MasterCard : Q4 & FY Earnings Earnings Release

Earnings Release

Mastercard Incorporated Reports Fourth-Quarter and Full-Year 2018 Financial Results

• • Fourth-quarter net income of $0.9 billion, or $0.87 per diluted share

• • Fourth-quarter adjusted net income of $1.6 billion, or $1.55 per adjusted diluted share

• • Fourth-quarter net revenue of $3.8 billion, or an increase of 15%

• • Fourth-quarter gross dollar volume up 14% and purchase volume up 15%

Purchase, NY - January 31, 2019 - Mastercard Incorporated (NYSE: MA) today announced financial results for the fourth-quarter and full-year 2018.

"We had a very strong end to the year, bringing 2018 to a record close, driven by broad-based growth across each of our regions," said Ajay Banga, Mastercard president and CEO. "These results reflect strong execution in growing our core business and driving new capabilities to improve the customer experience and enhance security across all transaction types. When you combine this with the strategic investments we've made for the long term, we are very well positioned for continued growth."

Quarterly Results

Summary of Fourth-Quarter Operating Results

Increase / (Decrease)

Amounts in billions ($), except per share data

Q4 2018 Q4 2017

Net revenue

$3.8

$3.3

15%

17%

Operating expenses Operating income Operating margin Effective income tax rate Net income

$2.6 $1.8

$1.2 $1.5

32.4% 46.0%

Currency-

Reported
GAAP	neutral
44%	46%
(19)%	(17)%
(13.5) ppt	(13.3) ppt

26.0% 84.7%(58.7) ppt(59.7) ppt

$0.9 $0.2

296% 334%

Diluted earnings per share

$0.87 $0.21

314% 358%

Summary of Fourth-Quarter Non-GAAP Results1

Increase / (Decrease)

Amounts in billions ($), except per share data

Currency-Q4 2018

Q4 2017

As adjustedneutral

Net revenue

$3.8

$3.3

15%

17%

Adjusted operating expenses Adjusted operating margin Adjusted effective income tax rate Adjusted net income

$1.8

$1.6

12%

52.3%

• 51.0% 1.3 ppt

  18.3%

• 26.8% (8.5) ppt

14% 1.4 ppt (8.4) ppt

$1.6

Adjusted diluted earnings per share

$1.55

$1.2 $1.14

33% 36%

36% 40%

1 The Summary of Non-GAAP Results excludes the impact of special items ("Special Items") and/or foreign currency. See Non-GAAP reconciliations starting on page 13 for further information on the Special Items, the impact of foreign currency and the reconciliation to GAAP reported amounts.

-more-

The following additional details are provided to aid in understanding Mastercard's fourth-quarter 2018 results, versus the year-ago period:

• • Net revenue increased 15% as reported, or 17% on a currency-neutral basis. The new revenue recognition rules contributed 5 percentage points to this growth. Excluding this item, underlying revenue growth was 12%, driven by the impact of the following factors:

  An increase in switched transactions of 17%.1, 2

  A 14% increase in gross dollar volume, on a local currency basis, to $1.5 trillion. An increase in cross-border volumes of 17% on a local currency basis.1

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

• • Total operating expenses increased 44%, or 46% on a currency-neutral basis. Excluding the impact of Special Items, adjusted operating expenses increased 12%, or 14% on a currency-neutral basis. This includes a 2 percentage point increase related to the new revenue recognition rules and acquisitions. The remaining operating expense growth of 12% was primarily related to the company's continued investments in strategic initiatives.

• • Other income (expense) was favorable versus the year ago period, primarily due to higher investment income, partially offset by higher interest expense related to the company's debt issuance in February 2018 and higher equity losses in the current year.

• • The effective tax rate for the fourth quarter of 2018 was 26.0%, versus 84.7% for the comparable period in 2017, primarily due to the impact of U.S. tax reform recorded in 2017 and a lower 2018 statutory tax rate in the U.S. These benefits are offset by the nondeductibility of the European Commission fine. Excluding Special Items, the adjusted effective tax rate for the fourth quarter was 18.3%, versus 26.8% for the comparable period in 2017. On an adjusted basis, U.S. tax reform contributed approximately 7.8 percentage points to the lower tax rate, versus year ago.

• • As of December 31, 2018, the company's customers had issued 2.5 billion Mastercard and Maestro-branded cards, adjusted for the impact of the Venezuela deconsolidation.

Return of Capital to Shareholders

During the fourth quarter of 2018, Mastercard repurchased approximately 4.4 million shares at a cost of $888 million and paid $259 million in dividends. Quarter-to-date through January 30, the company repurchased an additional 4.0 million shares at a cost of $773 million, which leaves $6.0 billion remaining under current repurchase program authorizations.

• 1 Adjusted to normalize for the effects of differing switching days between periods.

• 2 Adjusted for the impact of the Venezuela deconsolidation.

Full-Year 2018 Results

Summary of Full-Year Operating Results

Increase / (Decrease)

Amounts in billions ($), except per share data

FY 2018 FY 2017

Net revenue

$15.0 $12.5

Operating expenses Operating income Operating margin Effective income tax rate Net income

$7.7 $5.9

$7.3 $6.6

48.7% 53.0%

Currency-

Reported
GAAP	neutral
20%	20%
31%	30%
10%	10%
(4.3) ppt	(4.3) ppt

18.7% 40.0%(21.3) ppt(21.1) ppt

$5.9 $3.9

50% 49%

Diluted earnings per share

$5.60 $3.65

53% 53%

Summary of Full-Year Non-GAAP Results1

Increase / (Decrease)

Amounts in billions ($), except per share data

Currency-FY 2018

FY 2017

As adjustedneutral

Net revenue

$15.0

Adjusted operating expenses Adjusted operating margin Adjusted effective income tax rate Adjusted net income

$6.5

$12.5 $5.7

20% 20%

15% 15%

56.2%

• 54.4% 1.8 ppt

  18.5%

• 26.8% (8.3) ppt

1.8 ppt (8.2) ppt

$6.8

Adjusted diluted earnings per share

$6.49

$4.9 $4.58

38% 38%

42% 41%

1 The Summary of Non-GAAP Results excludes the impact of special items ("Special Items") and/or foreign currency. See Non-GAAP reconciliations starting on page 14 for further information on the Special Items, the impact of foreign currency and the reconciliation to GAAP reported amounts.

The following additional details are provided to aid in understanding Mastercard's full-year 2018 results, versus the year-ago period:

• • Net revenue increased 20% as reported and on a currency-neutral basis. The new revenue recognition rules and acquisitions contributed 4 percentage points and 0.5 percentage points to this growth, respectively. Excluding these items, revenue growth was 15%, driven by the impact of the following factors:

  An increase in switched transactions of 17%.2,3

  An increase in cross-border volumes of 18% on a local currency basis.2

  A 14% increase in gross dollar volume, on a local currency basis, to $5.9 trillion.

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

• • Total operating expenses increased 31%, or 30% on a currency-neutral basis. Excluding the impact of Special Items, adjusted operating expenses increased 15%, both as adjusted and on a currency-neutral basis. Acquisitions and the contribution to the Mastercard Impact Fund (formerly referred to as Mastercard's Center for Inclusive Growth Fund), a non-profit charitable organization, each contributed 2 percentage points of growth and the new revenue recognition rules contributed 3 percentage points of growth. Excluding these items, operating expenses grew at 8%, primarily related to the company's continued investments in strategic initiatives.

• 2 Adjusted to normalize for the effects of differing switching days between periods.

• 3 Adjusted for the impact of the Venezuela deconsolidation.

• • Other income (expense) was favorable versus the year ago period, primarily due to higher investment income, partially offset by higher interest expense related to the company's debt issuance in February 2018 and higher equity losses in the current year.

• • The effective tax rate for the full-year 2018 was 18.7%, versus 40.0% for the comparable period in 2017, primarily due to the impact of the U.S. tax reform recorded in 2017 and a lower 2018 statutory tax rate in the U.S. These benefits are offset by the nondeductibility of the European Commission fine. Excluding Special Items, the adjusted effective tax rate for the full-year 2018 was 18.5%, versus 26.8% for the comparable period in 2017. On an adjusted basis, U.S. tax reform contributed approximately 4.8 percentage points to the lower tax rate, versus year ago.

Return of Capital to Shareholders

For the full year of 2018, Mastercard repurchased approximately 26.2 million shares at a cost of $4.9 billion and paid $1.0 billion in dividends.

Fourth-Quarter and Full-Year Financial Results Conference Call Details

At 9:00 a.m. ET today, the company will host a conference call to discuss its fourth-quarter and full-year 2018 results.

The dial-in information for this call is 833-236-5755 (within the U.S.) and 647-689-4183 (outside the U.S.). A replay of the call will be available for 30 days and can be accessed by dialing 800-585-8367 (within the U.S.) and 416-621-4642 (outside the U.S.), using passcode 4187924.

This call can also be accessed through the Investor Relations section of the company's website atwww.mastercard.com/investor. Presentation slides used on this call will also be 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 represents 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. Our global payments processing network connects 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 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:

• • direct regulation of the payments industry (including regulatory, legislative and litigation activity with respect to 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 directly or indirectly subject based on our participation in the payments industry (including anti-money laundering and economic sanctions, financial sector oversight, real-time account-based payment systems, issuer practice regulation and regulation of internet and digital transactions)

• • the impact of changes in laws, including the recent U.S. tax legislation, regulations and interpretations thereof, or challenges to our tax positions

• • regulation of privacy, data protection and security

• • potential or incurred liability and limitations on business resulting from litigation

• • the impact of competition in the global payments industry (including disintermediation and pricing pressure)

• • the challenges relating to rapid technological developments and changes

• • the challenges relating to operating an account-based payment system in addition to our core network and to working with new customers and end users

• • the impact of information security incidents, account data breaches, fraudulent activity or service disruptions on our business

• • issues related to our relationships with our financial institution customers (including loss of substantial business from significant customers, competitor relationships with our customers and banking industry consolidation)