MasterCard Incorporated Reports Second-Quarter 2016 Financial Results

07/28/2016
  • Second-quarter net income of $983 million, including a special item, or $0.89 per diluted share
  • Second-quarter net income of $1.1 billion, excluding a special item, or $0.96 per diluted share
  • Second-quarter net revenue increase of 13%, to $2.7 billion
  • Second-quarter gross dollar volume up 11% and purchase volume up 9%

PURCHASE, N.Y.--(BUSINESS WIRE)-- MasterCard Incorporated (NYSE:MA) today announced financial results for the second quarter of 2016. The company reported net income of $983 million, an increase of 7% or 8% on a currency-neutral basis, and earnings per diluted share of $0.89, up 10% or 11% on a currency-neutral basis versus the year-ago period. Excluding special items related to separate U.K. merchant litigations taken in both this quarter and the previous year’s quarter, the company reported net income of $1.1 billion, an increase of 10% or 11% on a currency-neutral basis, and earnings per diluted share of $0.96, up 13% or 14% on a currency-neutral basis versus the year-ago period.

Net revenue for the second quarter of 2016 was $2.7 billion, a 13% increase versus the same period in 2015. On a currency-neutral basis, net revenue increased 14%. Net revenue growth was driven by the impact of the following:

  • An increase in processed transactions of 14%, to 13.7 billion;
  • An 11% increase in gross dollar volume, on a local currency basis, to $1.2 trillion; and
  • An increase in cross-border volumes of 10%.

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

Worldwide purchase volume during the quarter was up 9% on a local currency basis versus the second quarter of 2015, to $897 billion. As of June 30, 2016, the company’s customers had issued 2.3 billion MasterCard and Maestro-branded cards.

“We carried solid momentum into the second quarter, delivering 14 percent revenue growth for the first half of the year, after adjusting for currency,” said Ajay Banga, president and CEO, MasterCard. “With last week’s VocaLink announcement, we will expand our capabilities beyond core card-based solutions into a broader set of transactions and payments. The collective technology and experience will provide consumers, businesses and governments more choice and value in how they pay and are paid.”

Total operating expenses increased 15%, or 17% on a currency-neutral basis, to $1.3 billion during the second quarter of 2016 compared to the same period in 2015. Excluding special items, total operating expenses were $1.2 billion, an increase of 12%, or 13% on a currency-neutral basis, compared to the year-ago period. The increase was primarily due to continued investments in strategic initiatives, as well as higher legal costs.

Operating income for the second quarter of 2016 increased 10%, or 11% on a currency-neutral basis, versus the year-ago period. Excluding special items, operating income increased 13%, or 15% on a currency-neutral basis, versus the year-ago period. The company delivered an operating margin of 51.2% or 55.2% excluding special items.

MasterCard reported other expense of $15 million in the second quarter of 2016, versus $10 million in the second quarter of 2015. The change was mainly driven by higher interest expense related to the company’s Euro bond debt issuance in November 2015.

MasterCard’s effective tax rate was 28.0% in the second quarter of 2016, versus a rate of 25.7% in the comparable period in 2015. Excluding special items, the effective tax rate was 27.9% in the second quarter of 2016, versus a rate of 25.8% in the comparable period in 2015. The increase was primarily due to the recognition of a discrete U.S. foreign tax credit benefit which occurred in the second quarter of 2015, as well as a larger 2015 repatriation benefit.

During the second quarter of 2016, MasterCard repurchased approximately 5 million shares of Class A common stock at a cost of $462 million. Quarter-to-date through July 21, the company did not repurchase any additional shares, which leaves $2.7 billion remaining under the current repurchase program authorization.

Year-to-Date 2016 Results

For the six months ended June 30, 2016, MasterCard reported net income of $1.9 billion, essentially flat, or an increase of 2% on a currency-neutral basis, and earnings per diluted share of $1.75, up 4% or 6% on a currency-neutral basis versus the year-ago period. Excluding special items, net income was $2.0 billion, up 2% or 4% on a currency-neutral basis, and earnings per diluted share was $1.82, up 5%, or 8% on a currency-neutral basis, compared to the same period in 2015.

Net revenue for the first half of 2016 was $5.1 billion, an increase of 11%, or 14% on a currency-neutral basis, versus the same period in 2015. Transaction processing growth of 14%, gross dollar volume growth of 12% and cross-border volume growth of 11% 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 $2.4 billion, an increase of 20%, or 22% on a currency-neutral basis for the first half of 2016, compared to the same period in 2015. Excluding special items, total operating expenses were $2.3 billion, an increase of 18%, or 20% on a currency-neutral basis, compared to the same period in 2015. The increase was primarily due to continued investments to support strategic initiatives, as well as higher legal costs. In addition, the impact from foreign currency hedging activity and balance sheet remeasurement had a negative impact of approximately 6 percentage points on operating expense growth, compared to the same period in 2015.

Operating income for the six months ended June 30, 2016 was $2.7 billion, an increase of 5%, or 8% on a currency-neutral basis, versus the same period in 2015. Excluding special items, operating income was $2.8 billion, an increase of 6%, or 9% on a currency-neutral basis, compared to the same period in 2015. The company delivered an operating margin of 53.1% or 55.2% excluding special items.

MasterCard’s effective tax rate was 28.1% for six months ended June 30, 2016, versus a rate of 24.8% in the same period in 2015. Excluding special items, the effective tax rate was 28.1% in the first half of 2016, versus a rate of 24.9% in the comparable period in 2015. The increase was primarily due to the recognition of a discrete U.S. foreign tax credit benefit which occurred in 2015, as well as a larger 2015 repatriation benefit.

Second-Quarter Financial Results Conference Call Details

At 9:00 a.m. ET today, the company will host a conference call to discuss its second-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 40840885. 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 40840885.

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 June 30,     Six Months Ended June 30,
2016     2015 2016     2015
(in millions, except per share data)
Net Revenue $ 2,694 $ 2,390 $ 5,140 $ 4,620
Operating Expenses
General and administrative 930 810 1,798 1,460
Advertising and marketing 184 176 319 318
Depreciation and amortization 93 92 188 179
Provision for litigation settlements 107   61   107   61  
Total operating expenses 1,314   1,139   2,412   2,018  
Operating income 1,380 1,251 2,728 2,602
Other Income (Expense)
Investment income 10 6 20 15
Interest expense (22 ) (17 ) (42 ) (34 )
Other income (expense), net (3 ) 1   (4 ) (2 )
Total other income (expense) (15 ) (10 ) (26 ) (21 )
Income before income taxes 1,365 1,241 2,702 2,581
Income tax expense 382   320   760   640  
Net Income $ 983   $ 921   $ 1,942   $ 1,941  
 
Basic Earnings per Share $ 0.89   $ 0.81   $ 1.76   $ 1.70  
Basic Weighted-Average Shares Outstanding 1,098   1,138   1,104   1,143  
Diluted Earnings per Share $ 0.89   $ 0.81   $ 1.75   $ 1.69  
Diluted Weighted-Average Shares Outstanding 1,101   1,141   1,107   1,146  
 
 

MASTERCARD INCORPORATED

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

 
        June 30, 2016      

December 31,

2015

(in millions, except per share data)
ASSETS
Cash and cash equivalents $ 5,176 $ 5,747
Restricted cash for litigation settlement 542 541
Investments 1,271 991
Accounts receivable 1,203 1,079
Settlement due from customers 1,005 1,068
Restricted security deposits held for customers 936 895
Prepaid expenses and other current assets 865   663  
Total Current Assets 10,998 10,984
Property, plant and equipment, net of accumulated depreciation of $561 and $491, respectively 680 675
Deferred income taxes 337 317
Goodwill 1,834 1,891
Other intangible assets, net of accumulated amortization of $910 and $816, respectively 762 803
Other assets 1,671   1,580  
Total Assets $ 16,282   $ 16,250  
LIABILITIES AND EQUITY
Accounts payable $ 452 $ 472
Settlement due to customers 828 866
Restricted security deposits held for customers 936 895
Accrued litigation 810 709
Accrued expenses 2,753 2,763
Other current liabilities 683   564  
Total Current Liabilities 6,462 6,269
Long-term debt 3,306 3,268
Deferred income taxes 83 79
Other liabilities 562   572  
Total Liabilities 10,413 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

        1,077 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 4,072 4,004
Class A treasury stock, at cost, 295 and 275 shares, respectively (15,284 ) (13,522 )
Retained earnings 17,746 16,222
Accumulated other comprehensive income (loss) (697 ) (676 )
Total Stockholders’ Equity 5,837 6,028
Non-controlling interests 32   34  
Total Equity 5,869   6,062  
Total Liabilities and Equity $ 16,282   $ 16,250  
 
 

MASTERCARD INCORPORATED

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 
        Six Months Ended June 30,
2016       2015
(in millions)
Operating Activities
Net income $ 1,942 $ 1,941
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of customer and merchant incentives 396 358
Depreciation and amortization 188 179
Share-based payments (11 ) (23 )
Deferred income taxes (8 ) 1
Other (28 ) (23 )
Changes in operating assets and liabilities:
Accounts receivable (100 ) (51 )
Income taxes receivable (63 )
Settlement due from customers 75 (290 )
Prepaid expenses (522 ) (522 )
Accrued litigation and legal settlements 107 (49 )
Accounts payable (18 ) 37
Settlement due to customers (50 ) 261
Accrued expenses (120 )
Net change in other assets and liabilities 96   96  
Net cash provided by operating activities 2,067   1,732  
Investing Activities
Purchases of investment securities available-for-sale (561 ) (789 )
Purchases of investments held-to-maturity (139 ) (744 )
Proceeds from sales of investment securities available-for-sale 107 716
Proceeds from maturities of investment securities available-for-sale 162 322
Proceeds from maturities of investments held-to-maturity 130
Acquisition of businesses, net of cash acquired (584 )
Purchases of property, plant and equipment (101 ) (56 )
Capitalized software (80 ) (87 )
Increase in restricted cash for litigation settlement (2 ) (1 )
Other investing activities (11 ) 1  
Net cash used in investing activities (495 ) (1,222 )
Financing Activities
Purchases of treasury stock (1,819 ) (1,795 )
Dividends paid (421 ) (367 )
Tax benefit for share-based payments 33 34
Cash proceeds from exercise of stock options 16 21
Other financing activities (3 ) (9 )
Net cash used in financing activities (2,194 ) (2,116 )
Effect of exchange rate changes on cash and cash equivalents 51   (170 )
Net decrease in cash and cash equivalents (571 ) (1,776 )
Cash and cash equivalents - beginning of period 5,747   5,137  
Cash and cash equivalents - end of period $ 5,176   $ 3,361  
 
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 June 30, 2016
All MasterCard Credit, GDV     Growth     Growth     Purchase

Volume

    Growth     Purchase

Trans.

    Cash

Volume

    Growth     Cash

Trans.

    Accounts     Cards
Charge and Debit Programs (Bil.)     (USD)     (Local)     (Bil.)     (Local)     (Mil.)     (Bil.)     (Local)     (Mil.)     (Mil.)     (Mil.)
APMEA $ 371 7.9 % 12.8 % $ 247 11.0 % 3,565 $ 124 16.7 % 1,259 547 584
Canada 36 5.8 % 10.9 % 34 10.7 % 511 2 13.8 % 6 43 49
Europe 351 9.7 % 13.7 % 234 8.8 % 5,158 117 25.0 % 888 412 427
Latin America   79 -1.6 % 14.7 %   47 14.8 % 1,558   32 14.6 % 248 149 167
Worldwide less United States 837 7.6 % 13.3 % 562 10.3 % 10,792 275 19.8 % 2,401 1,151 1,227
United States   391 7.5 % 7.5 %   335 8.0 % 6,169   56 4.8 % 351 349 384
Worldwide 1,228 7.6 % 11.4 % 897 9.4 % 16,961 331 17.0 % 2,752 1,500 1,611
 
MasterCard Credit and Charge Programs
Worldwide less United States 458 2.7 % 7.9 % 419 8.4 % 6,213 39 2.5 % 189 526 583
United States   184 6.9 % 6.9 %   177 6.9 % 2,018   8 5.8 % 9 164 195
Worldwide 642 3.9 % 7.6 % 596 8.0 % 8,231 46 3.0 % 198 690 778
 
MasterCard Debit Programs
Worldwide less United States 379 14.2 % 20.5 % 143 16.3 % 4,579 236 23.2 % 2,213 625 644
United States   207 8.1 % 8.1 %   159 9.2 % 4,152   49 4.7 % 342 185 189
Worldwide 586 11.9 % 15.8 % 302 12.4 % 8,730 285 19.6 % 2,554 810 833
 
 
For the 6 Months ended June 30, 2016
All MasterCard Credit, GDV Growth Growth Purchase

Volume

Growth Purchase

Trans.

Cash

Volume

Growth Cash

Trans.

Accounts Cards
Charge and Debit Programs (Bil.)     (USD)     (Local)     (Bil.)     (Local)     (Mil.)     (Bil.)     (Local)     (Mil.)     (Mil.)     (Mil.)
APMEA $ 720 6.9 % 12.8 % $ 479 11.3 % 6,831 $ 241 16.0 % 2,468 547 584
Canada 65 2.2 % 9.9 % 62 10.2 % 956 4 4.8 % 11 43 49
Europe 668 10.4 % 15.7 % 451 11.4 % 10,014 217 25.8 % 1,684 412 427
Latin America   152 -5.1 % 14.6 %   89 14.9 % 3,041   63 14.1 % 486 149 167
Worldwide less United States 1,606 6.8 % 14.1 % 1,082 11.6 % 20,842 524 19.6 % 4,649 1,151 1,227
United States   764 8.6 % 8.6 %   652 9.1 % 11,942   112 6.0 % 689 349 384
Worldwide 2,369 7.4 % 12.3 % 1,733 10.6 % 32,783 636 16.9 % 5,339 1,500 1,611
 
MasterCard Credit and Charge Programs
Worldwide less United States 879 1.4 % 8.2 % 804 8.8 % 11,988 75 2.3 % 366 526 583
United States   354 9.1 % 9.1 %   339 8.9 % 3,861   15 11.8 % 18 164 195
Worldwide 1,233 3.5 % 8.5 % 1,143 8.9 % 15,849 90 3.7 % 384 690 778
 
MasterCard Debit Programs
Worldwide less United States 727 14.1 % 22.0 % 278 20.3 % 8,853 449 23.0 % 4,283 625 644
United States   410 8.3 % 8.3 %   313 9.3 % 8,081   97 5.1 % 671 185 189
Worldwide 1,137 11.9 % 16.7 % 590 14.2 % 16,934 546 19.4 % 4,954 810 833
 
 
For the 3 Months ended June 30, 2015
All MasterCard Credit, GDV Growth Growth Purchase

Volume

Growth Purchase

Trans.

Cash

Volume

Growth Cash

Trans.

Accounts Cards
Charge and Debit Programs (Bil.)     (USD)     (Local)     (Bil.)     (Local)     (Mil.)     (Bil.)     (Local)     (Mil.)     (Mil.)     (Mil.)
APMEA $ 344 7.3 % 15.1 % $ 232 15.7 % 2,907 $ 112 14.1 % 1,074 476 509
Canada 34 3.8 % 17.3 % 33 19.2 % 453 2 -8.2 % 6 39 45
Europe 320 -7.1 % 16.4 % 220 14.9 % 4,389 100 19.8 % 756 371 389
Latin America   80 -9.1 % 15.4 %   47 18.3 % 1,386   33 11.6 % 225 139 157
Worldwide less United States 778 -1.0 % 15.8 % 532 15.8 % 9,135 247 15.7 % 2,061 1,025 1,100
United States   364 7.2 % 7.2 %   310 7.1 % 5,582   54 7.6 % 344 326 360
Worldwide 1,142 1.5 % 12.9 % 842 12.4 % 14,718 300 14.2 % 2,404 1,351 1,460
 
MasterCard Credit and Charge Programs
Worldwide less United States 446 -3.1 % 11.3 % 406 12.6 % 5,544 40 -0.6 % 189 510 572
United States   172 6.7 % 6.7 %   165 6.4 % 1,836   7 13.4 % 9 155 186
Worldwide 618 -0.5 % 10.0 % 571 10.8 % 7,380 48 1.3 % 198 665 757
 
MasterCard Debit Programs
Worldwide less United States 332 2.0 % 22.4 % 126 27.2 % 3,591 206 19.6 % 1,871 515 528
United States   192 7.6 % 7.6 %   145 7.9 % 3,746   46 6.8 % 335 171 174
Worldwide 524 4.0 % 16.5 % 271 16.1 % 7,338 252 17.0 % 2,206 686 702
 
 
For the 6 Months ended June 30, 2015
All MasterCard Credit, GDV Growth Growth Purchase

Volume

Growth Purchase

Trans.

Cash

Volume

Growth Cash

Trans.

Accounts Cards
Charge and Debit Programs (Bil.)     (USD)     (Local)     (Bil.)     (Local)     (Mil.)     (Bil.)     (Local)     (Mil.)     (Mil.)     (Mil.)
APMEA $ 674 8.1 % 15.1 % $ 452 15.4 % 5,588 $ 222 14.5 % 2,099 476 509
Canada 64 3.1 % 16.3 % 60 18.3 % 846 4 -8.9 % 11 39 45
Europe 605 -7.7 % 15.8 % 420 14.1 % 8,329 185 19.8 % 1,427 371 389
Latin America   160 -6.1 % 15.2 %   95 18.7 % 2,725   65 10.4 % 439 139 157
Worldwide less United States 1,504 -0.6 % 15.4 % 1,028 15.3 % 17,488 476 15.7 % 3,976 1,025 1,100
United States   703 6.9 % 6.9 %   597 7.1 % 10,698   106 5.7 % 669 326 360
Worldwide 2,206 1.7 % 12.6 % 1,625 12.2 % 28,187 581 13.7 % 4,645 1,351 1,460
 
MasterCard Credit and Charge Programs
Worldwide less United States 867 -2.4 % 11.1 % 788 12.5 % 10,707 79 -0.9 % 368 510 572
United States   324 6.0 % 6.0 %   311 6.3 % 3,445   13 1.2 % 16 155 186
Worldwide 1,191 -0.2 % 9.7 % 1,099 10.7 % 14,151 93 -0.6 % 384 665 757
 
MasterCard Debit Programs
Worldwide less United States 637 2.0 % 21.9 % 240 25.7 % 6,781 396 19.7 % 3,607 515 528
United States   379 7.6 % 7.6 %   286 8.0 % 7,254   92 6.3 % 654 171 174
Worldwide 1,015 4.0 % 16.1 % 526 15.4 % 14,035 489 16.9 % 4,261 686 702
 
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 and MasterCard Electronic™-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.

In 2015 Q3, several customers purged inactive MasterCard cards and accounts. Data for the comparable periods has been revised to be consistent with this approach.

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 June 30,      

Percent

Increase/(Decrease)

2016       2015
Actual      

Special

Item

     

Non-

GAAP 1

Actual      

Special

Item

     

Non-

GAAP 1

Actual      

Special

Items

     

Non-

GAAP 1

Total operating expenses $ 1,314 $ (107 ) $ 1,207 $ 1,139 $ (61 ) $ 1,078 15 % 3 % 12 %
Operating income $ 1,380 $ 107 $ 1,487 $ 1,251 $ 61 $ 1,312 10 % (3 )% 13 %
Operating Margin 51.2 % 55.2 % 52.4 % 54.9 %
Income tax expense $ 382 $ 29 $ 411 $ 320 $ 17 $ 337 20 % (2 )% 22 %
Effective Tax Rate 28.0 % 27.9 % 25.7 % 25.8 %
Net Income $ 983 $ 78 $ 1,061 $ 921 $ 44 $ 965 7 % (3 )% 10 %
Diluted Earnings per Share $ 0.89 $ 0.07 $ 0.96 $ 0.81 $ 0.04 $ 0.85 10 % (3 )% 13 %
 
 
Six Months Ended June 30,

Percent

Increase/(Decrease)

2016 2015
Actual

Special

Item

Non-

GAAP 1

Actual

Special

Item

Non-

GAAP 1

Actual

Special

Items

Non-

GAAP 1

Total operating expenses $ 2,412 $ (107 ) $ 2,305 $ 2,018 $ (61 ) $ 1,957 20 % 2 % 18 %
Operating income $ 2,728 $ 107 $ 2,835 $ 2,602 $ 61 $ 2,663 5 % (1 )% 6 %
Operating Margin 53.1 % 55.2 % 56.3 % 57.7 %
Income tax expense $ 760 $ 29 $ 789 $ 640 $ 17 $ 657 19 % (1 )% 20 %
Effective Tax Rate 28.1 % 28.1 % 24.8 % 24.9 %
Net income $ 1,942 $ 78 $ 2,020 $ 1,941 $ 44 $ 1,985 % (2 )% 2 %
Diluted Earnings per Share $ 1.75 $ 0.07 $ 1.82 $ 1.69 $ 0.04 $ 1.73 4 % (1 )% 5 %
 
Note: Figures may not sum due to rounding
 
1 Represents effect of excluding the U.K. merchant litigation provisions
 

Source: MasterCard Investor Relations

MasterCard Incorporated

Investor Relations:

Barbara Gasper or Jesal Meswani, 914-249-4565

investor.relations@mastercard.com

or

Media Relations:

Seth Eisen, 914-249-3153

Seth.Eisen@mastercard.com

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