakeholders, including issuers and acquirers, merchants and governments;
• exposure to loss or illiquidity due to settlement guarantees and other significant third-party obligations;
• the impact of global economic and political events and conditions, including global financial market activity, declines in cross-border activity; negative trends in consumer spending and the effect of adverse currency fluctuation;
• reputational impact, including impact related to brand perception, account data breaches and fraudulent activity;
• issues related to acquisition integration, strategic investments and entry into new businesses; and
• potential or incurred liability and limitations on business resulting from litigation.

For additional information on these and other factors that could cause Mastercard’s actual results to differ materially from expected results, please see the company’s filings with the Securities and Exchange Commission, including the company’s Annual Report on Form 10-K for the year ended December 31, 2015 and any subsequent reports on Forms 10-Q and 8-K.

       

MASTERCARD INCORPORATED

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

  Three Months Ended September 30, Nine Months Ended September 30, 2016     2015 2016     2015 (in millions, except per share data) Net Revenue $ 2,880 $ 2,530 $ 8,020 $ 7,150 Operating Expenses General and administrative 933 883 2,731 2,343 Advertising and marketing 184 184 503 502 Depreciation and amortization 93 94 281 273 Provision for litigation settlements —   —   107   61   Total operating expenses 1,210   1,161   3,622   3,179   Operating income 1,670 1,369 4,398 3,971 Other Income (Expense) Investment income 12 5 32 20 Interest expense (23 ) (15 ) (65 ) (49 ) Other income (expense), net (26 ) (7 ) (30 ) (9 ) Total other income (expense) (37 ) (17 ) (63 ) (38 ) Income before income taxes 1,633 1,352 4,335 3,933 Income tax expense 449   375   1,209   1,015   Net Income $ 1,184   $ 977   $ 3,126   $ 2,918     Basic Earnings per Share $ 1.08   $ 0.86   $ 2.84   $ 2.57   Basic Weighted-Average Shares Outstanding 1,096   1,130   1,101   1,136   Diluted Earnings per Share $ 1.08   $ 0.86   $ 2.83   $ 2.56   Diluted Weighted-Average Shares Outstanding 1,099   1,133   1,104   1,139            

MASTERCARD INCORPORATED

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

  September 30, 2016 December 31, 2015 (in millions, except per share data) ASSETS Cash and cash equivalents $ 5,205 $ 5,747 Restricted cash for litigation settlement 543 541 Investments 1,774 991 Accounts receivable 1,298 1,079 Settlement due from customers 1,137 1,068 Restricted security deposits held for customers 997 895 Prepaid expenses and other current assets 822   663   Total Current Assets 11,776 10,984 Property, plant and equipment, net of accumulated depreciation of $585 and $491, respectively 698 675 Deferred income taxes 327 317 Goodwill 1,814 1,891 Other intangible assets, net of accumulated amortization of $952 and $816, respectively 747 803 Other assets 1,961   1,580   Total Assets $ 17,323   $ 16,250   LIABILITIES AND EQUITY Accounts payable $ 437 $ 472 Settlement due to customers 1,052 866 Restricted security deposits held for customers 997 895 Accrued litigation 716 709 Accrued expenses 3,214 2,763 Other current liabilities 705   564   Total Current Liabilities 7,121 6,269 Long-term debt 3,326 3,268 Deferred income taxes 82 79 Other liabilities 545   572   Total Liabilities 11,074 10,188 Commitments and Contingencies Stockholders’ Equity

Class A common stock, $0.0001 par value; authorized 3,000 shares, 1,373 and 1,370 shares issued and  1,072 and 1,095 outstanding, respectively

— —

Class B common stock, $0.0001 par value; authorized 1,200 shares, 20 and 21 issued and outstanding,  respectively

— — Additional paid-in-capital 4,135 4,004 Class A treasury stock, at cost, 301 and 275 shares, respectively (15,921 ) (13,522 ) Retained earnings 18,722 16,222 Accumulated other comprehensive income (loss) (717 ) (676 ) Total Stockholders’ Equity 6,219 6,028 Non-controlling interests 30   34   Total Equity 6,249   6,062   Total Liabilities and Equity $ 17,323   $ 16,250        

MASTERCARD INCORPORATED

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

  Nine Months Ended September 30, 2016     2015 (in millions) Operating Activities Net income $ 3,126 $ 2,918 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of customer and merchant incentives 629 560 Depreciation and amortization 281 273 Share-based payments 15 1 Deferred income taxes (1 ) 18 Other (24 ) 33 Changes in operating assets and liabilities: Accounts receivable (190 ) (27 ) Income taxes receivable 4 (83 ) Settlement due from customers (53 ) 78 Prepaid expenses (818 ) (704 ) Accrued litigation and legal settlements 12 (60 ) Accounts payable (33 ) (31 ) Settlement due to customers 171 (192 ) Accrued expenses 247 1 Net change in other assets and liabilities 126   219   Net cash provided by operating activities 3,492   3,004   Investing Activities Purchases of investment securities available-for-sale (751 ) (862 ) Purchases of investments held-to-maturity (729 ) (868 ) Proceeds from sales of investment securities available-for-sale 164 666 Proceeds from maturities of investment securities available-for-sale 247 476 Proceeds from maturities of investments held-to-maturity 240 576 Acquisition of businesses, net of cash acquired — (584 ) Purchases of property, plant and equipment (156 ) (125 ) Capitalized software (124 ) (124 ) Increase in restricted cash for litigation settlement (2 ) (1 ) Other investing activities (14 ) (7 ) Net cash used in investing activities (1,125 ) (853 ) Financing Activities Purchases of treasury stock (2,410 ) (2,725 ) Dividends paid (630 ) (548 ) Tax benefit for share-based payments 44 40 Cash proceeds from exercise of stock options 31 25 Other financing activities (3 ) (8 ) Net cash used in financing activities (2,968 ) (3,216 ) Effect of exchange rate changes on cash and cash equivalents 59   (195 ) Net decrease in cash and cash equivalents (542 ) (1,260 ) Cash and cash equivalents - beginning of period 5,747   5,137   Cash and cash equivalents - end of period $ 5,205   $ 3,877     Non-Cash Investing and Financing Activities Fair value of assets acquired, net of cash acquired $ —   $ 625   Fair value of liabilities assumed related to acquisitions $ —   $ 41        

MASTERCARD INCORPORATED OPERATING PERFORMANCE

  For the 3 Months Ended September 30, 2016

GDV(Bil.)

   

Growth(USD)

   

Growth(Local)

   

PurchaseVolume(Bil.)

   

Growth(Local)

   

PurchaseTrans.(Mil.)

   

CashVolume(Bil.)

   

Growth(Local)

   

CashTrans(Mil.)

   

Accounts(Mil.)

   

Cards(Mil.)

All Mastercard Credit, Charge and Debit Programs

APMEA $ 381 8.8 % 10.0 % $ 256 8.3 % 3,763 $ 125 13.7 % 1,298 565 601 Canada 36 9.8 % 9.4 % 34 10.1 % 528 2 -1.4 % 6 43 50 Europe 338 1.7 % 5.4 % 214 -2.4 % 4,880 124 22.1 % 920 420 434 Latin America 83   7.5 % 14.3 % 51   15.5 % 1,652   32   12.5 % 252   148   166 Worldwide less United States 838 5.7 % 8.5 % 555 4.6 % 10,822 283 17.0 % 2,475 1,177 1,251 United States 383   4.8 % 4.8 % 327   4.8 % 6,058   57   4.7 % 351   344   380 Worldwide 1,221 5.4 % 7.3 % 882 4.7 % 16,880 339 14.7 % 2,827 1,521 1,631  

Mastercard Credit and Charge Programs

Worldwide less United States 465 4.1 % 6.4 % 426 7.0 % 6,438 39 0.8 % 188 527 582 United States 182   3.9 % 3.9 % 174   3.8 % 2,019   8   7.0 % 10   164   196 Worldwide 648 4.0 % 5.7 % 600 6.0 % 8,457 47 1.8 % 198 691 778  

Mastercard Debit Programs

Worldwide less United States 373 7.8 % 11.1 % 129 -2.5 % 4,384 243 20.0 % 2,287 650 668 United States 201   5.6 % 5.6 % 152   5.9 % 4,039   49   4.4 % 342   180   184 Worldwide 573 7.0 % 9.1 % 281 1.9 % 8,423 292 17.1 % 2,629 830 852   For the 9 Months Ended September 30, 2016

GDV(Bil.)

Growth(USD)

Growth(Local)

PurchaseVolume(Bil.)

Growth(Local)

PurchaseTrans.(Mil.)

CashVolume(Bil.)

Growth(Local)

CashTrans(Mil.)

Accounts(Mil.)

Cards(Mil.)

All Mastercard Credit, Charge and Debit Programs

APMEA $ 1,102 7.6 % 11.9 % $ 736 10.3 % 10,594 $ 366 15.3 % 3,765 565 601 Canada 102 4.8 % 9.7 % 96 10.1 % 1,484 5 2.7 % 17 43 50 Europe 1,005 7.2 % 11.9 % 665 6.6 % 14,895 340 24.1 % 2,600 420 434 Latin America 235   -0.9 % 14.6 % 140   15.3 % 4,699   95   13.7 % 739   148   166 Worldwide less United States 2,444 6.4 % 12.1 % 1,638 9.1 % 31,672 806 18.5 % 7,121 1,177 1,251 United States 1,147   7.3 % 7.3 % 978   7.6 % 18,002   169   5.5 % 1,040   344   380 Worldwide 3,591 6.7 % 10.5 % 2,616 8.6 % 49,674 975 16.1 % 8,161 1,521 1,631  

Mastercard Credit and Charge Programs

Worldwide less United States 1,345 2.4 % 7.6 % 1,231 8.2 % 18,432 114 1.7 % 554 527 582 United States 536   7.3 % 7.3 % 513   7.1 % 5,879   23   10.0 % 28   164   196 Worldwide 1,881 3.7 % 7.5 % 1,744 7.9 % 24,311 137 3.0 % 582 691 778  

Mastercard Debit Programs

Worldwide less United States 1,099 11.8 % 18.0 % 407 12.0 % 13,240 692 21.9 % 6,567 650 668 United States 611   7.4 % 7.4 % 465   8.2 % 12,124   146   4.8 % 1,013   180   184 Worldwide 1,710 10.2 % 14.0 % 872 9.9 % 25,364 838 18.5 % 7,580 830 852   For the 3 months ended September 30, 2015

GDV(Bil.)

Growth(USD)

Growth(Local)

PurchaseVolume(Bil.)

Growth(Local)

PurchaseTrans.(Mil.)

CashVolume(Bil.)

Growth(Local)

CashTrans(Mil.)

Accounts(Mil.)

Cards(Mil.)

All Mastercard Credit, Charge and Debit Programs

APMEA $ 350 2.6 % 14.0 % $ 237 14.5 % 3,125 $ 113 12.9 % 1,136 498 531 Canada 33 -2.1 % 17.8 % 31 19.2 % 468 2 -2.5 % 6 40 46 Europe 332 -5.9 % 16.9 % 228 14.8 % 4,637 104 21.9 % 791 379 397 Latin America 77   -15.2 % 16.7 % 45   18.0 % 1,444   32   14.9 % 231   142   161 Worldwide less United States 793 -3.2 % 15.6 % 541 15.2 % 9,674 252 16.6 % 2,163 1,059 1,135 United States 366   7.8 % 7.8 % 312   7.9 % 5,673   54   6.9 % 340   330   363 Worldwide 1,159 — % 13.0 % 853 12.4 % 15,347 306 14.8 % 2,503 1,389 1,498  

Mastercard Credit and Charge Programs

Worldwide less United States 447 -6.0 % 10.7 % 407 11.7 % 5,785 40 1.7 % 189 512 573 United States 176   8.7 % 8.7 % 168   8.2 % 1,909   8   22.3 % 9   156   186 Worldwide 623 -2.2 % 10.2 % 575 10.7 % 7,694 48 4.5 % 198 668 760

Mastercard Debit Programs

Worldwide less United States 346 0.6 % 22.7 % 134 27.3 % 3,889 212 19.9 % 1,974 547 561 United States 190   6.9 % 6.9 % 144   7.6 % 3,764   47   4.7 % 331   174   177 Worldwide 536 2.8 % 16.6 % 278 16.3 % 7,653 258 16.9 % 2,305 721 738   For the 9 Months ended September 30, 2015

GDV(Bil.)

Growth(USD)

Growth(Local)

PurchaseVolume(Bil.)

Growth(Local)

PurchaseTrans.(Mil.)

CashVolume(Bil.)

Growth(Local)

CashTrans(Mil.)

Accounts(Mil.)

Cards(Mil.)

All Mastercard Credit, Charge and Debit Programs

APMEA $ 1,024 6.2 % 14.8 % $ 689 15.1 % 8,714 $ 335 14.0 % 3,234 498 531 Canada 97 1.2 % 16.8 % 92 18.6 % 1,314 5 -6.9 % 17 40 46 Europe 938 -7.1 % 16.2 % 648 14.4 % 12,967 289 20.6 % 2,219 379 397 Latin America 237   -9.3 % 15.6 % 140   18.5 % 4,169   97   11.8 % 668   142   161 Worldwide less United States 2,296 -1.5 % 15.5 % 1,569 15.3 % 27,164 727 16.0 % 6,138 1,059 1,135 United States 1,069   7.2 % 7.2 % 909   7.4 % 16,371   160   6.1 % 1,009   330   363 Worldwide 3,365 1.1 % 12.7 % 2,478 12.2 % 43,535 887 14.1 % 7,147 1,389 1,498  

Mastercard Credit and Charge Programs

Worldwide less United States 1,314 -3.6 % 11.0 % 1,195 12.2 % 16,491 119 -0.1 % 557 512 573 United States 500   6.9 % 6.9 % 479   6.9 % 5,353   21   8.0 % 25   156   186 Worldwide 1,814 -0.9 % 9.8 % 1,673 10.7 % 21,844 140 1.1 % 582 668 760  

Mastercard Debit Programs

Worldwide less United States 982 1.6 % 22.2 % 374 26.3 % 10,672 608 19.8 % 5,581 547 561 United States 569   7.3 % 7.3 % 430   7.9 % 11,018   139   5.8 % 985   174   177 Worldwide 1,551 3.6 % 16.3 % 804 15.7 % 21,691 747 16.9 % 6,565 721 738   APMEA = Asia Pacific / Middle East / Africa Note that the figures in the preceding tables may not sum due to rounding; growth represents change from the comparable year-ago period  

Footnote

The tables set forth the gross dollar volume (“GDV”), purchase volume, cash volume and the number of purchase transactions, cash transactions, accounts and cards on a regional and global basis for Mastercard™-branded cards. Growth rates over prior periods are provided for volume-based data.

Debit transactions on Maestro® and Cirrus®-branded cards and transactions involving brands other than Mastercard are not included in the preceding tables.

For purposes of the table: GDV represents purchase volume plus cash volume and includes the impact of balance transfers and convenience checks; “purchase volume” means the aggregate dollar amount of purchases made with Mastercard-branded cards for the relevant period; and “cash volume” means the aggregate dollar amount of cash disbursements obtained with Mastercard-branded cards for the relevant period. The number of cards includes virtual cards, which are Mastercard-branded payment accounts that do not generally have physical cards associated with them.

The Mastercard payment product is comprised of credit, charge and debit programs, and data relating to each type of program is included in the tables. Debit programs include Mastercard-branded debit programs where the primary means of cardholder validation at the point of sale is for cardholders either to sign a sales receipt or enter a PIN. The tables include information with respect to transactions involving Mastercard-branded cards that are not processed by Mastercard and transactions for which Mastercard does not earn significant revenues.

Information denominated in U.S. dollars is calculated by applying an established U.S. dollar/local currency exchange rate for each local currency in which Mastercard volumes are reported. These exchange rates are calculated on a quarterly basis using the average exchange rate for each quarter. Mastercard reports period-over-period rates of change in purchase volume and cash volume on the basis of local currency information, in order to eliminate the impact of changes in the value of foreign currencies against the U.S. dollar in calculating such rates of change.

The data set forth in the GDV, purchase volume, purchase transactions, cash volume and cash transactions columns is provided by Mastercard customers and is subject to verification by Mastercard and partial cross-checking against information provided by Mastercard’s transaction processing systems. The data set forth in the accounts and cards columns is provided by Mastercard customers and is subject to certain limited verification by Mastercard. A portion of the data set forth in the accounts and cards columns reflects the impact of routine portfolio changes among customers and other practices that may lead to over counting of the underlying data in certain circumstances. All data is subject to revision and amendment by Mastercard’s customers subsequent to the date of its release.

Performance information for prior periods can be found in the “Investor Relations” section of the Mastercard website at www.mastercard.com/investor.

       

Non-GAAP Reconciliations

($ in millions, except per share data)

  Three Months Ended September 30, Percent Increase/(Decrease) 2016     2015 Actual Actual    

SpecialItem

   

Non-GAAP 1

Actual    

SpecialItem

   

Non-GAAP 1

Total operating expenses $ 1,210 $ 1,161 $ (79 ) $ 1,082 4% (8)% 12% Operating income $ 1,670 $ 1,369 $ 79 $ 1,448 22% 7% 15% Operating Margin 58.0 % 54.1 % 57.2 % Income tax expense $ 449 $ 375 $ 29 $ 404 20% 9% 11% Effective Tax Rate 27.5 % 27.7 % 28.2 % Net Income $ 1,184 $ 977 $ 50 $ 1,027 21% 6% 15% Diluted Earnings per Share $ 1.08 $ 0.86 $ 0.04 $ 0.91 26% 7% 19%           Nine Months Ended September 30, Percent Increase/(Decrease) 2016     2015 Actual    

SpecialItem

   

Non-GAAP 2

Actual    

Special Items

   

Non-GAAP 1,2

Actual    

SpecialItems

   

Non-GAAP 1,2

Total operating expenses $ 3,622 $ (107 ) $ 3,515 $ 3,179 $ (140 ) $ 3,039 14% (2)% 16% Operating income $ 4,398 $ 107 $ 4,505 $ 3,971 $ 140 $ 4,111 11% 1% 10% Operating Margin 54.8 % 56.2 % 55.5 % 57.5 % Income tax expense $ 1,209 $ 29 $ 1,238 $ 1,015 $ 45 $ 1,060 19% 2% 17% Effective Tax Rate 27.9 % 27.9 % 25.8 % 26.0 % Net income $ 3,126 $ 78 $ 3,204 $ 2,918 $ 95 $ 3,013 7% 1% 6% Diluted Earnings per Share $ 2.83 $ 0.07 $ 2.90 $ 2.56 $ 0.08 $ 2.64 11% 1% 10%     Note: Figures may not sum due to rounding

1

 

Represents effect of excluding the Special Item relating to the termination of the U.S. employee pension plan (Q2 2015: $79 million pre-tax, $50 million after-tax, $0.04 per diluted share)

2

Represents effect of excluding the Special Items relating to the U.K. merchant litigation provisions (Q2 2016: $107 million pre-tax, $78 million after-tax, $0.07 per diluted share; Q2 2015: $61 million pre-tax, $44 million after-tax, $0.04 per diluted share)      

Article 8 Impacts on Europe and Worldwide GDV and Purchase Volume Growth Rates

  Growth (Local Currency) 2015Q1     2015Q2     2015Q3     2015Q4     2016Q1     2016Q2     2016Q3     3QYTD15     FY15     3QYTD16 GDV Europe as reported 15% 16% 17% 15% 18% 14% 5% 16% 16% 12% Europe adjusted for Article 8 19% 19% 19% 17% 19% 19% 18% 19% 19% 19%   Worldwide as reported 12% 13% 13% 12% 13% 11% 7% 13% 13% 11% Worldwide adjusted for Article 8 13% 13% 13% 13% 13% 13% 11% 13% 13% 12%   Purchase Volume Europe as reported 13% 15% 15% 13% 14% 9% (2)% 14% 14% 7% Europe adjusted for Article 8 18% 19% 18% 16% 16% 15% 16% 18% 18% 16%   Worldwide as reported 12% 12% 12% 12% 12% 9% 5% 12% 12% 9% Worldwide adjusted for Article 8 13% 13% 13% 12% 12% 11% 9% 13% 13% 11%

 

 

Note:

Article 8 of the EU Interchange Fee Regulation related to card payments, that became effective June 9, 2016, states that a network can no longer charge fees on domestic EEA payment transactions that do not use its payment brand. Prior to that, Mastercard collected a de minimis assessment fee in a few countries, particularly France, on transactions with Mastercard co-badged cards if the brands of domestic networks (as opposed to Mastercard) were used. As a result, the non-Mastercard co-badged volume is no longer being included.   To aid in understanding the underlying trends in the business, the table above reflects adjusted 2015 and YTD 2016 growth rates for the impact of Article 8, by eliminating the related co-badged volumes in prior periods.

View source version on businesswire.com: http://www.businesswire.com/news/home/20161028005442/en/

Mastercard IncorporatedInvestor Relations:Barbara Gasper or Jesal Meswani, 914-249-4565investor.relations@mastercard.comorMedia Relations:Seth Eisen, 914-249-3153Seth.Eisen@mastercard.com