MasterCard Incorporated Reports Second-Quarter 2016 Financial Results

PURCHASE, N.Y.--(BUSINESS WIRE)--

MasterCard Incorporated 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 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

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