Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2024
Or
☐
o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 001-32877
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Mastercard Incorporated
(Exact name of registrant as specified in its charter)
Delaware13-4172551
Delaware13-4172551
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification Number)
2000 Purchase Street10577
Purchase, NYNY(Zip Code)
(Address of principal executive offices)
(914) 249-2000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange of which registered
Class A Common Stock, par value $0.0001 per shareMANew York Stock Exchange
2.1% Notes due 2027MA27New York Stock Exchange
1.0% Notes due 2029MA29ANew York Stock Exchange
2.5% Notes due 2030MA30New York Stock Exchange
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x     No  o
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes☒No☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files)Yes
☒


No
☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filerxAccelerated filer
o
Non-accelerated filer
o (do not check if a smaller reporting company)
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐o
Emerging growth company☐o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)oYes☐No☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  o   No  x
As of OctoberApril 26, 2017,2024, there were 1,043,602,880922,470,031 shares outstanding of the registrant’s Class A common stock, par value $0.0001 per share; and 15,060,7577,145,369 shares outstanding of the registrant’s Class B common stock, par value $0.0001 per share.



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MASTERCARD INCORPORATED
FORM 10-Q

TABLE OF CONTENTS
Page
PART I — FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)5
Consolidated Balance Sheet — September 30, 2017 and December 31, 201626
Consolidated Statement of Operations — Three and Nine Months Ended September 30, 2017 and 201636
Consolidated Statement of Comprehensive Income — Three and Nine Months Ended September 30, 2017 and 201637
PART II
39
Consolidated Statement of Changes in Equity — Nine Months Ended September 30, 201739
Consolidated Statement of Cash Flows — Nine Months Ended September 30, 2017 and 201639
Unregistered sales of equity securities, use of proceeds and issuer purchases of equity securities
Notes to Consolidated Financial Statements40
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS40
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK42
-
ITEM 4. CONTROLS AND PROCEDURES
41
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
42
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
43
ITEM 1A. RISK FACTORS
43
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
43
ITEM 5. OTHER INFORMATION
43
ITEM 6. EXHIBITS
43
SIGNATURES
44



2 MASTERCARD MARCH 31, 2024 FORM 10-Q

2
Table of Contents


In this Report on Form 10-Q (“Report”), references to the “Company,” “Mastercard,” “we,” “us” or “our” refer to the Mastercard brand generally, and to the business conducted by Mastercard Incorporated and its consolidated subsidiaries, including our operating subsidiary, Mastercard International Incorporated.Incorporated, and to the Mastercard brand.
Forward-Looking Statements
This Report 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 Report, 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 Company’s future prospects, developments and business strategies.
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:
•regulation related to the payments system-related legalindustry (including regulatory, legislative and regulatory challenges (includinglitigation activity with respect to interchange fees, surchargingrates and the extension of current regulatory activity to additional jurisdictions or products)surcharging)
•the impact of preferential or protective government actions
•regulation of privacy, data, protectionAI, information security and securitythe digital economy
•regulation that directly or indirectly applies to which we are subjectus based on our participation in the global payments industry (including payments oversight, anti-money laundering, andcountering the financing of terrorism, economic sanctions financial sector oversight,and anti-corruption, account-based payments systems, and issuer practice regulation and regulationacquirer practices regulation)
•the impact of internetchanges in tax laws, as well as regulations and digital transactions)interpretations of such laws or challenges to our tax positions
•potential or incurred liability and limitations on business resulting fromrelated to any litigation or litigation settlements
•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 a real-time account-based payments system and to working with new customers and end users
•the impact of information security failures,incidents, account data breaches or service disruptions on our business
•issues related to our relationships with our financial institution customersstakeholders (including loss of substantial business from significant customers, competitor relationships with our customers, consolidation amongst our customers, merchants’ continued focus on acceptance costs and banking industry consolidation)unique risks from our work with governments)
the impact of our relationships with other stakeholders, including merchants and governments
exposure to loss or illiquidity due to settlement guarantees and other significant third-party obligations
•the impact of global economic, political, financial and politicalsocietal events and conditions, (including global financial market activity, declines in cross-border activity, negative trends in consumer spending and the effect ofincluding adverse currency fluctuation)fluctuations and foreign exchange controls
•reputational impact, including impact related to brand perception account data breaches and fraudulent activitylack of visibility of our brands in products and services
•the impact of environmental, social and governance matters and related stakeholder reaction
•the inability to attract and retain a highly qualified and diverse workforce, or maintain our corporate culture
•issues related to acquisition integration, strategic investments and entry into new businesses
•exposure to loss or illiquidity due to our role as guarantor as well as other contractual obligations and discretionary actions we may take
•issues related to our Class A common stock and corporate governance structure
Please see a complete discussion of these risk factors in Part I, Item 1A - Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2023. We caution you that the important factors referenced above may not contain all of the factors that are important to you. Our forward-looking statements speak only as of the date of this Report or as of the date they are made, and we undertake no obligation to update our forward-looking statements.


MASTERCARD MARCH 31, 2024 FORM 10-Q 3

PART I


3
Table of Contents


PART I — FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Item 1. Consolidated financial statements (unaudited)
Mastercard Incorporated
Index to consolidated financial statements (unaudited)
Page
Consolidated Statement of Operations — Three Months Ended March 31, 2024 and 2023
6
Consolidated Statement of Comprehensive Income — Three Months Ended March 31, 2024 and 2023
7
8
Consolidated Statement of Changes in Equity —Three Months Ended March 31, 2024 and 2023
9
Consolidated Statement of Cash Flows — Three Months Ended March 31, 2024 and 2023
10
11

MASTERCARD INCORPORATEDMARCH 31, 2024 FORM 10-Q 5
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
 September 30, 2017 December 31, 2016
 (in millions, except per share data)
ASSETS   
Cash and cash equivalents$5,559
 $6,721
Restricted cash for litigation settlement545
 543
Investments1,864
 1,614
Accounts receivable1,858
 1,416
Settlement due from customers1,199
 1,093
Restricted security deposits held for customers1,026
 991
Prepaid expenses and other current assets1,180
 850
Total Current Assets13,231
 13,228
Property, plant and equipment, net of accumulated depreciation of $692 and $603, respectively901
 733
Deferred income taxes425
 307
Goodwill3,015
 1,756
Other intangible assets, net of accumulated amortization of $1,108 and $974, respectively1,147
 722
Other assets2,195
 1,929
Total Assets$20,914
 $18,675
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY   
Accounts payable$722
 $609
Settlement due to customers1,002
 946
Restricted security deposits held for customers1,026
 991
Accrued litigation709
 722
Accrued expenses3,685
 3,318
Other current liabilities840
 620
Total Current Liabilities7,984
 7,206
Long-term debt5,393
 5,180
Deferred income taxes139
 81
Other liabilities860
 524
Total Liabilities14,376
 12,991
    
Commitments and Contingencies
 
    
Redeemable Non-controlling Interests
70
 —
    
Stockholders’ Equity
 
Class A common stock, $0.0001 par value; authorized 3,000 shares, 1,380 and 1,374 shares issued and 1,045 and 1,062 outstanding, respectively—
 —
Class B common stock, $0.0001 par value; authorized 1,200 shares, 15 and 19 issued and outstanding, respectively—
 —
Additional paid-in-capital4,318
 4,183
Class A treasury stock, at cost, 335 and 312 shares, respectively(19,735) (17,021)
Retained earnings22,401
 19,418
Accumulated other comprehensive income (loss)(542) (924)
Total Stockholders’ Equity6,442
 5,656
Non-controlling interests26
 28
Total Equity6,468
 5,684
Total Liabilities, Redeemable Non-controlling Interests and Equity$20,914
 $18,675

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Statement of Operations (Unaudited)
 Three Months Ended March 31,
 20242023
 (in millions, except per share data)
Net Revenue$6,348 $5,748 
Operating Expenses:
General and administrative2,286 2,043 
Advertising and marketing116 167 
Depreciation and amortization216 191 
Provision for litigation126 211 
Total operating expenses2,744 2,612 
Operating income3,604 3,136 
Other Income (Expense):
Investment income95 55 
Gains (losses) on equity investments, net6 (212)
Interest expense(150)(132)
Other income (expense), net3 6 
Total other income (expense)(46)(283)
Income before income taxes3,558 2,853 
Income tax expense547 492 
Net Income$3,011 $2,361 
Basic Earnings per Share$3.23 $2.48 
Basic weighted-average shares outstanding933 953 
Diluted Earnings per Share$3.22 $2.47 
Diluted weighted-average shares outstanding935 956 

The accompanying notes are an integral part of these consolidated financial statements.



6 MASTERCARD MARCH 31, 2024 FORM 10-Q
4

PART I
Table of ContentsITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Consolidated Statement of Comprehensive Income (Unaudited)
 Three Months Ended March 31,
 20242023
 (in millions)
Net Income$3,011 $2,361 
Other comprehensive income (loss):
Foreign currency translation adjustments(168)94 
Income tax effect9 (14)
Foreign currency translation adjustments, net of income tax effect(159)80 
Translation adjustments on net investment hedges47 (74)
Income tax effect(11)17 
Translation adjustments on net investment hedges, net of income tax effect36 (57)
Cash flow hedges22 (10)
Income tax effect(5)— 
Reclassification adjustments for cash flow hedges5 8 
Income tax effect(2)1 
Cash flow hedges, net of income tax effect20 (1)
Investment securities available-for-sale— 2 
Income tax effect— — 
Investment securities available-for-sale, net of income tax effect— 2 
Other comprehensive income (loss), net of income tax effect(103)24 
Comprehensive Income$2,908 $2,385 
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)


 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
 (in millions, except per share data)
Net Revenue$3,398
 $2,880
 $9,185
 $8,020
Operating Expenses       
General and administrative1,136
 933
 3,162
 2,731
Advertising and marketing203
 184
 587
 503
Depreciation and amortization118
 93
 321
 281
Provision for litigation settlement—
 —
 15
 107
Total operating expenses1,457
 1,210
 4,085
 3,622
Operating income1,941
 1,670
 5,100
 4,398
Other Income (Expense)       
Investment income15
 12
 44
 32
Interest expense(35) (23) (113) (65)
Other income (expense), net11
 (26) 7
 (30)
Total other income (expense)(9) (37) (62) (63)
Income before income taxes1,932
 1,633
 5,038
 4,335
Income tax expense502
 449
 1,350
 1,209
Net Income$1,430
 $1,184
 $3,688
 $3,126
        
Basic Earnings per Share$1.34
 $1.08
 $3.45
 $2.84
Basic Weighted-Average Shares Outstanding1,063
 1,096
 1,071
 1,101
Diluted Earnings per Share$1.34
 $1.08
 $3.43
 $2.83
Diluted Weighted-Average Shares Outstanding1,068
 1,099
 1,075
 1,104


The accompanying notes are an integral part of these consolidated financial statements.




5MASTERCARD MARCH 31, 2024 FORM 10-Q 7

PART I
Table of ContentsITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Consolidated Balance Sheet (Unaudited)
March 31, 2024December 31, 2023
 (in millions, except per share data)
Assets
Current assets:
Cash and cash equivalents$7,293 $8,588 
Restricted security deposits held for customers1,861 1,845 
Investments364 592 
Accounts receivable4,231 4,060 
Settlement assets1,647 1,233 
Prepaid expenses and other current assets3,028 2,643 
Total current assets18,424 18,961 
Property, equipment and right-of-use assets, net of accumulated depreciation and amortization of $2,304 and $2,237, respectively2,077 2,061 
Deferred income taxes1,329 1,355 
Goodwill7,545 7,660 
Other intangible assets, net of accumulated amortization of $2,284 and $2,209, respectively4,123 4,086 
Other assets9,104 8,325 
Total Assets$42,602 $42,448 
Liabilities, Redeemable Non-controlling Interests and Equity
Current liabilities:
Accounts payable$790 $834 
Settlement obligations1,824 1,399 
Restricted security deposits held for customers1,861 1,845 
Accrued litigation595 723 
Accrued expenses8,062 8,517 
Short-term debt2,086 1,337 
Other current liabilities1,687 1,609 
Total current liabilities16,905 16,264 
Long-term debt13,543 14,344 
Deferred income taxes345 369 
Other liabilities4,501 4,474 
Total Liabilities35,294 35,451 
Commitments and Contingencies
Redeemable Non-controlling Interests22 22 
Stockholders’ Equity
Class A common stock, $0.0001 par value; authorized 3,000 shares, 1,403 and 1,402 shares issued and 924 and 927 shares outstanding, respectively— — 
Class B common stock, $0.0001 par value; authorized 1,200 shares, 7 shares issued and outstanding— — 
Additional paid-in-capital5,920 5,893 
Class A treasury stock, at cost, 479 and 475 shares, respectively(62,434)(60,429)
Retained earnings64,959 62,564 
Accumulated other comprehensive income (loss)(1,202)(1,099)
Mastercard Incorporated Stockholders' Equity7,243 6,929 
Non-controlling interests43 46 
Total Equity7,286 6,975 
Total Liabilities, Redeemable Non-controlling Interests and Equity$42,602 $42,448 
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (in millions)
Net Income$1,430
 $1,184
 $3,688
 $3,126
Other comprehensive income (loss):       
Foreign currency translation adjustments199
 (2) 515
 3
Income tax effect(1) (5) —
 (10)
Foreign currency translation adjustments, net of income tax effect198
 (7) 515
 (7)
        
Translation adjustments on net investment hedge(65) (20) (207) (56)
Income tax effect23
 7
 75
 20
Translation adjustments on net investment hedge, net of income tax effect(42) (13) (132) (36)
        
Defined benefit pension and other postretirement plans—
 —
 (2) (1)
Income tax effect—
 —
 1
 —
Defined benefit pension and other postretirement plans, net of income tax effect—
 —
 (1) (1)
        
Investment securities available-for-sale1
 —
 (1) 5
Income tax effect—
 —
 1
 (2)
Investment securities available-for-sale, net of income tax effect1
 —
 —
 3
        
Other comprehensive income (loss), net of tax157
 (20) 382
 (41)
Comprehensive Income$1,587
 $1,164
 $4,070
 $3,085


The accompanying notes are an integral part of these consolidated financial statements.


8 MASTERCARD INCORPORATEDMARCH 31, 2024 FORM 10-Q
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
 Stockholders’ Equity    
 Common Stock 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Additional
Paid-In
Capital
 
Class A
Treasury
Stock
 
Non-
Controlling
Interests
 Total Equity
 Class A Class B   
 (in millions, except per share data)
Balance at December 31, 2016$—
 $—
 $19,418
 $(924) $4,183
 $(17,021) $28
 $5,684
Net income—
 —
 3,688
 —
 —
 —
 —
 3,688
Activity related to non-controlling interests—
 —
 —
 —
 —
 —
 (2) (2)
Other comprehensive income (loss), net of tax—
 —
 —
 382
 —
 —
 —
 382
Cash dividends declared on Class A and Class B common stock, $0.66 per share—
 —
 (705) —
 —
 —
 —
 (705)
Purchases of treasury stock—
 —
 —
 —
 —
 (2,718) —
 (2,718)
Share-based payments—
 —
 —
 —
 135
 4
 —
 139
Balance at September 30, 2017$—
 $—
 $22,401
 $(542) $4,318
 $(19,735) $26
 $6,468


PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Statement of Changes in Equity (Unaudited)
Stockholders’ Equity
Common StockAdditional
Paid-In
Capital		Class A
Treasury
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Mastercard Incorporated Stockholders’ EquityNon-
Controlling
Interests		Total Equity
Class AClass B
(in millions)
Three Months Ended
March 31, 2024
Balance at beginning of period$— $— $5,893 $(60,429)$62,564 $(1,099)$6,929 $46 $6,975 
Net income— — — — 3,011 — 3,011 — 3,011 
Activity related to non-controlling interests— — — — — — — (3)(3)
Redeemable non-controlling interest adjustments— — — — (1)— (1)— (1)
Other comprehensive income (loss)— — — — — (103)(103)— (103)
Dividends— — — — (615)— (615)— (615)
Purchases of treasury stock— — — (2,013)— — (2,013)— (2,013)
Share-based payments— — 27 8 — — 35 — 35 
Balance at end of period$— $— $5,920 $(62,434)$64,959 $(1,202)$7,243 $43 $7,286 
Three Months Ended
March 31, 2023
Balance at beginning of period$— $— $5,298 $(51,354)$53,607 $(1,253)$6,298 $58 $6,356 
Net income— — — — 2,361 — 2,361 — 2,361 
Activity related to non-controlling interests— — — — — — — (2)(2)
Redeemable non-controlling interest adjustments— — — — (3)— (3)— (3)
Other comprehensive income (loss)— — — — — 24 24 — 24 
Dividends— — — — (541)— (541)— (541)
Purchases of treasury stock— — (2,894)— — (2,894)— (2,894)
Share-based payments— — 78 7 — — 85 — 85 
Balance at end of period$— $— $5,376 $(54,241)$55,424 $(1,229)$5,330 $56 $5,386 


The accompanying notes are an integral part of these consolidated financial statements.



MASTERCARD MARCH 31, 2024 FORM 10-Q 9
6

PART I
Table of ContentsITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Consolidated Statement of Cash Flows (Unaudited)
 Three Months Ended March 31,
 20242023
 (in millions)
Operating Activities
Net income$3,011 $2,361 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of customer incentives411 378 
Depreciation and amortization216 191 
(Gains) losses on equity investments, net(6)212 
Share-based compensation108 108 
Deferred income taxes3 (129)
Other32 2 
Changes in operating assets and liabilities:
Accounts receivable(219)(38)
Settlement assets(417)35 
Prepaid expenses(1,490)(761)
Accrued litigation and legal settlements(127)9 
Restricted security deposits held for customers16 40 
Accounts payable(21)(184)
Settlement obligations430 (241)
Accrued expenses(446)(506)
Net change in other assets and liabilities171 442 
Net cash provided by operating activities1,672 1,919 
Investing Activities
Purchases of investment securities available-for-sale(95)(50)
Purchases of investments held-to-maturity(66)(26)
Proceeds from sales of investment securities available-for-sale22 4 
Proceeds from maturities of investment securities available-for-sale67 51 
Proceeds from maturities of investments held-to-maturity284 24 
Purchases of property and equipment(157)(110)
Capitalized software(221)(242)
Purchases of equity investments(8)(22)
Proceeds from sales of equity investments— 44 
Other investing activities— (70)
Net cash used in investing activities(174)(397)
Financing Activities
Purchases of treasury stock(1,992)(2,878)
Dividends paid(616)(545)
Proceeds from debt, net— 1,489 
Tax withholdings related to share-based payments(170)(76)
Cash proceeds from exercise of stock options97 53 
Other financing activities— 2 
Net cash used in financing activities(2,681)(1,955)
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents(95)37 
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents(1,278)(396)
Cash, cash equivalents, restricted cash and restricted cash equivalents - beginning of period10,465 9,196 
Cash, cash equivalents, restricted cash and restricted cash equivalents - end of period$9,187 $8,800 
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
 Nine Months Ended September 30,
 2017 2016
 (in millions)
Operating Activities   
Net income$3,688
 $3,126
Adjustments to reconcile net income to net cash provided by operating activities:   
Amortization of customer and merchant incentives761
 629
Depreciation and amortization321
 281
Share-based compensation137
 110
Tax benefit for share-based payments—
 (44)
Deferred income taxes(56) (1)
Other22
 (24)
Changes in operating assets and liabilities:   
Accounts receivable(321) (190)
Settlement due from customers(105) (53)
Prepaid expenses(1,286) (818)
Accrued litigation and legal settlements(14) 12
Accounts payable85
 (33)
Settlement due to customers54
 171
Accrued expenses380
 247
Net change in other assets and liabilities128
 130
Net cash provided by operating activities3,794
 3,543
Investing Activities   
Purchases of investment securities available-for-sale(531) (751)
Purchases of investments held-to-maturity(925) (729)
Proceeds from sales of investment securities available-for-sale153
 164
Proceeds from maturities of investment securities available-for-sale371
 247
Proceeds from maturities of investments held-to-maturity872
 240
Purchases of property, plant and equipment(214) (156)
Capitalized software(87) (124)
Acquisition of businesses, net of cash acquired(1,175) —
Investment in nonmarketable equity investments(128) (14)
Other investing activities8
 (2)
Net cash used in investing activities(1,656) (1,125)
Financing Activities   
Purchases of treasury stock(2,731) (2,410)
Dividends paid(709) (630)
Payment of debt(64) —
Tax benefit for share-based payments—
 44
Tax withholdings related to share-based payments(46) (51)
Cash proceeds from exercise of stock options48
 31
Other financing activities8
 (3)
Net cash used in financing activities(3,494) (3,019)
Effect of exchange rate changes on cash and cash equivalents194
 59
Net decrease in cash and cash equivalents(1,162) (542)
Cash and cash equivalents - beginning of period6,721
 5,747
Cash and cash equivalents - end of period$5,559
 $5,205

The accompanying notes are an integral part of these consolidated financial statements.



10 MASTERCARD MARCH 31, 2024 FORM 10-Q
7

Table of Contents
PART I

MASTERCARD INCORPORATED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Notes to consolidated financial statements (unaudited)
Note 1. Summary of Significant Accounting Policies
Organization
Mastercard Incorporated and its consolidated subsidiaries, including Mastercard International Incorporated (“Mastercard International” and together with Mastercard Incorporated, “Mastercard” or the “Company”), is a technology company in the global payments industry thatindustry. Mastercard connects consumers, financial institutions, merchants, governments, digital partners, businesses and businessesother organizations worldwide by enabling them to use electronic forms of payment instead of cashpayments and checks. The Company facilitates the switching (authorization, clearing and settlement) ofmaking those payment transactions safe, simple, smart and delivers related products and services. The Company makes payments easier and more efficient by creating a wide range of payment solutions and services through a family of well-known brands, including Mastercard®, Maestro® and Cirrus®. The Company also provides value-added offerings such as safety and security products, information services and consulting, issuer and acquirer processing, and loyalty and reward programs. The Company’s network is designed to ensure safety and security for the global payments system. A typical transaction on the Company’s network involves four participants in addition to the Company: cardholder (an individual who holds a card or uses another device enabled for payment), merchant, issuer (the cardholder’s financial institution) and acquirer (the merchant’s financial institution). The Company’s customers encompass a vast array of entities, including financial institutions and other entities that act as “issuers” and “acquirers”, as well as merchants, governments, and other businesses. The Company does not issue cards, extend credit, determine or receive revenue from interest rates or other fees charged to cardholders by issuers, or establish the rates charged by acquirers in connection with merchants’ acceptance of the Company’s branded cards.accessible.
Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Mastercard and its majority-owned and controlled entities, including any variable interest entities (“VIEs”) for which the Company is the primary beneficiary. Investments in VIEs for which the Company is not considered the primary beneficiary are not consolidated and are accounted for as marketable, equity method or measurement alternative method investments and recorded in other assets on the consolidated balance sheet. At September 30, 2017March 31, 2024 and December 31, 2016,2023, there were no significant VIEs which required consolidation.consolidation and the investments were not considered material to the consolidated financial statements. The Company consolidates acquisitions as of the date in which the Company has obtained a controlling financial interest. Intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the 20172024 presentation. The reclassification had no impact on previously reported total net revenue, operating income or net income. The Company follows accounting principles generally accepted in the United States of America (“GAAP”).
The balance sheet as of December 31, 20162023 was derived from the audited consolidated financial statements as of December 31, 2016.2023. The consolidated financial statements for the three and nine months ended September 30, 2017March 31, 2024 and 20162023 and as of September 30, 2017March 31, 2024 are unaudited, and in the opinion of management, include all normal recurring adjustments that are necessary to present fairly the results for interim periods. The results of operations for the three and nine months ended September 30, 2017March 31, 2024 are not necessarily indicative of the results to be expected for the full year.
The accompanying unaudited consolidated financial statements are presented in accordance with the U.S. Securities and Exchange Commission (“SEC”) requirements for Quarterly Reports on Form 10-Q. Reference should be made to the Mastercard IncorporatedMastercard’s Annual Report on Form 10-K for the year ended December 31, 20162023 for additional disclosures, including a summary of the Company’s significant accounting policies.
Non-controlling interest
Note 2. Revenue
The Company’s disaggregated net revenue by category and geographic region were as follows:
Three Months Ended March 31,
20242023
(in millions)
Net revenue by category:
Payment network$3,920 $3,650 
Value-added services and solutions2,428 2,098 
Net revenue$6,348 $5,748 
Net revenue by geographic region:
Americas 1
$2,773 $2,537 
Asia Pacific, Europe, Middle East and Africa3,575 3,211 
Net revenue$6,348 $5,748 
1Americas includes the United States, Canada and Latin America. Prior period amounts are included in the consolidated statement of operations within other income (expense). For the three and nine months ended September 30, 2017 and 2016, activity from non-controlling interests was not materialhave been reclassified to conform to the respective period results.
Recent Accounting Pronouncements
Derivatives and Hedging - In August 2017, the Financial Accounting Standards Board (“FASB”) issued accounting guidance to improve and simplify existing guidance to allow companies to better reflect its risk management activities in the financial statements. The guidance expands the ability to hedge nonfinancial and financial risk components, eliminates the requirement to separately measure and recognize hedge ineffectiveness and eases requirements of an entity’s assessment of hedge effectiveness. This guidance is effective for periods beginning after December 15, 2018 and early adoption is permitted. The Company currently does not account for its foreign currency derivative contracts under hedge accounting. However, the Company is in the process of evaluating the potential impacts this guidance may have on its consolidated financial statements if it decides to account for these contracts under the new hedge accounting rules. For a more detailed

presentation.


8MASTERCARD MARCH 31, 2024 FORM 10-Q 11

PART I
MASTERCARD INCORPORATED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


discussionThe Company’s customers are generally billed weekly, with certain billings occurring on a monthly and quarterly basis. The frequency of billing is dependent upon the nature of the Company’s foreign exchange risk management activities, refer to Note 13 (Foreign Exchange Risk Management).
Net periodic pension costperformance obligation and net periodic postretirement benefit cost - In March 2017, the FASB issued accounting guidance to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. Under this guidance, the service cost component is required to be reported in the same line item as other compensation costs arising from services rendered by employees during the period. The other components of the net periodic benefit costs are required to be presented in the consolidated statement of operations separately from the service cost component and outside of operating income. This guidance is required to be applied retrospectively. This guidance is effective for periods beginning after December 15, 2017, and interim periods within those years, with early adoption permitted.underlying contractual terms. The Company will adopt this guidance effective January 1, 2018. The Company is in the process of evaluating the impacts this guidance will have on its consolidated financial statements and, at this time, does not expect the impactstypically offer extended payment terms to be material.
Goodwill impairment - In January 2017, the FASB issued accounting guidance to simplify how companies are required to test goodwill for impairment. Under this guidance, step 2 of the goodwill impairment test has been eliminated. Step 2 of the goodwill impairment test required companies to determine the implied fair value of the reporting unit’s goodwill. Under this guidance, companies will perform their annual, or interim, goodwill impairment test by comparing the reporting unit’s carrying value, including goodwill, to its fair value. An impairment charge would be recorded if the reporting unit’s carrying value exceeds its fair value. This guidance is required to be applied prospectively and is effective for periods beginning after December 15, 2019, with early adoption permitted. The Company adopted this guidance effective January 1, 2017 and there was no impact from the adoption of the new accounting guidance on its consolidated financial statements.
Restricted cash - In November 2016, the FASB issued accounting guidance to address diversity in the classification and presentation of changes in restricted cash on the consolidated statement of cash flows. Under this guidance, companies will be required to present restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the consolidated statement of cash flows. This guidance is required to be applied retrospectively and is effective for periods beginning after December 15, 2017, with early adoption permitted. The Company will adopt this guidance effective January 1, 2018. Upon adoption of this standard, the Company will include restricted cash, which currently consists primarily of restricted cash for litigation settlement and restricted security deposits held for customers in its reconciliation of beginning-of-period and end-of-period amounts shown on the consolidated statement of cash flows.
Intra-entity asset transfers - In October 2016, the FASB issued accounting guidance to simplify the accounting for income tax consequences of intra-entity transfers of assets other than inventory. Under this guidance, companies will be required to recognize the income tax consequences of an intra-entity asset transfer when the transfer occurs. This guidance must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the period of adoption. This guidance is effective for periods beginning after December 15, 2017 and early adoption is permitted. The Company will adopt this guidance effective January 1, 2018. The Company is in the process of evaluating the impacts this guidance will have on its consolidated financial statements. However, the Company expects that it will recognize a cumulative-effect adjustment to retained earnings upon adoption of the new guidance related to certain tax activity resulting from intra-entity asset transfers occurring before the date of adoption. For a more detailed discussion of an intra-entity transfer of intellectual property that occurred in the fourth quarter of 2014, refer to Note 17 (Income Taxes) to the consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2016.
Share-based payments - In March 2016, the FASBissued accounting guidance related to share-based payments to employees. The Company adopted this guidance on January 1, 2017. The adoption had the following impacts on the consolidated financial statements:
The Company is required to recognize the excess tax benefits and deficiencies from share-based awards in the consolidated statement of operations in the period in which they occurred rather than in additional paid-in-capital. For the three and nine months ended September 30, 2017, the Company recorded excess tax benefits of $9 million and $40 million, respectively, within income tax expense. The Company is also required to revise its calculation of diluted weighted-average shares outstanding by excluding the tax effects from the assumed proceeds available to repurchase shares. For the three and nine months ended September 30, 2017, diluted weighted-average shares


9
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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


outstanding included additional shares of 1 million for both periods as a result of the change in this calculation. For the three and nine months ended September 30, 2017, the net impact of adoption resulted in an increase of $0.01 and $0.03, respectively, to diluted earnings per share. Lastly, the Company is required to change the classification of these tax effects within the consolidated statement of cash flows and classify them as an operating activity rather than as a financing activity. Each of these above items have been adopted prospectively.
Retrospectively, the Company is required to change its classification of cash paid for employees withholding tax related to equity awards as a financing activity rather than as an operating activity within the consolidated statement of cash flows. As a result of this change in classification, cash provided by operating activities and cash used in financing activities within the consolidated statement of cash flows increased by $46 million and $51 million for the nine months ended September 30, 2017 and 2016, respectively.
This guidance allows a company-wide accounting policy election either to continue estimating forfeitures each period or to account for forfeitures as they occur. The Company elected to continue its existing practice to estimate the number of awards that will be forfeited. There was no impact on its consolidated financial statements.
Leases - In February 2016, the FASB issued accounting guidance that will change how companies account for and present lease arrangements. This guidance requires companies to recognize leased assets and liabilities for both capital and operating leases. This guidance is effective for periods after December 15, 2018 and early adoption is permitted. Companies are required to adopt the guidance using a modified retrospective method. The Company expects to adopt this guidance effective January 1, 2019. The Company is in the process of evaluating the potential effects this guidance will have on its consolidated financial statements.
Revenue recognition - In May 2014, the FASB issued accounting guidance that provides a single, comprehensive revenue recognition model for all contracts with customers and supersedes most of the existing revenue recognition requirements. Under this guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued accounting guidance that delayed the effective date of this standard by one year, making this guidance effective for fiscal years beginning after December 15, 2017. This guidance will impact the timing of recognition for certain of the Company’s customer incentives. Under the new guidance, the Company will recognize certain customer incentives over the life of the contract as revenue is recognized versus as they are earned by the customer. The Company will adopt the new accounting guidance effective January 1, 2018. The accounting guidance permits either a full retrospective or a modified retrospective transition method. The Company expects to adopt this guidance with the modified retrospective transition method. The impact of the new accounting guidance will be dependent upon customer deals that have been executed and those that will be executed through the balance of 2017 and 2018. As such, the Company is in the process of quantifying the potential effects this guidance will have on its consolidated financial statements.
Note 2. Acquisitions
In the nine months ended September 30, 2017, the Company acquired businesses for total consideration of $1.5 billion. For the businesses acquired, Mastercard allocated the values associated with the assets, liabilities and redeemable non-controlling interests based on their respective fair values on the acquisition dates. Refer to Note 1 (Summary of Significant Accounting Policies) to the consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2016, for the valuation techniques Mastercard utilizes to fair value the assets and liabilities acquired in business combinations. The residual value allocated to goodwill is primarily attributable to the synergies expected to arise after the acquisition date and is not expected to be deductible for local tax purposes.


10
Table of Contents

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


For acquisitions occurring in 2017, the Company is evaluating and finalizing the purchase price accounting; however, the preliminary estimated fair values of the purchase price allocations in aggregate, as of the acquisition dates, are noted below:
 (in millions)
Cash consideration$1,286
Contingent consideration198
Redeemable non-controlling interests69
Gain on previously held minority interest13
Total fair value of businesses acquired$1,566
  
Assets: 
Cash and cash equivalents$111
Other current assets108
Other intangible assets488
Goodwill1,131
Other assets90
Total assets1,928
  
Liabilities: 
Short-term debt1
64
Other current liabilities169
Net pension liability66
Other liabilities63
Total liabilities362
  
Net assets acquired$1,566

1 The short-term debt assumed through acquisitions was repaid during the second quarter of 2017.
customers. The following table summarizessets forth the identified intangible assets acquired:
 
Acquisition Date
Fair Value
 Weighted-Average Useful Life
 (in millions) (Years)
Developed technologies$302
 7.6
Customer relationships183
 10.0
Other3
 1.6
Other intangible assets$488
 8.5
For the businesses acquired in 2017, the largest acquisition relates to VocaLink Holdings Limited (“Vocalink”), a payment systems and ATM switching platform operator, located principally in the U.K. On April 28, 2017, Mastercard acquired a 92.4% controlling interest in Vocalink for cash consideration of £719 million ($929 million aslocation of the acquisition date). In addition, the Vocalink sellers have the potential to earn additional contingent consideration up to £169 million (approximately $225 million as of September 30, 2017) if certain revenue targets are met in 2018. Refer to Note 4 (Fair Value and Investment Securities) for additional information related to the fair value of contingent consideration.
A majority of Vocalink’s shareholders have retained a 7.6% ownership for at least three years, which is recorded as redeemable non-controlling interestsamounts recognized on the consolidated balance sheet. These remaining shareholders have a put option to sell their ownership interest to Mastercard onsheet from contracts with customers:
March 31,
2024		December 31,
2023
(in millions)
Receivables from contracts with customers
Accounts receivable$3,989 $3,851 
Contract assets
Prepaid expenses and other current assets157 133 
Other assets409 387 
Deferred revenue 1
Other current liabilities632 459 
Other liabilities346 318 
1    Revenue recognized from performance obligations satisfied during the third and fifth anniversaries of the transaction and quarterly thereafter (the “Third Anniversary Option” and “Fifth Anniversary Option”, respectively).  The Third Anniversary Option is exercisable at a fixed price of £58 million (approximately $75 million as of September 30, 2017) (the “Fixed Price”). The Fifth Anniversary Option is exercisable at the greater of the Fixed Price or fair value. Additionally, Mastercard has a call option to purchase the remaining interest from Vocalink’s shareholders on the fifth anniversary of the transaction and quarterly thereafter, which is exercisable at the greater of the Fixed Price or fair value. The fair value of the redeemable non-controlling intereststhree months ended March 31, 2024 was determined utilizing a market approach, which extrapolated the consideration transferred that was discounted for$510 million.


11
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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


lack of control and marketability. The rollforward of redeemable non-controlling interests was not included as the activity was not considered to be material.
Pro forma information related to acquisitions was not included because the impact on the Company's consolidated results of operations was not considered to be material.
Note 3. Earnings Per Share
The components of basic and diluted earnings per share (“EPS”) for common stockshares were as follows:
Three Months Ended March 31,
20242023
(in millions, except per share data)
Numerator
Net income$3,011 $2,361 
Denominator
Basic weighted-average shares outstanding933 953 
Dilutive stock options and stock units2 3 
Diluted weighted-average shares outstanding 1
935 956 
Earnings per Share
Basic$3.23 $2.48 
Diluted$3.22 $2.47 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
 (in millions, except per share data)
Numerator       
Net income$1,430
 $1,184
 $3,688
 $3,126
Denominator       
Basic weighted-average shares outstanding1,063
 1,096
 1,071
 1,101
Dilutive stock options and stock units5
 3
 4
 3
Diluted weighted-average shares outstanding 1
1,068
 1,099
 1,075
 1,104
Earnings per Share       
Basic$1.34
 $1.08
 $3.45
 $2.84
Diluted$1.34
 $1.08
 $3.43
 $2.83
Note: Table may not sum due to rounding.

1For the periods presented, the calculation of diluted EPS excluded a minimal amount of anti-dilutive share-based payment awards.
Note 4. Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
The following table provides the components of cash, cash equivalents, restricted cash and restricted cash equivalents reported on the consolidated balance sheet that total to the amounts shown on the consolidated statement of cash flows.
March 31,
2024		December 31,
2023
(in millions)
Cash and cash equivalents$7,293 $8,588 
Restricted cash and restricted cash equivalents
Restricted security deposits held for customers1,861 1,845 
Prepaid expenses and other current assets33 32 
Cash, cash equivalents, restricted cash and restricted cash equivalents$9,187 $10,465 

12 MASTERCARD MARCH 31, 2024 FORM 10-Q

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Investments
The Company’s investments on the consolidated balance sheet include both available-for-sale and held-to-maturity debt securities (see Investments section below). The Company’s strategic investments in equity securities of publicly traded and privately held companies are classified within other assets on the consolidated balance sheet (see Equity Investments section below).
Investments
Investments on the consolidated balance sheet consisted of the following:
March 31,
2024		December 31,
2023
(in millions)
Available-for-sale securities$283 $286 
Held-to-maturity securities 1
81 306 
Total investments$364 $592 
1Held-to-maturity securities represent investments in time deposits that mature within one year. The cost of these securities approximates fair value.
Investment income on the consolidated statement of operations primarily consists of interest income generated from cash, cash equivalents, held-to maturity and available-for-sale investment securities, as well as realized gains and losses on the Company’s investment securities. The realized gains and losses from the sales of available-for-sale securities for the three months ended March 31, 2024 and 2023 were not material.
Available-for-Sale Securities
The major classes of the Company’s available-for-sale investment securities and their respective amortized cost basis and fair values were as follows:
 March 31, 2024December 31, 2023
 Amortized
Cost		Gross
Unrealized
Gain		Gross
Unrealized
Loss		Fair
Value		Amortized
Cost		Gross
Unrealized
Gain		Gross
Unrealized
Loss		Fair
Value
(in millions)
Government and agency securities$89 $— $— $89 $86 $— $— $86 
Corporate securities194 1 (1)194 200 1 (1)200 
Total$283 $1 $(1)$283 $286 $1 $(1)$286 
The Company’s government and agency securities include U.S. government bonds, U.S. government sponsored agency bonds and foreign government bonds which are denominated in the national currency of the issuing country. Corporate securities held at March 31, 2024 and December 31, 2023, primarily carried a credit rating of A- or better. Corporate securities are comprised of commercial paper and corporate bonds. The gross unrealized gains and losses on the available-for-sale securities are primarily driven by changes in interest rates. For the available-for-sale securities in gross unrealized loss positions, the Company (1) does not intend to sell the securities, (2) more likely than not, will not be required to sell the securities before recovery of the unrealized losses, and (3) expects that the contractual principal and interest will be received. Unrealized gains and losses are recorded as a separate component of other comprehensive income (loss) on the consolidated statement of comprehensive income.
The maturity distribution based on the contractual terms of the Company’s available-for-sale investment securities at March 31, 2024 was as follows:
 
 Amortized CostFair Value
 (in millions)
Due within 1 year$151 $151 
Due after 1 year through 5 years132 132 
Total$283 $283 

MASTERCARD MARCH 31, 2024 FORM 10-Q 13

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Equity Investments
Included in other assets on the consolidated balance sheet are equity investments with readily determinable fair values (“Marketable securities”) and equity investments without readily determinable fair values (“Nonmarketable securities”). Marketable securities are equity interests in publicly traded companies and are measured using unadjusted quoted prices in their respective active markets. Nonmarketable securities that do not qualify for equity method accounting are measured at cost, less any impairment and adjusted for changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer (“Measurement alternative”).
The following table is a summary of the activity related to the Company’s equity investments:
 Balance at December 31, 2023PurchasesSales
Changes in Fair Value 1
Other 2
Balance at March 31, 2024
(in millions)
Marketable securities$506 $— $— $7 $(1)$512 
Nonmarketable securities1,223 8 — (1)(5)1,225 
Total equity investments$1,729 $8 $— $6 $(6)$1,737 
1Recorded in gains (losses) on equity investments, net on the consolidated statement of operations.
2Includes translational impact of currency.
The following table sets forth the components of the Company’s Nonmarketable securities:
March 31,
2024		December 31,
2023
(in millions)
Measurement alternative$1,013 $1,008 
Equity method212 215 
Total Nonmarketable securities$1,225 $1,223 
The following table summarizes the total carrying value of the Company’s Measurement alternative investments, including cumulative unrealized gains and losses through March 31, 2024:
(in millions)
Initial cost basis$558 
Cumulative adjustments 1:
Upward adjustments636 
Downward adjustments (including impairment)(181)
Carrying amount, end of period$1,013
1 Includes immaterial translational impact of currency.
The following table summarizes the unrealized gains and losses included in the carrying value of the Company’s Measurement alternative investments and Marketable securities:
Three Months Ended March 31,
20242023
(in millions)
Measurement alternative investments:
Upward adjustments$7 $— 
Downward adjustments (including impairment)(3)(133)
Marketable securities:
Unrealized gains (losses), net7 (66)

14 MASTERCARD MARCH 31, 2024 FORM 10-Q

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Fair Value andInvestment Securities
Financial Instruments – Recurring Measurements
The Company’s financial instruments are carried at fair value, cost or amortized cost on the consolidated balance sheet. The Company classifies its fair value measurements of financial instruments into a three-level hierarchy (the “Valuation Hierarchy”). There were no transfers made among the three levels
Financial Instruments - Carried at Fair Value
Financial instruments carried at fair value are categorized for fair value measurement purposes as recurring or non-recurring in the Valuation Hierarchy during the nine months ended September 30, 2017.nature.

Recurring Measurements

12
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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


The distribution of the Company’s financial instruments measured at fair value on a recurring basis within the Valuation Hierarchy were as follows:
March 31, 2024December 31, 2023
September 30, 2017 Quoted Prices
in Active
Markets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		TotalQuoted Prices
in Active
Markets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 Total
(in millions)
(in millions)(in millions)
Assets       
Investment securities available for sale 1:
       
Municipal securities$—
 $25
 $—
 $25
Investment securities available-for-sale 1:
Investment securities available-for-sale 1:
Investment securities available-for-sale 1:
Government and agency securities
Government and agency securities
Government and agency securities82
 110
 —
 192
Corporate securities—
 937
 —
 937
Asset-backed securities—
 84
 —
 84
Derivative instruments 2:
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Marketable securities 3:
Marketable securities 3:
Marketable securities 3:
Equity securities1
 —
 —
 1
Derivative instruments 2:
       
Foreign currency derivative assets—
 4
 —
 4
Equity securities
Equity securities
Deferred compensation plan 4:
Deferred compensation assets
Deferred compensation assets
Deferred compensation assets
       
Liabilities       
Liabilities
Liabilities
Derivative instruments 2:
       
Foreign currency derivative liabilities$—
 $(33) $—
 $(33)
Derivative instruments 2:
Derivative instruments 2:
Foreign exchange contracts
Foreign exchange contracts
Foreign exchange contracts
Interest rate contracts
Deferred compensation plan 5:
Deferred compensation liabilities
Deferred compensation liabilities
Deferred compensation liabilities
 December 31, 2016
 Quoted Prices
in Active
Markets
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)		 Total
 (in millions)
Assets       
Investment securities available for sale 1:
       
Municipal securities$—
 $59
 $—
 $59
Government and agency securities49
 117
 —
 166
Corporate securities—
 855
 —
 855
Asset-backed securities—
 80
 —
 80
Equity securities2
 —
 —
 2
Derivative instruments 2:
       
Foreign currency derivative assets—
 29
 —
 29
        
Liabilities       
Derivative instruments 2:
       
Foreign currency derivative liabilities$—
 $(13) $—
 $(13)
1The Company’s U.S. government securities and marketable equity securities are classified within Level 1 of the Valuation Hierarchy as the fair values are based on unadjusted quoted prices for identical assets in active markets. The fair value of the Company’s available-for-sale municipal securities,non-U.S. government and agency securities corporate securities and asset-backedcorporate securities are based on observable inputs such as quoted prices, benchmark yields and issuer spreads for similar assets in active markets and are therefore included in Level 2 of the Valuation Hierarchy.
2The Company’s foreign currencyexchange and interest rate derivative asset and liability contracts have been classified within Level 2 of the Valuation Hierarchy as themeasured at fair value isare based on observable inputs such as broker quotes relating to foreign currency exchange rates for similar derivative instruments. See Note 13 (Foreign Exchange Risk Management)15 (Derivative and Hedging Instruments) for further details.

3The Company’s Marketable securities are publicly held and fair values are based on unadjusted quoted prices in their respective active markets.
4The Company has a nonqualified deferred compensation plan where assets are invested primarily in mutual funds held in a rabbi trust, which is restricted for payments to participants of the plan. The Company has elected to use the fair value option for these mutual funds, which are measured using quoted prices of identical instruments in active markets and are included in prepaid expenses and other current assets on the consolidated balance sheet.
5The deferred compensation liabilities are measured at fair value based on the quoted prices of identical instruments to the investment vehicles selected by the participants. These are included in other liabilities on the consolidated balance sheet.


13MASTERCARD MARCH 31, 2024 FORM 10-Q 15

PART I
MASTERCARD INCORPORATED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


Nonrecurring Measurements
Settlement and Other Guarantee LiabilitiesNonmarketable Securities
The Company estimates the fair value of its settlement and other guarantees using market assumptions for relevant though not directly comparable undertakings, as the latter are not observable in the market given the proprietary nature of such guarantees. At September 30, 2017 and December 31, 2016, the carrying value and fair value of settlement and other guarantee liabilities were not material and accordingly are not included in the Valuation Hierarchy table above. Settlement and other guarantee liabilities are classified within Level 3 of the Valuation Hierarchy as their valuation requires substantial judgment and estimation of factors that are not observable in the market. For additional information regarding the Company’s settlement and other guarantee liabilities, see Note 12 (Settlement and Other Risk Management).
Financial Instruments - Non-Recurring Measurements
Held-to-Maturity Securities
Investments on the consolidated balance sheet include both available-for-sale and short-term held-to-maturity securities. Held-to-maturityNonmarketable securities are not measuredrecorded at fair value on a recurringnonrecurring basis and are not included in the Valuation Hierarchy table above. At September 30, 2017 and December 31, 2016, the Company held $625 million and $452 million, respectively, of short-term held-to-maturity securities. In addition, at December 31, 2016, the Company held $61 million of long-term held-to-maturity securities included in other assets on the consolidated balance sheet. The Company did not hold any long-term held-to-maturity securities at September 30, 2017. Both short-term and long-term held-to-maturity securities consist of time deposits and are classified within Level 2 of the Valuation Hierarchy. The cost of these securities approximates fair value.
Nonmarketable Equity Investments
The Company’s nonmarketable equity investments are measured at fair value atperiods after initial recognition and for impairment testing. These investmentsunder the equity method or measurement alternative method. Nonmarketable securities are classified within Level 3 of the Valuation Hierarchy due to the absence of quoted market prices, the inherent lack of liquidity and the fact thatunobservable inputs used to measure fair value are unobservable andthat require management’s judgment. The Company uses discounted cash flows and market assumptions to estimate the fair value of its nonmarketable equity investmentsNonmarketable securities when certain events or circumstances indicate that impairment may exist. These investmentsSee Note 5 (Investments) for further details.
Financial Instruments - Not Carried at Fair Value
Debt
Debt instruments are included in other assetscarried on the consolidated balance sheet and in Note 5 (Prepaid Expenses and Other Assets).
Debt
at amortized cost. The Company estimates the fair value of its long-term debt based on either market quotes. These debt instruments are not traded in active markets and arequotes or observable market data. Debt is classified withinas Level 2 of the Valuation Hierarchy.Hierarchy as it is generally not traded in active markets. At September 30, 2017,March 31, 2024, the carrying value and fair value of long-term debt was $5.4$15.6 billion and $5.6$14.4 billion, respectively. At December 31, 2016,2023, the carrying value and fair value of long-term debt was $5.2$15.7 billion and $5.3$14.7 billion, respectively. See Note 15 (Debt) to the consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023 for further details.
Other Financial Instruments
Certain other financial instruments are carried on the consolidated balance sheet at cost or amortized cost basis, which approximates fair value due to their short-term, highly liquid nature. These instruments include cash and cash equivalents, restricted cash,time deposits, accounts receivable, settlement due from customers,assets, restricted security deposits held for customers,cash and restricted cash equivalents, accounts payable, settlement due to customersobligations and other accrued liabilities.
Non-Financial Instruments
Certain assets are measured at fair value on a nonrecurring basis for purposes of initial recognition and impairment testing. The Company’s non-financial assets measured at fair value on a nonrecurring basis include property, plant and equipment, goodwill and other intangible assets. These assets are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.
Contingent consideration related to acquisitions is measured at fair value on a recurring basis. These liabilities are classified within Level 3 of the Valuation Hierarchy as the inputs used to measure fair value are unobservable and require management’s judgment. The fair value of the contingent consideration at the acquisition date and subsequent periods is determined utilizing an income approach based on a Monte Carlo technique and is recorded in Other liabilities on the consolidated


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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


balance sheet. The contingent consideration attributable to acquisitions made in 2017 is primarily based on the achievement of 2018 revenue targets. Changes to projected revenues of the acquired businesses could result in a higher or lower contingent consideration liability. Measurement period adjustments, if any, to the preliminary estimated fair value of contingent consideration as of the acquisition date will be recorded to goodwill, however, changes in fair value as a result of updated assumptions will be recorded within general and administrative expenses. The activity of the Company’s contingent consideration liability for the nine months ended September 30, 2017 was as follows:
 (in millions)
Balance at December 31, 2016$—
Preliminary estimated fair value as of acquisition date for businesses acquired198
Net change in valuation—
Foreign currency translation8
Balance at September 30, 2017$206
Amortized Costs and Fair Values – Available-for-Sale Investment Securities
The major classes of the Company’s available-for-sale investment securities, for which unrealized gains and losses are recorded as a separate component of other comprehensive income (loss) on the consolidated statement of comprehensive income, and their respective amortized cost basis and fair values as of September 30, 2017 and December 31, 2016 were as follows:
 September 30, 2017
 
Amortized
Cost
 
Gross
Unrealized
Gain
 
Gross
Unrealized
Loss
 
Fair
Value
 (in millions)
Municipal securities$25
 $—
 $—
 $25
Government and agency securities192
 —
 —
 192
Corporate securities934
 3
 —
 937
Asset-backed securities84
 —
 —
 84
Equity securities—
 1
 —
 1
Total$1,235
 $4
 $—
 $1,239
        
 December 31, 2016
 
Amortized
Cost
 
Gross
Unrealized
Gain
 
Gross
Unrealized
Loss
 
Fair
Value
 (in millions)
Municipal securities$59
 $—
 $—
 $59
Government and agency securities165
 1
 —
 166
Corporate securities853
 3
 (1) 855
Asset-backed securities80
 —
 —
 80
Equity securities2
 —
 —
 2
Total$1,159
 $4
 $(1) $1,162
The Company’s available-for-sale investment securities held at September 30, 2017 and December 31, 2016, primarily carried a credit rating of A-, or better. The municipal securities are primarily comprised of tax-exempt bonds and are diversified across states and sectors. Government and agency securities include U.S. government bonds, U.S. government sponsored agency bonds and foreign government bonds with similar credit quality to that of the U.S. government bonds.


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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


Corporate securities are comprised of commercial paper and corporate bonds. The asset-backed securities are investments in bonds which are collateralized primarily by automobile loan receivables.
Investment Maturities
The maturity distribution based on the contractual terms of the Company’s investment securities at September 30, 2017 was as follows:
 Available-For-Sale
 
Amortized
Cost
 Fair Value
 (in millions)
Due within 1 year$449
 $449
Due after 1 year through 5 years786
 789
Due after 5 years through 10 years—
 —
Due after 10 years—
 —
No contractual maturity 1
—
 1
Total$1,235
 $1,239
1 Equity securities have been included in the No contractual maturity category, as these securities do not have stated maturity dates.
Investment Income
Investment income primarily consists of interest income generated from cash, cash equivalents and investments. Gross realized gains and losses are recorded within investment income on the Company’s consolidated statement of operations. The gross realized gains and losses from the sales of available-for-sale securities for the three and nine months ended September 30, 2017 and 2016 were not significant.
Note 5. 7. Prepaid Expenses and Other Assets
Prepaid expenses and other current assets consisted of the following:
March 31,
2024		March 31,
2024		December 31,
2023
(in millions)(in millions)
Customer incentives
September 30,
2017		 December 31,
2016
(in millions)
Customer and merchant incentives$508
 $479
Prepaid income taxes168
 118
Other
Other
Other504
 253
Total prepaid expenses and other current assets$1,180
 $850
Other assets consisted of the following:
September 30,
2017		 December 31,
2016
(in millions)
Customer and merchant incentives$1,393
 $1,134
Nonmarketable equity investments240
 132
Prepaid income taxes351
 325
March 31,
2024		March 31,
2024		December 31,
2023
(in millions)(in millions)
Customer incentives
Equity investments
Income taxes receivable148
 175
Other63
 163
Total other assets$2,195
 $1,929
Customer and merchant incentives represent payments made or amounts to be paid to customers and merchants under business agreements. CostsPayments made directly related to entering into such agreementsan agreement are generally deferredcapitalized and amortized over the life of the agreements. Amounts to be paid for these incentives and the related liability were included in accrued expenses and other liabilities.

agreement.


16MASTERCARD MARCH 31, 2024 FORM 10-Q
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PART I
MASTERCARD INCORPORATED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


Nonmarketable equity investments represent the Company’s cost and equity method investments. For the nine months ended September 30, 2017, the Company invested $128 million in nonmarketable cost method equity investments.
Note 6. 8. Accrued Expenses and Accrued Litigation
Accrued expenses consisted of the following:
March 31,
2024		December 31,
2023
 (in millions)
Customer incentives$6,210 $6,219 
Personnel costs631 1,258 
Income and other taxes642 486 
Other579 554 
Total accrued expenses$8,062 $8,517 
 September 30,
2017		 December 31,
2016
 (in millions)
Customer and merchant incentives$2,417
 $2,286
Personnel costs486
 496
Advertising65
 71
Income and other taxes356
 161
Other361
 304
Total accrued expenses$3,685
 $3,318
Customer incentives represent amounts to be paid to customers under business agreements. As of March 31, 2024 and December 31, 2023, long-term customer incentives included in other liabilities were $2,765 million and $2,777 million, respectively.
As of September 30, 2017March 31, 2024 and December 31, 2016,2023, the Company’s provision for litigation was $709$595 million and $722$723 million, respectively. These amounts are not included in the accrued expenses table above and are separately reported as accrued litigation on the consolidated balance sheet. See Note 1113 (Legal and Regulatory Proceedings) for further discussion ofadditional information regarding the U.S. and Canadian merchant class litigations.Company’s accrued litigation.
Note 7. Stockholders’9. Stockholders' Equity
Dividends
The Company’s Board of Directors has approved share repurchase programs authorizing the Company to repurchasedeclared quarterly cash dividends on its Class A common stock. The Company typically completes a share repurchase program before a new program becomes effective. The following table summarizes the Company’s share repurchase authorizations of itsand Class AB common stock through September 30, 2017, as well as historical purchases:summarized below: 
Three Months Ended March 31,
20242023
(in millions, except per share data)
Dividends declared per share$0.66 $0.57 
Total dividends declared$615 $541 
 Authorization Dates
 December 2016 December 2015 
December
2014
 Total
 (in millions, except average price data)
Board authorization$4,000
 $4,000
 $3,750
 $11,750
Dollar value of shares repurchased during the nine months ended September 30, 2016$—
 $1,903
 $507
 $2,410
Remaining authorization at December 31, 2016$4,000
 $996
 $—
 $4,996
Dollar value of shares repurchased during the nine months ended September 30, 2017$1,735
 $996
 $—
 $2,731
Remaining authorization at September 30, 2017$2,265
 $—
 $—
 $2,265
Shares repurchased during the nine months ended September 30, 2016—
 20.6
 5.7
 26.3
Average price paid per share during the nine months ended September 30, 2016$—
 $92.35
 $89.76
 $91.80
Shares repurchased during the nine months ended September 30, 201714.0
 9.1
 —
 23.1
Average price paid per share during the nine months ended September 30, 2017$123.81
 $109.16
 $—
 $118.03
Cumulative shares repurchased through September 30, 201714.0
 40.4
 40.8
 95.2
Cumulative average price paid per share$123.81
 $99.10
 $92.03
 $99.71


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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


Common Stock Activity
The following table presents the changes in the Company’s outstanding Class A and Class B common stock for the nine months ended September 30, 2017:stock:
Three Months Ended March 31,
20242023
 Outstanding SharesOutstanding Shares
 Class AClass BClass AClass B
(in millions)
Balance at beginning of period927.3 7.2 948.4 7.6 
Purchases of treasury stock(4.4)— (8.0)— 
Share-based payments1.2 — 0.9 — 
Conversion of Class B to Class A common stock0.1 (0.1)0.1 (0.1)
Balance at end of period924.2 7.1 941.4 7.5 

MASTERCARD MARCH 31, 2024 FORM 10-Q 17

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Outstanding Shares
 Class A Class B
 (in millions)
Balance at December 31, 20161,062.4
 19.3
Purchases of treasury stock(23.1) —
Share-based payments2.0
 —
Conversion of Class B to Class A common stock3.8
 (3.8)
Balance at September 30, 20171,045.1
 15.5
In December 2023 and 2022, the Company’s Board of Directors approved share repurchase programs of its Class A common stock authorizing the Company to repurchase up to $11.0 billion and $9.0 billion, respectively. The following table summarizes the Company’s share repurchases of its Class A common stock:
Three Months Ended March 31,
20242023
(in millions, except per share data)
Dollar-value of shares repurchased 1
$1,992 $2,878 
Shares repurchased4.4 8.0 
Average price paid per share$454.23 $361.70 
1The dollar-value of shares repurchased does not include a 1% excise tax. The incremental tax is recorded in treasury stock on the consolidated balance sheet.
As of March 31, 2024, the remaining authorization under the share repurchase programs approved by the Company’s Board of Directors was $12.2 billion.
Note 8. 10. Accumulated Other Comprehensive Income (Loss)
The changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, for the ninethree months ended September 30, 2017March 31, 2024 and 20162023 were as follows:
December 31, 2023Increase / (Decrease)ReclassificationsMarch 31, 2024
(in millions)
Foreign currency translation adjustments 1
$(1,119)$(159)$— $(1,278)
Translation adjustments on net investment hedges 2
181 36 — 217 
Cash flow hedges
Foreign exchange contracts 3
(17)17 2 2 
Interest rate contracts(118)— 1 (117)
Defined benefit pension and other postretirement plans(25)— — (25)
Investment securities available-for-sale(1)— — (1)
Accumulated other comprehensive income (loss)$(1,099)$(106)$3 $(1,202)
December 31, 2022Increase / (Decrease)ReclassificationsMarch 31, 2023
(in millions)
Foreign currency translation adjustments 1
$(1,414)$80 $— $(1,334)
Translation adjustments on net investment hedges 2
309 (57)— 252 
Cash flow hedges
Foreign exchange contracts 3
(8)(10)8 (10)
Interest rate contracts(123)— 1 (122)
Defined benefit pension and other postretirement plans(11)— — (11)
Investment securities available-for-sale(6)2 — (4)
Accumulated other comprehensive income (loss)$(1,253)$15 $9 $(1,229)
1During the three months ended March 31, 2024, the increase in the accumulated other comprehensive loss related to foreign currency translation adjustments was driven primarily by the depreciation of the euro and British pound against the U.S. dollar. During the three months ended March 31, 2023, the decrease in the accumulated other comprehensive loss related to foreign currency translation adjustments was driven primarily by the appreciation of the euro and British pound against the U.S. dollar.
2During the three months ended March 31, 2024, the increase in the accumulated other comprehensive gain related to the net investment hedges was driven by the depreciation of the euro against the U.S. dollar. During the three months ended March 31, 2023, the decrease in the accumulated other comprehensive gain related to the net investment hedges was driven by the appreciation of the euro against the U.S. dollar. See Note 15 (Derivative and Hedging Instruments) for additional information.
3Certain foreign exchange derivative contracts are designated as cash flow hedging instruments. Gains and losses resulting from changes in the fair value of these contracts are deferred in accumulated other comprehensive income (loss) and subsequently reclassified to the consolidated statement of operations when the underlying hedged transactions impact earnings. See Note 15 (Derivative and Hedging Instruments) for additional information.

18 MASTERCARD MARCH 31, 2024 FORM 10-Q
 
Foreign Currency Translation Adjustments 1
 Translation Adjustments on Net Investment Hedge Defined Benefit Pension and Other Postretirement Plans Investment Securities Available-for-Sale Accumulated Other Comprehensive Income (Loss)
 (in millions)
Balance at December 31, 2015$(663) $(26) $13
 $—
 $(676)
Other comprehensive income (loss) for the period2
(7) (36) (1) 3
 (41)
Balance at September 30, 2016$(670) $(62) $12
 $3

$(717)
          
Balance at December 31, 2016$(949) $12
 $11
 $2
 $(924)
Other comprehensive income (loss) for the period2
515
 (132) (1) —
 382
Balance at September 30, 2017$(434) $(120) $10
 $2
 $(542)
1
During the nine months ended September 30, 2017, the decrease in other comprehensive loss related to foreign currency translation adjustments was driven primarily by the appreciation of the euro.
2
During the nine months ended September 30, 2017 and 2016, gains and losses reclassified from accumulated other comprehensive income to the consolidated statement of operations were not significant.

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9. 11. Share-Based Payments
During the ninethree months ended September 30, 2017,March 31, 2024, the Company granted the following awards under the Mastercard Incorporated 2006 Long Term Incentive Plan, as amended and restated (“LTIP”as of June 22, 2021 (the “LTIP”). The LTIP is a shareholder-approvedstockholder-approved plan that permits the grant of various types of equity awards to employees.
Grants in 2024Weighted-Average
Grant-Date
Fair Value
(in millions)(per option/unit)
Non-qualified stock options0.2$165 
Restricted stock units0.9$472 
Performance stock units0.2$513 
 Grants in 2017 
Weighted-Average
Grant-Date
Fair Value
 (in millions) (per option/unit)
Non-qualified stock options1.7 $21
Restricted stock units1.3 $110
Performance stock units0.2 $126
Stock options generally vest in four equal annual installments beginning one year after the date of grant and have a term of ten years. The Company useduses the Black-Scholes option pricing model to estimatedetermine the grant dategrant-date fair value of stock options and calculatedcalculates the expected termlife and the expected volatility based on historical Mastercard information. As a


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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


result, theThe expected termlife of stock options granted in 20172024 was fiveestimated to be six years, while the expected volatility was determined to be 19.3%28.7%.
Vesting of the shares underlying the restricted stock units and performance stock units will generally occur three These awards expire ten years afterfrom the date of grant. grant and vest ratably over three years.
The fair value of restricted stock units (“RSUs”) is determined and fixed on the grant date based on the Company’s Class A common stock price, adjusted for the exclusion of dividend equivalents. RSUs generally vest ratably over three years.
The Company uses the Monte Carlo simulation valuation model was used to determine the grant dategrant-date fair value of performance stock units (“PSUs”) granted. PSUs vest after three years from the date of grant and are subject to a mandatory one-year deferral period, during which vested PSUs are eligible for dividend equivalents.
Compensation expense is recorded net of estimated forfeitures over the shorter of the vesting period or the date the individual becomes eligible to retire under the LTIP. The Company uses the straight-line method of attribution over the requisite service period for expensing equity awards.
Note 10. 12. Income Taxes
The effective income tax rates were 26.0%15.4% and 26.8%17.2% for the three and nine months ended September 30, 2017, respectively, versus 27.5%March 31, 2024 and 27.9% for the comparable periods in 2016.2023, respectively. The lower effective income tax rates, as compared torate for the prior year, werethree months ended March 31, 2024, versus the comparable period in 2023, was primarily due to a more favorable geographicalchange in the Company’s geographic mix of taxable earnings partially offset by a lower U.S. foreignas well as discrete tax credit benefit associated with the repatriation of current year foreign earnings.benefits related to share-based payments.
The Company is subject to tax in the United States, Belgium, Singapore, the United Kingdom and various other foreign jurisdictions, as well as state and local jurisdictions. Uncertain tax positions are reviewed on an ongoing basis and are adjusted after considering facts and circumstances, including progress of tax audits, developments in case law and closing of statutes of limitation. Within the next twelve months, the Company believes that the resolution of certain federal, foreign and state and local examinations areis reasonably possible and that a change in estimate, reducing unrecognized tax benefits, may occur. While such a change may be significant, it is not possible to provide a range of the potential change until the examinations progress further or the related statutes of limitation expire. The Company has effectively settled its U.S. federal income tax obligations through 2008, with the exception of transfer pricing issues which are settled through 2011.2014. With limited exception, the Company is no longer subject to state and local or foreign examinations by tax authorities for years before 2009.2014.
Note 11. 13. Legal and Regulatory Proceedings
Mastercard is a party to legal and regulatory proceedings with respect to a variety of matters in the ordinary course of business.  Some of these proceedings are based on complex claims involving substantial uncertainties and unascertainable damages.  Accordingly, except as discussed below, it is not possible to determine the probability of loss or estimate damages, and therefore, Mastercard has not established reservesliabilities for any of these proceedings.proceedings, except as discussed below. When the Company determines that a loss is both probable and reasonably estimable, Mastercard records a liability and discloses the amount of the liability if it is material. When a material loss contingency is only reasonably possible, Mastercard does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Unless otherwise stated below with respect to these matters, Mastercard cannot provide an estimate of the possible loss or range of loss based on one or more of the following reasons: (1) actual or potential plaintiffs have not claimed an amount of monetary damages or the amounts are unsupportable or exaggerated, (2) the matters are in early stages, (3) there is uncertainty as to the outcome of pending appeals or motions, (4) there are significant factual issues to be resolved, (5) the existence in many such proceedings ofinvolve multiple defendants or potential defendants whose share of any potential financial responsibility has yet to be determined and/or (6) there are novel legal issues presented. Furthermore, except as identified with respect to the matters below, Mastercard does not believe that the outcome of any individual existing legal or regulatory proceeding to which it is a party will have a material adverse effect on its results of operations, financial condition orand overall business. However, an adverse judgment or other outcome or settlement with respect to any proceedings discussed below could result in fines or payments by Mastercard and/or could require Mastercard to change its business practices. In addition, an adverse outcome in a regulatory proceeding could lead to the filing of civil damage claims and possibly result in significant

MASTERCARD MARCH 31, 2024 FORM 10-Q 19

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
damage awards. Any of these events could have a material adverse effect on Mastercard’s results of operations, financial condition and overall business.


19
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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


Interchange Litigation and Regulatory Proceedings
Mastercard’s interchange fees and other practices are subject to regulatory, and/or legal review and/or challenges in a number of jurisdictions, including the proceedings described below. When taken as a whole, the resulting decisions, regulations and legislation with respect to interchange fees and acceptance practices may have a material adverse effect on the Company’s prospects for future growth and its overall results of operations and financial position and cash flows.condition.
United States.In June 2005, the first of a series of complaints were filed on behalf of merchants (the majority of the complaints were styled as class actions, although a few complaints were filed on behalf of individual merchant plaintiffs) against Mastercard International, Visa U.S.A., Inc., Visa International Service Association and a number of financial institutions. Taken together, the claims in the complaints were generally brought under both Sections 1 and 2 of the Sherman Act, which prohibit monopolization and attempts or conspiracies to monopolize a particular industry, and some of these complaints contain unfair competition law claims under state law. The complaints allege, among other things, that Mastercard, Visa, and certain financial institutions conspired to set the price of interchange fees, enacted point of sale acceptance rules (including the no surcharge“no surcharge” rule) in violation of antitrust laws and engaged in unlawful tying and bundling of certain products and services.services, resulting in merchants paying excessive costs for the acceptance of Mastercard and Visa credit and debit cards. The cases were consolidated for pre-trial proceedings in the U.S. District Court for the Eastern District of New York in MDL No. 1720.1720 (the “U.S. MDL Litigation Cases”). The plaintiffs filed a consolidated class action complaint that seeksseeking treble damages.
In July 2006, the group of purported merchant class plaintiffs filed a supplemental complaint alleging that Mastercard’s initial public offering of its Class A Common Stock in May 2006 (the “IPO”) and certain purported agreements entered into between Mastercard and financial institutions in connection with the IPO: (1) violate U.S. antitrust laws and (2) constituted a fraudulent conveyance because the financial institutions allegedly attempted to release, without adequate consideration, Mastercard’s right to assess them for Mastercard’s litigation liabilities. The class plaintiffs sought treble damages and injunctive relief including, but not limited to, an order reversing and unwinding the IPO.
In February 2011, Mastercard and Mastercard International entered into each of: (1) an omnibus judgment sharing and settlement sharing agreement with Visa Inc., Visa U.S.A. Inc. and Visa International Service Association and a number of financial institutions; and (2) a Mastercard settlement and judgment sharing agreement with a number of financial institutions.  The agreements provide for the apportionment of certain costs and liabilities which Mastercard, the Visa parties and the financial institutions may incur, jointly and/or severally, in the event of an adverse judgment or settlement of one or all of the cases in the merchant litigations.U.S. MDL Litigation Cases. Among a number of scenarios addressed by the agreements, in the event of a global settlement involving the Visa parties, the financial institutions and Mastercard, Mastercard would pay 12% of the monetary portion of the settlement. In the event of a settlement involving only Mastercard and the financial institutions with respect to their issuance of Mastercard cards, Mastercard would pay 36% of the monetary portion of such settlement. 
In October 2012, the parties entered into a definitive settlement agreement with respect to the merchant class litigationU.S. MDL Litigation Cases (including with respect to the claims related to the IPO) and the defendants separately entered into a settlement agreement with the individual merchant plaintiffs. The settlements included cash payments that were apportioned among the defendants pursuant to the omnibus judgment sharing and settlement sharing agreement described above. Mastercard also agreed to provide class members with a short-term reduction in default credit interchange rates and to modify certain of its business practices, including its “no surcharge”no surcharge rule. The court granted final approval of the settlement in December 2013,2013. Following an appeal by objectors and objectors to the settlement appealed that decision toas a result of a reversal by the U.S. Court of Appeals for the Second Circuit. In June 2016, the court of appeals vacated the class action certification, reversed the settlement approval and sent the case back toCircuit, the district court for further proceedings.divided the merchants’ claims into two separate classes - monetary damages claims (the “Damages Class”) and claims seeking changes to business practices (the “Rules Relief Class”). The court of appeals’ ruling was based primarily on whetherappointed separate counsel for each class.
In 2018, the merchants were adequately represented by counsel in the settlement.
Priorparties to the reversal ofDamages Class litigation entered into a class settlement agreement to resolve the settlement approval,Damages Class claims, with merchants representing slightly more than 25% of the Mastercard and Visa purchaseDamages Class interchange volume over the relevant period chosechoosing to opt out of the class settlement. Mastercard had anticipated that most of the larger merchants who opted out of theThe Damages Class settlement would initiate separate actions seeking to recover damages, and over 30 opt-out complaints have been filed on behalf of numerous merchantsagreement became final in various jurisdictions.August 2023. Since 2018, Mastercard has executed settlementreached settlements or agreements in principle to settle with a number ofover 250 opt-out merchants. Mastercard believes theseThese opt-out merchant settlements, along with the Damages Class settlement, agreements are not impacted byrepresent over 90% of Mastercard’s U.S. interchange volume. During the rulingfirst quarter of the court of appeals. The defendants have consolidated all of these matters (except for two state court actions) in front of the same federal district court that approved the merchant class settlement. In July


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


2014,2024, the district court denied the defendants’ motionmotions for summary judgment with respect to dismissthe ongoing individual opt-out merchant cases. The defendants and the opt-out merchant complaintsmerchants are in discussions regarding next steps, including whether the individual opt-out cases should be sent back to the original jurisdictions in which the cases were filed for failure to state a claim. Deposition discovery commenced in December 2016 andpotential trials.
In 2021, the district court granted the Rules Relief Class’s motion for class certification. In March 2024, the parties into the class action are in mediation.Rules Relief Class litigation entered into a settlement agreement to resolve the Rules Relief Class claims, which is subject to court approval. The court has scheduled argument on preliminary approval for June 2024.

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PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2017,March 31, 2024 and December 31, 2023, Mastercard had accrued a liability of $707 million as a reserve for both the merchant class litigation and the filed and anticipated opt-out merchant cases. As of September 30, 2017 and December 31, 2016, Mastercard had $545$499 million and $543$596 million, respectively, in a qualified cash settlement fund related tofor the merchant class litigation and classifiedU.S. MDL Litigation Cases. The liability as restricted cash on its consolidated balance sheet. Mastercard believes the reserve for both the merchant class litigation and the filed and anticipated opt-out merchantsof March 31, 2024 represents itsMastercard’s best estimate of its probable liabilities in these matters at September 30, 2017. The portion of the accrued liability relating to both the opt-out merchants and the merchant class litigation settlement does not represent an estimate of a loss, if any, if the matters were litigated to a final outcome. Mastercard cannot estimate the potential liability if that were to occur.
Canada. In December 2010, a proposed class action complaint was commenced against Mastercard in Quebec on behalf of Canadian merchants. The suit essentially repeated the allegations and arguments of a previously filed application by the Canadian Competition Bureau to the Canadian Competition Tribunal (dismissed in Mastercard’s favor) concerning certain Mastercard rules related to point-of-sale acceptance, including the “honor all cards” and “no surcharge” rules. The Quebec suit sought compensatory and punitive damages in unspecified amounts, as well as injunctive relief. In the first half of 2011, additional purported class action lawsuits were commenced in British Columbia and Ontario against Mastercard, Visa and a number of large Canadian financial institutions. The British Columbia suit sought compensatory damages in unspecified amounts, and the Ontario suit sought compensatory damages of $5 billion on the basis of alleged conspiracy and various alleged breaches of the Canadian Competition Act. Additional purported class action complaints were commenced in Saskatchewan and Alberta with claims that largely mirror those in the other suits. In June 2017, Mastercard entered into a class settlement agreement to resolve all of the Canadian class action litigation. The settlement, which is subject to court approval in each applicable province, requires Mastercard to make a cash payment and modify its “no surcharge” rule. During the first quarter of 2017, the Company recorded a provision for litigation of $15 million related to this matter.
Europe. In July 2015, the European Commission issued a Statement of Objections related to Mastercard’s interregional interchange fees and central acquiring rules within the European Economic Area. The Statement of Objections, which follows an investigation opened in 2013, includes preliminary conclusions concerning the alleged anticompetitive effects of these practices. The European Commission has indicated it intends to seek fines if these conclusions are subsequently confirmed. In April 2016, Mastercard submitted a response to the Statement of Objections disputing the European Commission’s preliminary conclusions and participated in a related oral hearing in May 2016. Since that time, Mastercard has remained in discussions with the European Commission. Although the Statement of Objections does not quantify the level of fines, based upon recent interactions with the European Commission, it is possible that they could be substantial, potentially in excess of $1 billion if the European Commission were to issue a negative decision.  Fines may be less than this amount in the event of a negotiated resolution. Due to the uncertainty of numerous legal issues, including the potential for a negotiated resolution, Mastercard cannot estimate a possible range of loss at this time, although Mastercard expects to obtain greater clarity with respect to these issues in the fourth quarter of 2017 or early 2018.
In the United Kingdom, beginning in May 2012, a number of retailersUnited Kingdom (“U.K.”) merchants filed claims or threatened litigation against Mastercard seeking damages for excessive costs paid for acceptance of Mastercard credit and debit cards arising out of alleged anti-competitive conduct with respect to, among other things, Mastercard’s cross-border interchange fees and its U.K. and Ireland domestic interchange fees (the “U.K. Merchant claimants”), with claimed purported damages exceeding $1 billion. The U.K. Merchant claimants (including all resolved matters) represent approximately 40% of Mastercard’s U.K. interchange volume over the relevant damages period. Additional merchants have. In addition, Mastercard has faced similar filed or threatened litigation by merchants with respect to interchange rates in other countries in Europe (the “Pan-European Merchant claimants”) for purported. Mastercard has resolved a substantial amount of these damages exceeding $1 billion.claims through settlement or judgment. Following these settlements, approximately £0.9 billion (approximately $1.1 billion as of March 31, 2024) of unresolved damages claims remain. Mastercard continues to litigate with the remaining U.K. and Pan-European Merchant claimants and it has submitted statements of defense to the retailers’ claims disputing liability and damages. damages claims. A number of those matters are now progressing with motion practice and discovery. A hearing involving multiple merchant cases was completed in March 2024 concerning certain liability issues with respect to merchant claims for damages related to post-Interchange Fee Regulation consumer interchange fees as well as commercial and inter-regional interchange fees.
In June 2015,a separate matter, Mastercard entered intoand Visa were served with a settlement with one ofproposed collective action complaint in the U.K. Merchant claimants for $61 million, recorded as a provision for litigation settlement. Following the conclusionon behalf of a trial for liability andmerchants seeking damages for one ofcommercial card transactions in both the U.K. merchant cases, in July 2016,and the tribunal issuedEuropean Union. In December 2023, the plaintiffs filed a judgmentrevised collective action application claiming damages against Mastercard for damages. Mastercard recorded a litigation provision of $107 million in the second quarter of 2016 that includes the amount of the judgment and estimated legal fees and costs. Mastercard has been granted permission to appeal this judgment. In the fourth quarter of 2016, Mastercard recorded a charge of $10 million relating to settlements with multiple U.K. Merchant claimants.


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In January 2017, Mastercard received a liability judgment in its favor on all significant matters in a separate action brought by ten of the U.K. Merchant claimants, who had been seeking in excess of $500 million£1.0 billion (approximately $1.3 billion as of March 31, 2024). A hearing on this application occurred in damages. Subsequently, Mastercard settled with six of these claimants to resolve their claims, with no financial payments required by Mastercard. The remaining U.K. Merchant claimants have sought court permission to appeal the judgment, and permission to appeal was granted in part and denied in part.April 2024.
In September 2016, a proposed collective action was filed in the United Kingdom on behalf of U.K. consumers seeking damages for intra-EEA and domestic U.K. interchange fees that were allegedly passed on to consumers by merchants between 1992 and 2008. The complaint, which seeks to leverage the European Commission’s 2007 decision on intra-EEA interchange fees, claims damages in an amount that exceeds £14£10 billion (approximately $19$13 billion as of September 30, 2017)March 31, 2024). In July 2017,2021, the trial court deniedissued a decision in which it granted class certification to the plaintiffs’ application forplaintiffs but narrowed the casescope of the class. Since January 2023, the trial court has held hearings on various issues, including whether any causal connection existed between the levels of Mastercard’s intra-EEA interchange fees and U.K. domestic interchange fees and regarding Mastercard’s request to proceed as a collective action.narrow the number of years of damages sought by the plaintiffs on statute of limitations grounds. In February 2024, the trial court ruled in Mastercard’s favor, finding no causal connection between the levels of Mastercard’s intra-EEA interchange and U.K. domestic interchange fees. The plaintiffs’ request forplaintiffs have requested permission to appeal this decision was denied,ruling.
Mastercard has been named as a defendant in a proposed consumer collective action filed in Portugal on behalf of Portuguese consumers. The complaint, which they have appealed. The plaintiffs have alsoseeks to leverage the 2019 resolution of the European Commission’s investigation of Mastercard’s central acquiring rules and interregional interchange fees, claims damages of approximately €0.4 billion (approximately $0.4 billion as of March 31, 2024) for interchange fees that were allegedly passed on to consumers by Portuguese merchants for a period of approximately 20 years. Mastercard has submitted a statement of defense that disputes both liability and damages.
Australia. In 2022, the Australian Competition & Consumer Commission (“ACCC”) filed a separate requestcomplaint targeting certain agreements entered into by Mastercard and certain Australian merchants related to Mastercard’s debit program. The ACCC alleges that by entering into such agreements, Mastercard engaged in conduct with the purpose of substantially lessening competition in the supply of debit card acceptance services. The ACCC seeks both declaratory relief and monetary fines and costs. A hearing on liability issues has been scheduled for judicial review of the court’s denial of their collective action.March 2025.
ATM Non-Discrimination Rule Surcharge Complaints
In October 2011, a trade association of independent Automated Teller Machine (“ATM”)ATM operators and 13 independent ATM operators filed a complaint styled as a class action lawsuit in the U.S. District Court for the District of Columbia against both Mastercard and Visa (the “ATM Operators Class Complaint”).  Plaintiffs seek to represent a class of non-bank operators of ATM terminals that operate in the United States with the discretion to determine the price of the ATM access fee for the terminals they operate. Plaintiffs allege that Mastercard and Visa have violated Section 1 of the Sherman Act by imposing rules that require ATM operators to charge non-discriminatory ATM surcharges for transactions processed over Mastercard’s and Visa’s respective networks that are not greater than the surcharge for transactions over other networks accepted at the same ATM.  Plaintiffs seek both injunctive and monetary relief equal to treble the damages they claim to have sustained as a result of the alleged violations and their costs of suit, including attorneys’ fees. Plaintiffs have not quantified their damages although they allege that they expect damages to be in the tens of millions of dollars. 
Subsequently, multiple related complaints were filed in the U.S. District Court for the District of Columbia alleging both federal antitrust and multiple state unfair competition, consumer protection and common law claims against Mastercard and Visa on behalf of different putative classes of users of ATM services (the “ATM Consumer Complaints”).services. The claims in these actions largely mirror the allegations made in the ATM Operators Class Complaint, although these complaints seek damages on behalf of consumers of ATM services who pay allegedly inflated ATM fees at both bank (“Bank ATM Consumer Class Complaint”) and non-bank (“Non-bank ATM Consumer Class Complaint”) ATM operators as a result of the defendants’ ATM rules. Plaintiffs seek both injunctive and monetary relief equal to treble the damages they claim to have sustained as a result of the alleged violations and their costs of suit, including attorneys’ fees. Plaintiffs have not quantified their damages although they allege that they expect damages to be in the tens of millions of dollars. 

MASTERCARD MARCH 31, 2024 FORM 10-Q 21

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In January 2012,2019, the plaintiffs in all three class complaints filed with the district court their motions for class certification. In July 2023, the D.C. Circuit Court affirmed the district court’s previous order granting class certification. The U.S. Supreme Court declined to hear the defendants’ appeal of the certification decision.
In March 2024, Mastercard agreed to a term sheet with the class lawyers representing the Bank ATM Consumer Class to settle those claims. The parties are negotiating a settlement agreement which would be subject to court approval. During the first quarter of 2024, Mastercard recorded an accrual of $93 million in connection with this matter. The litigation with the ATM Operators ComplaintClass and theNon-bank ATM Consumer Complaints filed amendedClass is ongoing. The plaintiffs in these two remaining class action complaints, that largely mirror their prior complaints. In February 2013, the district court granted Mastercard’s motion to dismiss the complaints for failure to state a claim. On appeal, the Court of Appeals reversed the district court’s order in August 2015 and sent the case back for further proceedings. In March 2016, certainaggregate, allege over $1 billion in damages against all of the plaintiffs in the ATM Operators Complaint filed a motion seeking a preliminary injunction enjoining the enforcement of the nondiscrimination rules pending the outcome of the litigation.  In May 2017, the court denied the plaintiffs’ motion and the case is now proceeding to discovery.defendants.
U.S. Liability Shift Litigation
In March 2016, a proposed U.S. merchant class action complaint was filed in federal court in California alleging that Mastercard, Visa, American Express and Discover (the “Network Defendants”), EMVCo, and a number of issuing banks (the “Bank Defendants”) engaged in a conspiracy to shift fraud liability for card present transactions from issuing banks to merchants not yet in compliance with the standards for EMV chip cards in the United States (the “EMV Liability Shift”), in violation of the Sherman Act and California law. Plaintiffs allege damages equal to the value of all chargebacks for which class members became liable as a result of the EMV Liability Shift on October 1, 2015. The plaintiffs seek treble damages, attorney’s fees and costs and an injunction against future violations of governing law, and the defendants have filed a motion to dismiss. In September 2016, thelaw. The district court denied the Network Defendants’ motion to dismiss the complaint, but granted such a motion for EMVCo and the Bank Defendants. In May 2017, the district court transferred the case to New York so that discovery could be coordinated with the U.S. merchantMDL Litigation Cases described above. In 2020, the district court issued an order granting the plaintiffs’ request for class interchange litigation described above.certification. The plaintiffs have submitted expert reports that allege aggregate damages in excess of $1 billion against the four Network Defendants. The Network Defendants have submitted expert reports rebutting both liability and damages and all briefs on summary judgment have been submitted.

Telephone Consumer Protection Class Action

Mastercard is a defendant in a Telephone Consumer Protection Act (“TCPA”) class action pending in Florida. The plaintiffs are individuals and businesses who allege that approximately 381,000 unsolicited faxes were sent to them advertising a Mastercard co-brand card issued by First Arkansas Bank (“FAB”). The TCPA provides for uncapped statutory damages of $500 per fax. Mastercard has asserted various defenses to the claims, and has notified FAB of an indemnity claim that it has (which FAB has disputed). In 2019, the Federal Communications Commission (“FCC”) issued a declaratory ruling clarifying that the TCPA does not apply to faxes sent to online fax services that are received online via email. In 2021, the trial court granted plaintiffs’ request for class certification, but narrowed the scope of the class to stand alone fax recipients only. Mastercard’s request to appeal that decision was denied. Briefing on plaintiffs’ motion to amend the class definition and Mastercard’s cross-motion to decertify the stand alone fax recipient class was completed in April 2023 and the parties await the court’s decision.
22
U.S. Department of Justice Investigation
TableIn March 2023, Mastercard received a Civil Investigative Demand (“CID”) from the U.S. Department of ContentsJustice Antitrust Division (“DOJ”) seeking documents and information regarding a potential violation of Sections 1 or 2 of the Sherman Act. The CID focuses on Mastercard’s U.S. debit program and competition with other payment networks and technologies. Mastercard is cooperating with the DOJ in connection with the CID.

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


Note 12. 14. Settlement and Other Risk Management
Mastercard’s rules guarantee the settlement of many of the Mastercard, Cirrus and Maestro brandedpayment network transactions between its issuers and acquirerscustomers (“settlement risk”). Settlement exposure is the outstanding settlement risk to customers under Mastercard’s rules due to the difference in timing between the payment transaction date and subsequent settlement. WhileFor those transactions the term andCompany guarantees, the guarantee will cover the full amount of the guarantee are unlimited,settlement obligation to the extent the settlement obligation is not otherwise satisfied. The duration of the settlement exposure is short termshort-term and typicallygenerally limited to a few days.
Gross settlement exposure is estimated using the average daily cardpayment volume during the quarterthree months prior to period end multiplied by the estimated number of days to settle.of exposure. The Company has global risk management policies and procedures, which include risk standards, to provide a framework for managing the Company’s settlement risk. Customer-reported transaction datarisk and the transaction clearing data underlying the settlement exposure calculation may be revised in subsequent reporting periods.
exposure. In the event that Mastercard effectsof failed settlement by a payment on behalf of a failed customer, Mastercard may seek an assignment ofpursue one or more remedies available under the underlying receivables ofCompany’s rules to recover potential losses. Historically, the failed customer. Customers may be charged for the amount of any settlement loss incurred during the ordinary course activities of the Company.
The Company has global risk management policies and procedures aimed at managing theexperienced a low level of losses from customer settlement exposure. These risk management procedures include interaction with the bank regulators of countries in which it operates, requiring customers to make adjustments to settlement processes, and requiring collateral from customers. failures.
As part of its policies, Mastercard requires certain customers that aredo not in compliance withmeet the Company’s risk standards in effect at the timeto enter into risk mitigation arrangements, including cash collateral and/or forms of review to post collateral, typically in the form of cash,credit enhancement such as letters of credit orand guarantees. This requirement is based on management’sa review of the individual risk circumstances for each customer that is out of compliance. In addition to these amounts, Mastercard holds collateral to cover variability and future growth in customer programs. The Company may also hold collateral to pay merchants in the event of an acquirer failure. Although the Company is not contractually obligated under its rules to effect such payments to merchants, the Company may elect to do so to protect brand integrity.customer. Mastercard monitors its credit risk portfolio on a regular basis and the adequacy of collateralits risk mitigation arrangements on hand.a regular basis. Additionally, from time to time, the Company periodically reviews its risk management methodology and standards. As such, the amounts of estimated settlement exposure are revised as necessary.

22 MASTERCARD MARCH 31, 2024 FORM 10-Q

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s estimated settlement exposure from Mastercard, Cirrus and Maestro branded transactions was as follows:
 September 30,
2017		 December 31,
2016
 (in millions)
Gross settlement exposure1
$44,595
 $39,523
Collateral held for settlement exposure(4,135) (3,734)
Net uncollateralized settlement exposure$40,460
 $35,789
1. In the second quarter of 2017, Mastercard adjusted the methodology for estimating gross settlement exposure for certain customers whose exposures are now reported before the impact of potential offsetting positions. The gross settlement exposure as of December 31, 2016 has been updated to conform to the current year’s methodology.
General economic and political conditions in countries in which Mastercard operates affect the Company’s settlement risk. Many of the Company’s financial institution customers have been directly and adversely impacted by political instability and uncertain economic conditions. These conditions present increased risk that the Company may have to perform under its settlement guarantee. This risk could increase if political, economic and financial market conditions deteriorate further. The Company’s global risk management policies and procedures are revised and enhanced from time to time. Historically, the Company has experienced a low level of losses from financial institution failures.
March 31,
2024		December 31,
2023
(in millions)
Gross settlement exposure$73,775 $75,023 
Risk mitigation arrangements applied to settlement exposure(12,549)(12,167)
Net settlement exposure$61,226 $62,856 
Mastercard also provides guarantees to customers and certain other counterparties indemnifying them from losses stemming from failures of third parties to perform duties. This includes guarantees of Mastercard-branded travelers cheques issued, but not yet cashed of $398$336 million and $397$340 million at September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively, of which $315the Company has risk mitigation arrangements for $269 million and $312$272 million at September 30, 2017March 31, 2024 and December 31, 2016, is mitigated by collateral arrangements.2023, respectively. In addition, the Company enters into agreements in the ordinary course of business under which the Company agrees to indemnify third parties against damages, losses and expenses incurred in connection with legal and other proceedings arising from relationships or transactions with the Company. Certain indemnifications do not provide a


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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


stated maximum exposure. As the extent of the Company’s obligations under these agreements depends entirely upon the occurrence of future events, the Company’s potential future liability under these agreements is not determinable. Historically, payments made by the Company under these types of contractual arrangements have not been material.
Note 13. Foreign Exchange Risk Management15. Derivative and Hedging Instruments
The Company monitors and manages its foreign currency and interest rate exposures as part of its overall risk management program which focuses on the unpredictability of financial markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results. A principalprimary objective of the Company’s risk management strategies is to reduce significant, unanticipated earnings fluctuationsthe financial impact that may arise from volatility in foreign currency exchange rates principally through the use of both foreign exchange derivative instruments.
Derivatives
The Company enters intocontracts and foreign currency denominated debt. In addition, the Company may enter into interest rate derivative contracts to manage risk associated withthe effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances. The Company does not enter into derivatives for speculative purposes.
Cash Flow Hedges
The Company may enter into foreign exchange derivative contracts, including forwards and options, to manage the impact of foreign currency variability on anticipated receiptsrevenues and disbursementsexpenses, which are valuedfluctuate based on currencies other than the functional currenciescurrency of the entity. The objective of these hedging activities is to reduce the effect of movement in foreign exchange rates for a portion of revenues and expenses forecasted to occur. As these contracts are designated as cash flow hedging instruments, gains and losses resulting from changes in fair value of these contracts are deferred in accumulated other comprehensive income (loss) and subsequently reclassified to the consolidated statement of operations when the underlying hedged transactions impact earnings.
In addition, the Company may enter into interest rate derivative contracts to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances, and designate such derivatives as hedging instruments in a cash flow hedging relationship. Gains and losses resulting from changes in fair value of these contracts are deferred in accumulated other comprehensive income (loss) and are subsequently reclassified as an adjustment to interest expense over the respective terms of the hedged debt issuances.
Fair Value Hedges
The Company may enter into interest rate derivative contracts, including interest rate swaps, to manage the effects of interest rate movements on the fair value of the Company's fixed-rate debt and designate such derivatives as hedging instruments in a fair value hedging relationship. Changes in fair value of these contracts and changes in fair value of fixed-rate debt attributable to changes in the hedged benchmark interest rate generally offset each other and are recorded in interest expense on the consolidated statement of operations. Gains and losses related to the net settlements of interest rate swapsare alsorecorded in interest expense on the consolidated statement of operations. The periodic cash settlements are included in operating activities on the consolidated statement of cash flows.
In 2021, the Company entered into an interest rate swap designated as a fair value hedge related to $1.0 billion of the 3.850% Senior Notes due March 2050. In effect, the interest rate swap synthetically converts the fixed interest rate on this debt to a variable interest rate based on the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap Rate. The net impact to interest expense for the three months ended March 31, 2024 and 2023 was not material.

MASTERCARD MARCH 31, 2024 FORM 10-Q 23

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net Investment Hedges
The Company may use foreign currency denominated debt and/or foreign exchange derivative contracts to hedge a portion of its net investment in foreign subsidiaries against adverse movements in exchange rates. The effective portion of the net investment hedge is recorded as a currency translation adjustment in accumulated other comprehensive income (loss). Forward points are excluded from the effectiveness assessment and are recognized in general and administrative expenses on the consolidated statement of operations over the hedge period. The amounts recognized in earnings related to forward points for the three months ended March 31, 2024 and 2023 were not material.
As of March 31, 2024 and December 31, 2023, the Company had €1.6 billion euro-denominated debt outstanding designated as hedges of a portion of its net investment in its European operations. For the three months ended March 31, 2024 and 2023, the Company recorded pre-tax net foreign currency gains (losses) of $44 million and $(35) million, respectively, in other comprehensive income (loss).
As of March 31, 2024 and December 31, 2023, the Company had net foreign currency gains of $217 million and $181 million, after tax, respectively, in accumulated other comprehensive income (loss) associated with this hedging activity.
Non-designated Derivatives
The Company may also enter into foreign currencyexchange derivative contracts to serve as economic hedges, such as to offset possible changes in the value of monetary assets and liabilities due to foreign exchange fluctuations, without designating these derivative contracts as hedging instruments. In addition, the Company is subject to foreign exchange risk as part of earnings, assetsits daily settlement activities. This risk is typically limited to a few days between when a payment transaction takes place and liabilities.the subsequent settlement with customers. To manage this risk, the Company may enter into short duration foreign exchange derivative contracts based upon anticipated receipts and disbursements for the respective currency position. The objective of these activities is to reduce the Company’s exposure to volatility arising from gains and losses resulting from fluctuations of foreign currencies against its functional currencies. Gains and losses resulting from changes in fair value of these contracts are recorded in general and administrative expenses on the consolidated statement of operations, net, along with the foreign currency gains and losses on monetary assets and liabilities.
AsThe following table summarizes the fair value of September 30, 2017the Company’s derivative financial instruments and Decemberthe related notional amounts:
March 31, 2024December 31, 2023
 NotionalDerivative assetsDerivative liabilitiesNotionalDerivative assetsDerivative liabilities
(in millions)
Derivatives designated as hedging instruments
Foreign exchange contracts in a cash flow hedge 1
$951 $13 $11 $1,006 $2 $25 
Interest rate contracts in a fair value hedge 2
1,000 — 88 1,000 — 79 
Derivatives not designated as hedging instruments
Foreign exchange contracts 1
5,526 41 20 5,424 34 79 
Total derivative assets/liabilities$7,477 $54 $119 $7,430 $36 $183 
1Foreign exchange derivative assets and liabilities are included within prepaid expenses and other current assets and other current liabilities, respectively, on the consolidated balance sheet.
2Interest rate derivative liabilities are included within other current liabilities and other liabilities on the consolidated balance sheet.
The pre-tax gain (loss) related to the Company's derivative financial instruments designated as hedging instruments are as follows:
Gain (Loss)
Recognized in OCI		Gain (Loss)
Reclassified from AOCI
Three Months Ended March 31,Location of Gain (Loss) Reclassified from AOCI into EarningsThree Months Ended March 31,
2024202320242023
(in millions)(in millions)
Derivative financial instruments in a cash flow hedge relationship:
Foreign exchange contracts$22 $(10)Net revenue$(3)$(6)
Interest rate contracts$— $— Interest expense$(2)$(2)
Derivative financial instruments in a net investment hedge relationship:
Foreign exchange contracts$3 $(39)

24 MASTERCARD MARCH 31, 2016,2024 FORM 10-Q

PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company estimates that the majoritypre-tax amount of the net deferred loss on cash flow hedges recorded in accumulated other comprehensive income (loss) at March 31, 2024 that will be reclassified into the consolidated statement of operations within the next 12 months is not material. The term of the foreign exchange derivative contracts to hedge foreign currency fluctuations had been entered into with customers of Mastercard. Mastercard’s derivative contractsdesignated in hedging relationships are summarized below:
 September 30, 2017 December 31, 2016
 Notional 
Estimated Fair
Value
 Notional 
Estimated Fair
Value
 (in millions)
Commitments to purchase foreign currency$20
 $—
 $37
 $(2)
Commitments to sell foreign currency861
 (30) 777
 18
Options to sell foreign currency16
 1
 —
 —
Balance sheet location       
Accounts receivable 1
  $4
   $29
Other current liabilities 1
  (33)   (13)
1 The derivative contracts are subject to enforceable master netting arrangements, which contain various netting and setoff provisions.generally less than 18 months.
The amount of gain (loss) recognized in incomeon the consolidated statement of operations for thenon-designated derivative contracts to purchase and sell foreign currency is summarized below: 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (in millions)
Foreign currency derivative contracts       
General and administrative$(20) $(6) $(65) $(42)
The fair value of the foreign currency derivative contracts generally reflects the estimated amounts that the Company would receive (or pay), on a pre-tax basis, to terminate the contracts. The terms of the foreign currency derivative contracts are generally less than 18 months. The Company had no deferred gains or losses related to foreign exchange contracts in accumulated other comprehensive income as of September 30, 2017 and December 31, 2016, as these contracts were not accounted for under hedge accounting.
 Three Months Ended March 31,
Derivatives not designated as hedging instruments:20242023
(in millions)
Foreign exchange contracts
General and administrative$72 $15 
The Company’s derivative financial instruments are subject to both market and counterparty credit risk. Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in market factors such as foreign currency exchange rates, interest rates and other related variables. The effect of a hypothetical 10% adverse change in foreign currency forward rates could result in a fair value loss of approximately $97 million on the


24
Table of Contents

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


Company’s foreign currency derivative contracts outstanding at September 30, 2017. Counterparty credit risk is the risk of loss due to failure of the counterparty to perform its obligations in accordance with contractual terms. The Company’s derivative contracts are subject to enforceable master netting arrangements, which contain various netting and setoff provisions. However, the Company has elected to present derivative assets and liabilities on a gross basis on the consolidated balance sheet. To mitigate counterparty credit risk, the Company enters into derivative contracts with a diversified group of selected financial institutions based upon their credit ratings and other factors. Generally, the Company does not obtain collateral related to derivatives because of the high credit ratings of the counterparties.
Net Investment Hedge

The Company uses foreign currency denominated debt to hedge a portion of its net investment in foreign operations against adverse movements in exchange rates, with changes in the value of the debt recorded within currency translation adjustment in accumulated other comprehensive income (loss). In 2015, the Company designated its €1.65 billion euro-denominated debt as a net investment hedge for a portion of its net investment in European foreign operations. As of September 30, 2017, the Company had a net foreign currency transaction pre-tax loss of $187 million in accumulated other comprehensive income (loss) associated with hedging activity. There was no ineffectiveness in the current period.MASTERCARD MARCH 31, 2024 FORM 10-Q 25


25

Table of Contents

PART I
ITEM 2. MANAGEMENT’SMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. Management’s discussion and analysis of financial condition and results of operations
The following supplements management's discussion and analysis of Mastercard Incorporated for the year ended December 31, 20162023 as contained in the Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on February 15, 2017.13, 2024. It also should be read in conjunction with the consolidated financial statements and notes of Mastercard Incorporated and its consolidated subsidiaries, including Mastercard International Incorporated (together, “Mastercard” or the “Company”), included elsewhere in this Report. Percentage changes provided throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” were calculated on amounts rounded to the nearest thousand.
Business Overview
Mastercard is a technology company in the global payments industry that connects consumers, financial institutions, merchants, governments and businesses worldwide, enabling them to use electronic forms of payment instead of cash and checks. As the operator of what we believe is the world’s fastest payments network, we facilitate the switching (authorization, clearing and settlement) of payment transactions and deliver related products and services. We make payments easier and more efficient by creating a wide range of payment solutions and services using our family of well-known brands, including Mastercard®, Maestro® and Cirrus®. We also provide value-added offerings such as safety and security products, information services and consulting, issuer and acquirer processing and loyalty and reward programs. Our network is designed to ensure safety and security for the global payments system.
A typical transaction on our network involves four participants in addition to us: cardholder (an individual who holds a card or uses another device enabled for payment), merchant, issuer (the cardholder’s financial institution) and acquirer (the merchant’s financial institution). We do not issue cards, extend credit, determine or receive revenue from interest rates or other fees charged to cardholders by issuers, or establish the rates charged by acquirers in connection with merchants’ acceptance of our branded cards. In most cases, cardholder relationships belong to, and are managed by, our financial institution customers.
We generate revenue by charging fees to issuers, acquirers and other stakeholders for providing transaction processing and other payment-related products and services, as well as by assessing these customers based primarily on the dollar volume of activity, or gross dollar volume (“GDV”), on the cards and other devices that carry our brands.
Our Strategy
Our ability to grow our business is influenced by personal consumption expenditure growth, driving cash and check transactions toward electronic forms of payment, increasing our share in electronic payments and providing value-added products and services. We achieve our strategy by growing, diversifying and building our business.
Grow. We focus on growing our core businesses globally, including growing our consumer credit, debit, prepaid and commercial products and solutions, increasing the number of payment transactions we switch.
Diversify. We look to diversify our business and capabilities by focusing on:
diversifying our customer base in new and existing markets by working with partners such as governments, merchants, technology companies (such as digital players and mobile providers) and other businesses
encouraging use of our products and solutions in areas that provide new opportunities for electronic payments, such as transit, business-to-person transfers, business-to-business transfers and person-to-person transfers
capturing more payment flows by adding automated clearing house (ACH) payments to our core card-based business via our recent acquisition of VocaLink Holdings Limited (“Vocalink”)
driving acceptance at merchants of all sizes
broadening financial inclusion for the unbanked and underbanked


26

Build. We build our business by:
taking advantage of the opportunities presented by the evolving ways consumers interact and transact in the growing digital economy
providing value-added services across safety and security, consulting, data analytics and loyalty
We grow, diversify and build our business through a combination of organic growth and strategic investments, including acquisitions.
Strategic Partners. We work with a variety of stakeholders. We provide financial institutions with solutions to help them increase revenue by driving preference for Mastercard-branded products. We help merchants by delivering data-driven insights and other services that help them grow and create simple and secure purchase experiences regardless of how and where their consumers shop. We partner with technology companies such as digital players and mobile providers to deliver digital payment solutions powered by our technology, expertise and security protocols. We help national and local governments drive increased financial inclusion and efficiency, reduce costs, increase transparency to reduce crime and corruption and advance social programs. For consumers, we provide better, safer and more convenient ways to pay.
Business Environment
We process transactions from more than 210 countries and territories and in more than 150 currencies. Net revenue generated in the United States was 34% and 35% of total net revenue for the three and nine months ended September 30, 2017, respectively, and 38% for both the three and nine months ended September 30, 2016. No individual country, other than the United States, generated more than 10% of total net revenue in each period, but differences in market growth, economic health and foreign exchange fluctuations in certain countries can have an impact on the proportion of revenue generated outside the United States over time. While the global nature of our business helps protect our operating results from adverse economic conditions in a single or a few countries, the significant concentration of our revenue generated in the United States makes our business particularly susceptible to adverse economic conditions in the United States.
The competitive and evolving nature of the global payments industry provides both challenges to and opportunities for the continued growth of our business. Adverse economic trends (including distress in financial markets, currency fluctuations, turmoil in specific economies around the world and additional government intervention) have impacted the environment in which we operate. Certain of our customers, merchants that accept our brands and cardholders who use our brands, have been directly impacted by these adverse economic conditions.
Mastercard’s financial results may be negatively impacted by actions taken by individual financial institutions or by governmental or regulatory bodies. In addition, political instability or a decline in economic conditions in the countries in which we operate may accelerate the timing of or increase the impact of risks to our financial performance. As a result, our revenue or results of operations may be negatively impacted. We continue to monitor political and economic conditions around the world to identify opportunities for the continued growth of our business and to evaluate the evolution of the global payments industry. Notwithstanding recent encouraging trends, the extent and pace of economic recovery in various regions remains uncertain and the overall business environment may present challenges for us to grow our business.
For a full discussion of the various legal, regulatory and business risks that could impact our financial results, see “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.


27

Financial Results Overview
The following tables providetable provides a summary of our key GAAP operating results:results, as reported:
Three Months Ended September 30, Increase/(Decrease) Nine Months Ended
September 30,		 Increase/(Decrease)
2017 2016 2017 2016 
($ in millions, except per share data)
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,Increase/(Decrease)
2024
(in millions, except per share data)
(in millions, except per share data)
(in millions, except per share data)
Net revenue$3,398
 $2,880
 18% $9,185
 $8,020
 15%
        
Net revenue
Net revenue$6,348 $5,748 10%
Operating expenses$1,457
 $1,210
 20% $4,085
 $3,622
 13%Operating expenses$2,744 $$2,612 5%5%
Operating income$1,941
 $1,670
 16% $5,100
 $4,398
 16%Operating income$3,604 $$3,136 15%15%
Operating margin57.1% 58.0% (0.9) ppt 55.5% 54.8% 0.7 pptOperating margin56.8 %54.6 %2.2 ppt
        
Income tax expense$502
 $449
 12% $1,350
 $1,209
 12%Income tax expense$547 $$492 11%11%
Effective income tax rate26.0% 27.5% (1.5) ppt 26.8% 27.9% (1.1) pptEffective income tax rate15.4 %17.2 %(1.9) ppt
        
Net income$1,430
 $1,184
 21% $3,688
 $3,126
 18%Net income$3,011 $$2,361 28%28%
        
Diluted earnings per share$1.34
 $1.08
 24% $3.43
 $2.83
 21%Diluted earnings per share$3.22 $$2.47 30%30%
Diluted weighted-average shares outstanding1,068
 1,099
 (3)% 1,075
 1,104
 (3)%Diluted weighted-average shares outstanding935 956 956 (2)%(2)%
Note: Table may not sum due to rounding.
SummaryThe following table provides a summary of Non-GAAP Results our key non-GAAP operating results1:
 
Three Months Ended September 30,2
 Increase/(Decrease) Nine Months Ended
September 30,		 Increase/(Decrease)
 2017 2016 
Reported GAAP2
 Currency-neutral 2017 2016 As adjusted Currency-neutral
 ($ in millions, except per share data)
Net revenue$3,398
 $2,880
 18% 17% $9,185
 $8,020
 15% 14%
                
Adjusted operating expenses$1,457
 $1,210
 20% 19% $4,070
 $3,515
 16% 16%
                
Adjusted operating margin57.1% 58.0% (0.9) ppt (1.1) ppt 55.7% 56.2% (0.5) ppt (0.6) ppt
                
Adjusted effective income tax rate26.0% 27.5% (1.5) ppt (1.5) ppt 26.8% 27.9% (1.1) ppt (1.1) ppt
                
Adjusted net income$1,430
 $1,184
 21% 19% $3,698
 $3,204
 15% 15%
                
Adjusted diluted earnings per share$1.34
 $1.08
 24% 23% $3.44
 $2.90
 19% 18%

1 The Summary of Non-GAAP Results excludes, adjusted to exclude the impact of gains and losses on our equity investments, Special Items and/or foreign currency. (which represent litigation judgments and settlements and certain one-time items) and the related tax impacts on our non-GAAP adjustments. In addition, we have presented growth rates, adjusted for the impact of currency:
Three Months Ended March 31,Increase/(Decrease)
20242023As adjustedCurrency-neutral
($ in millions, except per share data)
Net revenue$6,348 $5,748 10%11%
Adjusted operating expenses$2,617 $2,401 9%9%
Adjusted operating margin58.8 %58.2 %0.5 ppt0.7 ppt
Adjusted effective income tax rate15.9 %18.3 %(2.3) ppt(2.4) ppt
Adjusted net income$3,093 $2,678 16%16%
Adjusted diluted earnings per share$3.31 $2.80 18%19%
Note: Table may not sum due to rounding.
1    See “Non-GAAP Financial Information” for further information on the Special Items, the impact of foreign currencyour non-GAAP adjustments and the reconciliation to GAAP reported amounts.
2 There were no Special Items impacting the results for the three months ended September 30, 2017 and 2016.



2826 MASTERCARD MARCH 31, 2024 FORM 10-Q
Table of Contents


PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Key highlights for the three and nine months ended September 30, 2017 were as follows:
Net revenue increased 18% and 15%, or 17% and 14% on a currency-neutral basis, respectively,March 31, 2024, versus the comparable periodsperiod in 2016, primarily driven by increases across our revenue categories, partially offset by higher rebates and incentives. The impact of acquisitions contributed 2.5 and 1.5 percentage points of growth, respectively. Switched transactions increased 17%for both periods, gross dollar volume increased 10% and 9% on a local currency basis and adjusted for the impact of the EU regulation change, and cross-border volume increased 15% and 14% on a local currency basis, respectively, versus the comparable periods in 2016.
2023:
Operating expenses increased 20% and 13%, respectively, versus the comparable periods in 2016. Excluding the impact of the Special Items, adjusted operating expenses increased 20% and 16%, or 19% and 16% on a currency-neutral basis, respectively, versus the comparable periods in 2016. These increases were due to higher personnel costs reflecting our continued investment in strategic initiatives. The impact of acquisitions contributed 8 and 5 percentage points of growth for the three and nine months ended September 30, 2017.
Net revenue
Three Months Ended March 31, 2024
GAAPNon-GAAP
(currency-neutral)		Both the as reported and currency-neutral net revenue increase was attributable to growth in our payment network and value-added services and solutions.
up 10%up 11%
Operating expensesAdjusted
operating expenses
Three Months Ended March 31, 2024
GAAPNon-GAAP
(currency-neutral)		The as reported operating expense increase was primarily due to higher general and administrative expenses, partially offset by lower litigation provisions and advertising and marketing expenses. The as adjusted operating expense increase was primarily due to higher general and administrative expenses, partially offset by lower advertising and marketing expenses.
up 5%up 9%
The effective income tax rate was 26.0% and 26.8% for the three and nine months ended September 30, 2017, respectively, versus 27.5% and 27.9% for the comparable periods in 2016. The lower effective tax rates, as compared to the prior year, were due to a more favorable geographical mix of taxable earnings, partially offset by a lower U.S. foreign tax credit benefit associated with the repatriation of current year foreign earnings.
Effective income
tax rate
Adjusted effective
income tax rate
Three Months Ended March 31, 2024Both the as reported and as adjusted effective income tax rates were lower than the prior year rates primarily due to a change in our geographic mix of earnings as well as discrete tax benefits related to share-based payments.
GAAPNon-GAAP
15.4%15.9%
down 1.9 pptdown 2.3 ppt
Other financial highlights for the ninethree months ended September 30, 2017March 31, 2024 were as follows:
•We generated net cash flows from operations of $3.8 billion compared to $3.5 billion for the comparable period in 2016.
$1.7 billion.
•We repurchased 23.14.4 million shares of our common stock for $2.0 billion and paid dividends of $709 million.$0.6 billion.
Non-GAAP Financial Information
Non-GAAP financial information is defined as a numerical measure of a company’s performance that excludes or includes amounts so as to be different than the most comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”). TheseAs described more fully below, our non-GAAP financial measures exclude the impact of gains and losses on our equity investments which includes mark-to-market fair value adjustments, impairments and gains and losses upon disposition, as well as the followingrelated tax impacts. Our non-GAAP financial measures also exclude the impact of special items, (“Special Items”):
In the first quarter of 2017, we recorded a provision for litigation of $15 million ($10 million after tax, or $0.01 per diluted share) related to a litigation settlement with Canadian merchants (the “Canadian Merchant Litigation Provision”).
In the second quarter of 2016, we recorded a provision for litigation of $107 million ($78 million after tax, or $0.07 per diluted share) related to a judgment issued against the Company in a litigation with a merchant in the U.K. (the “U.K. Merchant Litigation Provision”).
See Note 11 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part I, Item I of this Report for further discussion. We excluded these litigation provisions because our management monitorswhere applicable, which represent litigation judgments and settlements and certain one-time items, as well as the related to interchange and regulation separately from ongoing operations and evaluates ongoing performance without these amounts.
In addition, wetax impacts (“Special Items”). We also present growth rates adjusted for the impact of foreign currency which is a non-GAAP financial measure. Currency-neutral growth rates, are calculated by remeasuring the prior period’s results using the current period’s exchange rates for both the translational and transactional impacts on operating results. The impact of foreign currency translation represents the effect of translating operating results where the functional currency is different than our U.S. dollar reporting currency. The impact of the transactional foreign currency represents the effect of converting revenue and expenses occurring in a currency other than the functional currency. Our management believes the presentation of the impact of foreign currency provides relevant information.


29

Our management believesWe believe that the non-GAAP financial measures presented facilitate an understanding of our operating performance and provide a meaningful comparison of our results between periods. Our management usesWe use non-GAAP financial measures to, among other things, evaluate our ongoing operations in relation to historical results, for internal planning and forecasting purposes and in the calculation of performance-based compensation. The presentationWe excluded these items because management evaluates the underlying operations and performance of non-GAAP financial measures should not be considered in isolation or as a substitute for our related financial results prepared in accordance with GAAP.

Net revenue, operatingthe Company separately from these recurring and nonrecurring items. Operating expenses, operating margin, other income (expense), effective income tax rate, net income and diluted earnings per share adjusted for the impact of gains and losses on our equity investments, Special Items and/or the impact of foreign currency, are non-GAAP financial measures and should not be relied upon as substitutes for measures calculated in accordance with GAAP.
Our non-GAAP financial measures for the comparable periods exclude the impact of the following:
Gains and Losses on Equity Investments
•In the three months ended March 31, 2024 and 2023, we recorded net gains of $6 million ($5 million after tax, or $0.01 per diluted share) and net losses of $212 million ($176 million after tax, or $0.18 per diluted share), respectively, primarily related to unrealized fair market value adjustments on marketable and nonmarketable equity securities.

MASTERCARD MARCH 31, 2024 FORM 10-Q 27

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Items
Litigation provisions
•In the three months ended March 31, 2024, we recorded charges of $126 million ($87 million after tax, or $0.09 per diluted share), primarily due to a legal provision associated with the ATM non-discrimination rule surcharge complaints.
•In the three months ended March 31, 2023, we recorded charges of $211 million ($140 million after tax, or $0.15 per diluted share) as a result of a change in estimate related to the claims of merchants who opted out of the U.S. merchant class litigation.
See Note 5 (Investments) and Note 13 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part I, Item 1 of this Report for further discussion related to certain of the items discussed above.
Currency-neutral Growth Rates
Currency-neutral growth rates are calculated by remeasuring the prior period’s results using the current period’s exchange rates for both the translational and transactional impacts on operating results and are non-GAAP financial measures. The impact of currency translation represents the effect of translating operating results where the functional currency is different from our U.S. dollar reporting currency. The impact of the transactional currency represents the effect of converting revenue and expenses occurring in a currency other than the functional currency of the entity. The impact of the related realized gains and losses resulting from our foreign exchange derivative contracts designated as cash flow hedging instruments is recognized in the respective financial statement line item on the statement of operations when the underlying forecasted transactions impact earnings. We believe the presentation of currency-neutral growth rates provides relevant information to facilitate an understanding of our operating results.
The translational and transactional impact of currency and the related impact of our foreign exchange derivative contracts designated as cash flow hedging instruments (“Currency impact”) has been excluded from our currency-neutral growth rates and has been identified in the non-GAAP information below and our “Drivers of Change” tables. See “Foreign Currency - Currency Impact” for further information on our currency impacts and “Financial Results - Net Revenue” and “Financial Results - Operating Expenses” for our "Drivers of Change” tables.
The following tables reconcile our as-reportedreported financial measures calculated in accordance with GAAP to the respective adjusted non-GAAP adjusted financial measures.
 Nine Months Ended September 30, 2017
  Operating expenses Operating margin Effective income tax rate  Net income  Diluted earnings per share
 
($ in millions, except per share data)

Reported - GAAP$4,085
 55.5% 26.8% $3,688
 $3.43
Special Item(15) 0.2% —% 10
 0.01
Non-GAAP$4,070
 55.7% 26.8% $3,698
 $3.44
measures:
Three Months Ended March 31, 2024
 Operating expensesOperating marginOther income (expense)Effective income tax rate Net income Diluted earnings per share
($ in millions, except per share data)
Reported - GAAP$2,744 56.8 %$(46)15.4 %$3,011 $3.22 
(Gains) losses on equity investments****(6)— %(5)(0.01)
Litigation provisions(126)2.0 % **0.5 %87 0.09 
Adjusted - Non-GAAP$2,617 58.8 %$(52)15.9 %$3,093 $3.31 
 Nine Months Ended September 30, 2016
  Operating expenses Operating margin Effective income tax rate  Net income  Diluted earnings per share
 
($ in millions, except per share data)

Reported - GAAP$3,622
 54.8% 27.9% $3,126
 $2.83
Special Item(107) 1.4% —% 78
 0.07
Non-GAAP$3,515
 56.2% 27.9% $3,204
 $2.90
 Three Months Ended September 30, 2017 as compared to the Three Months Ended September 30, 2016
 Increase/(Decrease)
 Net revenue  Operating expenses Operating margin Effective income tax rate  Net income  Diluted earnings per share
Reported - GAAP18 % 20 % (0.9) ppt (1.5) ppt 21 % 24 %
Foreign currency 1
(1)% (1)% (0.2) ppt – ppt (2)% (1)%
Non-GAAP - currency-neutral17 % 19 % (1.1) ppt (1.5) ppt 19 % 23 %
 Nine Months Ended September 30, 2017 as compared to the Nine Months Ended September 30, 2016
 Increase/(Decrease)
 Net revenue  Operating expenses Operating margin Effective income tax rate  Net income  Diluted earnings per share
Reported - GAAP15 % 13% 0.7 ppt (1.1) ppt 18 % 21 %
Special Item— % 3% (1.2) ppt – ppt (3)% (3)%
Non-GAAP15 % 16% (0.5) ppt (1.1) ppt 15 % 19 %
Foreign currency 1
— % —% (0.1) ppt – ppt — % — %
Non-GAAP - currency-neutral14 % 16% (0.6) ppt (1.1) ppt 15 % 18 %
Three Months Ended March 31, 2023
 Operating expensesOperating marginOther income (expense)Effective income tax rate Net income Diluted earnings per share
($ in millions, except per share data)
Reported - GAAP$2,612 54.6 %$(283)17.2 %$2,361 $2.47 
(Gains) losses on equity investments****212 — %176 0.18 
Litigation provisions(211)3.7 %**1.1 %140 0.15 
Adjusted - Non-GAAP$2,401 58.2 %$(71)18.3 %$2,678 $2.80 
Note: Tables may not sum due to rounding.
1 Represents the foreign currency translational and transactional impact.

**    Not applicable.


3028 MASTERCARD MARCH 31, 2024 FORM 10-Q

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table represents the reconciliation of our growth rates reported under GAAP to our non-GAAP growth rates:
Three Months Ended March 31, 2024 as compared to the Three Months Ended March 31, 2023
Increase/(Decrease)
 Operating expensesOperating marginEffective income tax rate Net income Diluted earnings per share
Reported - GAAP5%2.2 ppt(1.9) ppt28%30%
(Gains) losses on equity investments****— ppt(9)%(9)%
Litigation provisions4%(1.7) ppt(0.5) ppt(3)%(3)%
Adjusted - Non-GAAP9%0.5 ppt(2.3) ppt16%18%
Currency impact—%0.1 ppt(0.1) ppt1%—%
Adjusted - Non-GAAP - currency-neutral9%0.7 ppt(2.4) ppt16%19%
Note: Table may not sum due to rounding.
**    Not applicable.
Key Metrics and Drivers
In addition to the financial measures described above in “Financial Results Overview”, we review the following metrics to evaluate and identify trends in our business, measure our performance, prepare financial projections and make strategic decisions. We believe that the key metrics presented facilitate an understanding of our operating and financial performance and provide a meaningful comparison of our results between periods. 
Operating Margin measures how much profit we make on each dollar of sales after our operating costs but before other income (expense) and income tax expense. Operating margin is calculated by dividing our operating income by net revenue.
Key Drivers
Gross Dollar Volume (“GDV”)1 measures dollar volume of activity, including both domestic and cross-border volume, on cards carrying our brands during the period, on a local currency basis and U.S. dollar-converted basis. GDV represents purchase volume plus cash volume; “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 and includes the impact of balance transfers and convenience checks obtained with Mastercard-branded cards for the relevant period. Information denominated in U.S. dollars relating to GDV is calculated by applying an established U.S. dollar/local currency exchange rate for each local currency in which our volumes are reported. These exchange rates are calculated on a quarterly basis using the average exchange rate for each quarter.  We report 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 currencies against the U.S. dollar in calculating such rates of change.
Cross-border Volume Growth measures the growth of cross-border dollar volume during the period, on a local currency basis and U.S. dollar-converted basis, for all Mastercard-branded programs.
Switched Transactions measures the number of transactions switched by Mastercard, which is defined as the number of transactions initiated and switched through our network during the period.
1    Data used in the calculation of GDV is provided by Mastercard customers and is subject to verification by Mastercard and partial cross-checking against information provided by Mastercard’s transaction switching systems. All data is subject to revision and amendment by Mastercard or Mastercard’s customers.
Table

MASTERCARD MARCH 31, 2024 FORM 10-Q 29

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following tables provide a summary of Contentsthe growth trends in our key drivers:
Three Months Ended March 31,
20242023
Increase/(Decrease)
USDLocalUSDLocal
Mastercard-branded GDV growth 1
9%10%10%15%
United States6%6%9%9%
Worldwide less United States10%13%11%18%
Cross-border volume growth 1
19%18%29%35%
Three Months Ended March 31,
20242023
Increase/(Decrease)
Switched transactions growth13%12%
1    Excludes volume generated by Maestro and Cirrus cards.
Key Metrics related to the Payment Network
Assessments represent agreed-upon standard pricing provided to our customers based on various forms of payment-related activity. Assessments are used internally by management to monitor operating performance as it allows for comparability and provides visibility into cardholder trends. Assessments do not represent our net revenue.
The following provides additional information on our key metrics related to the payment network:
•Domestic assessments are charges based on activity related to cards that carry the Company’s brands where the merchant country and the country of issuance are the same. These assessments are primarily driven by the domestic dollar volume of activity (e.g., domestic purchase volume, domestic cash volume) or the number of cards issued.
•Cross-border assessments are charges based on activity related to cards that carry the Company’s brands where the merchant country and the country of issuance are different. These assessments are primarily driven by the cross-border dollar volume of activity (e.g., cross-border purchase volume, cross-border cash volume).
•Transaction processing assessments are charges primarily driven by the number of switched transactions on our payment network. Switching activities include:
◦Authorization, the process by which a transaction is routed to the issuer for approval
◦Clearing, the determination and exchange of financial transaction information between issuers and acquirers after a transaction has been successfully conducted at the point of interaction
◦Settlement, which facilitates the determination and exchange of funds between parties
These assessments can also include connectivity services and network access which are based on the volume of data transmitted and the number of authorization and settlement messages.
•Other network assessments are charges for licensing, implementation and other franchise fees.
The following table provides a summary of our key metrics related to the payment network:
Three Months Ended March 31,Increase/(Decrease)
20232022As reportedCurrency-neutral
($ in millions)
Domestic assessments$2,470 $2,254 10%10%
Cross-border assessments$2,238 $1,849 21%22%
Transaction processing assessments$3,086 $2,752 12%12%
Other network assessments$226 $212 6%6%

30 MASTERCARD MARCH 31, 2024 FORM 10-Q


Impact of PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Foreign Currency Rates
Currency Impact
Our primary revenue functional currencies are the U.S. dollar, euro, British pound and the Brazilian real. Our overall operating results are impacted by foreign currency translation, which represents the effect of translating operating results where the functional currency is different than our U.S. dollar reporting currency.
Our operating results canare also be impacted by transactional foreign currency. The impact of the transactional foreign currency represents the effect of converting revenue and expense transactions occurring in a currency other than the functional currency. Changes in foreign currency exchange rates directly impact the calculation of gross dollar volume (“GDV”) and gross euro volume (“GEV”), which areis used in the calculation of our key metrics related to domestic assessments and cross-border volume fees andassessments as well as certain volume-related rebates and incentives. In most non-European regions, GDV is calculated based on local currency spending volume converted to U.S. dollars using average exchange rates for the period. In Europe, GEV is calculated based on local currency spending volume converted toand euros using average exchange rates for the period. As a result, our key metrics related to domestic assessments and cross-border volume fees andassessments as well as certain volume-related rebates and incentives are impacted by the strengthening or weakening of the U.S. dollar versus non-European local currencies and the strengthening or weakening of the euro versus other European local currencies. For example, our billing in Australia is in the U.S. dollar;dollar, however, consumer spend in Australia is in the Australian dollar. The foreigntransactional currency transactional impact of converting Australian dollars to our U.S. dollar billing currency will have an impact on the revenue generated. The strengthening or weakening of the U.S. dollar is evident when GDV growth on a U.S. dollar-converted basis is compared to GDV growth on a local currency basis. For the three and nine months ended September 30, 2017,March 31, 2024, GDV on a U.S. dollar-converted basis increased 11% and 6%, respectively,9% while GDV on a local currency basis increased 10% and 7%, respectively, versus the comparable periods in 2016.2023. Further, the impact from transactional foreign currency occurs in our key metric related to transaction processing revenue,assessments and other network assessments as well as value-added services and solutions revenue and operating expenses when the localtransacting currency of these items areis different than the functional currency.currency of the entity.
In addition,To manage the impact of foreign currency variability on anticipated revenues and expenses, we may enter into foreign exchange derivative contracts and designate such derivatives as hedging instruments in a cash flow hedging relationship as discussed further in Note 15 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part I, Item 1.
Foreign Exchange Activity
We incur foreign currency gains and losses from remeasuring monetary assets and liabilities, including settlement assets and obligations, that are denominated in a currency other than the functional currency and from remeasuringof the entity. To manage this foreign exchange risk, we may enter into foreign exchange derivative contracts (“Foreign Exchange Activity”).to economically hedge the foreign currency exposure of our nonfunctional currency monetary assets and liabilities. The gains or losses resulting from the changes in fair value of these contracts are intended to reduce the potential effect of the underlying hedged exposure and are recorded net within general and administrative expenses on the consolidated statement of operations. The impact of Foreign Exchange Activitythis foreign exchange activity, including the related hedging activities, has not been eliminated in our currency-neutral results (see “Non-GAAP Financial Information”) and is recorded in general and administrative expenses. We attempt to manage foreign currency balance sheet remeasurement and cash flow risk through ourresults.
Our foreign exchange risk management activities which are discussed further in Note 13 (Foreign Exchange Risk Management)15 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part I, Item 1 of this Report. Since we do not designate foreign currency derivatives as hedging instruments pursuant to the accounting standards for derivative instruments and hedging activities, we record gains and losses on foreign exchange derivatives on a current basis, with the associated offset being recognized as the exposures materialize.1.
We are exposed to currency devaluation in certain countries. In addition, we are subject to exchange control regulations that restrict or prohibit the conversion of financial assets into U.S. dollars. While these revenues and assets are not material to Mastercard on a consolidated basis, they could be negatively impacted should there be a continued and sustained devaluation of local currencies relative to the U.S. dollar and/or a continued and sustained deterioration of economic conditions in these countries. This includes approximately $140 million of exposure in Venezuela as of September 30, 2017.
Financial Results
Net Revenue
Revenue Description
Our business model involves four participants in addition to us: cardholders, merchants, issuers (the cardholders’ financial institutions) and acquirers (the merchants’ financial institutions). Our gross revenue is generated by assessing our customers based primarily on the dollar volume of activity on the cards and other devices that carry our brands and from the fees that we charge our customers for providing transaction processing and other payment-related products and services. Our revenue is based upon transactional information accumulated by our systems or reported by our customers. Our primary revenue billing currencies are the U.S. dollar, euro, Brazilian real and the British pound.
The price structure for our products and services is complex and is dependent on the naturecomponents of volumes, types of transactions and type of products and services we offer to our customers. Our net revenue can be significantly impactedwere as follows:
 Three Months Ended March 31,Increase/(Decrease)
 20242023
 ($ in millions)
Payment network$3,920 $3,650 7%
Value-added services and solutions2,428 2,098 16%
Total net revenue$6,348 $5,748 10%
For the three months ended March 31, 2024, net revenue increased 10%, or 11% on a currency-neutral basis, versus the comparable period in 2023. The increase in net revenue was attributable to both our payment network and value-added services and solutions.
Net revenue from our payment network increased 7%, or 8% on a currency-neutral basis, versus the comparable period in 2023. The increase was primarily driven by growth in domestic and cross-border dollar volumes and an increase in the following:
domestic or cross-bordernumber of switched transactions,
signature-based or PIN-based transactions


31

geographic region or countrygrowth in which the transaction occurs
volumes/transactions subject to tiered rates
processed or not processed by Mastercard
amount of usage of our other products or services
amountkey drivers. Net revenue from our payment network included $4,100 million of rebates and incentives provided to customers,
We classify which increased 20%, on both an as reported and currency-neutral basis, versus the comparable period in 2023, primarily due to an increase in our net revenue into the following five categories:
1.
Domestic assessments are fees charged to issuers and acquirers based primarily on the dollar volume of activity on cards and other devices that carry our brands where the merchant country and the issuer country are the same. Domestic assessments include items such as card assessments, which are fees charged on the number of cards issued or assessments for specific purposes, such as acceptance development or market development programs.
2.
Cross-border volume fees are charged to issuers and acquirers based on the dollar volume of activity on cards and other devices that carry our brands where the merchant country and the issuer country are different. In general, a cross-border transaction generates higher revenue than a domestic transaction since cross-border fees are higher than domestic fees, and may include fees for currency conversion.
3.
Transaction processing revenue is earned for both domestic and cross-border transactions and is primarily based on the number of transactions. Transaction processing includes the following:
Switched transactions includethe following products and services:
Ø
Authorization is the process by which a transaction is routed to the issuer for approval. In certain circumstances, such as when the issuer’s systems are unavailable or cannot be contacted, Mastercard or others, on behalf of the issuer approve in accordance with either the issuer’s instructions or applicable rules (also known as “stand-in”).
Ø
Clearing is the determination and exchange of financial transaction information between issuers and acquirers after a transaction has been successfully conducted at the point of interaction. We clear transactions among customers through our central and regional processing systems.
Ø
Settlement isfacilitating the exchange of funds between parties.
Connectivity fees are charged to issuers, acquirers and other financial institutions for network access, equipment and the transmission of authorization and settlement messages. These fees are based on the size of the data being transmitted and the number of connections to our network.
Other Processing fees include issuer and acquirer processing solutions; payment gateways for e-commerce merchants; and mobile gateways for mobile initiated transactions.
4.
Other revenues: Other revenues consist of other payment-related products and services and are primarily associated with the following:
Consulting, data analytic and research fees are primarily generated by Mastercard Advisors, our professional advisory services group.
Safety and security services fees are for products and services we offer to prevent, detect and respond to fraud and to ensure the safety of transactions made on Mastercard products. We work with issuers, merchants and governments to help deploy standards for safe and secure transactions for the global payments system.
Loyalty and rewards solutions fees are charged to issuers for benefits provided directly to consumers with Mastercard-branded cards, such as access to a global airline lounge network, global and local concierge services, individual insurance coverages, emergency card replacement, emergency cash advance services and a 24-hour cardholder service center. For merchants, we provide targeted offers


32

and rewards campaigns and management services for publishing offers,key drivers as well as opportunities for holders of co-brand or loyalty cardsnew and rewards program members to obtain rewards points faster.renewed deals.
Program management services provided to prepaid card issuers consist of foreign exchange margin, commissions, load fees and ATM withdrawal fees paid by cardholders on the sale and encashment of prepaid cards.

MASTERCARD MARCH 31, 2024 FORM 10-Q 31

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Bank account-based paymentNet revenue from our value-added services relating to ACH and other ACH related services.
We also charge for a variety of other payment-related products and services, including account and transaction enhancement services, rules compliance and publications.
5.
Rebates and incentives (contra-revenue): Rebates and incentives are provided to certain Mastercard customers and are recorded as contra-revenue.
Revenue Analysis
In the three and nine months ended September 30, 2017, gross revenuesolutions increased 19% and 17%16%, or 17% and 16%15% on a currency-neutral basis, respectively, versus the comparable periodsperiod in 2016. Gross revenue2023. The increase was driven primarily by growth in the three(i) our underlying key drivers, (ii) our consulting and nine months ended September 30, 2017 was driven by an increase in transactions, dollar volume of activity on cards carrying our brands,marketing services, loyalty solutions and fraud and security capabilities and (iii) other payment-related products and services.solutions.
Rebates and incentives, in the three and nine months ended September 30, 2017, increased 20% and 21%, or 19% and 21% on a currency-neutral basis, respectively, versus the comparable periods in 2016, primarily dueSee Note 3 (Revenue) to the impact from new and renewed agreements and increased volumes.
Our net revenueconsolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the three and nine monthsyear ended September 30, 2017, increased 18% and 15%, or 17% and 14% onDecember 31, 2023 for a currency-neutral basis, respectively, versus the comparable periods in 2016. The impact of acquisitions contributed 2.5 and 1.5 percentage points of growth for the three and nine months ended September 30, 2017, respectively.
The significant componentsfurther discussion of our net revenue for the three and nine months ended September 30, 2017 and 2016 were as follows:recognition policies.
 Three Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease)
 2017 2016  2017 2016 
 ($ in millions)
Domestic assessments$1,302
 $1,132
 15% $3,751
 $3,269
 15%
Cross-border volume fees1,157
 996
 16% 3,057
 2,658
 15%
Transaction processing1,662
 1,357
 22% 4,505
 3,793
 19%
Other revenues747
 620
 21% 2,002
 1,707
 17%
Gross revenue4,868
 4,105
 19% 13,315
 11,427
 17%
Rebates and incentives (contra-revenue)(1,470) (1,225) 20% (4,130) (3,407) 21%
Net revenue$3,398
 $2,880
 18% $9,185
 $8,020
 15%


33

Change
The following table summarizes the primary drivers of change in net revenue growth in the three and nine months ended September 30, 2017, versus the comparable periods in 2016:revenue:
 Three Months Ended September 30, 2017
 Volume Acquisitions Foreign Currency 
Other 1
 Total
Domestic assessments10% —% 1% 5%
2 
15%
Cross-border volume fees14% —% 1% 1% 16%
Transaction processing14% 1% 2% 6% 22%
Other revenues**
 9% 2% 10%
3 
21%
Rebates and incentives (contra-revenue)9% —% 1% 10%
4 
20%
          
Net revenue11% 2%
5 
1% 3% 18%
 Nine Months Ended September 30, 2017
 Volume Acquisitions Foreign Currency 
Other 1
 Total
Domestic assessments9% —% — % 6%
2 
15%
Cross-border volume fees13% —% (1)% 3% 15%
Transaction processing15% 1% — % 3% 19%
Other revenues**
 6% 1 % 11%
3 
17%
Rebates and incentives (contra-revenue)9% —% — % 12%
4 
21%
          
Net revenue11% 2%
5 
— % 2% 15%
Three Months Ended March 31, 2024
Increase/(Decrease)
OperationalAcquisitions
Currency Impact 1
Total
Payment network8 %**(1)%7 %
Value-added services and solutions15 %— %— %16 %
Net revenue11 %— %— %10 %
Note: Table may not sum due to rounding.
**    Not applicable.
1Includes impact from pricingthe translational and other non-volume based fees.
2 Includestransactional impact of currency and the allocation of revenue to service deliverables, which are recorded in other revenue when services are performed.
3 Includes impacts from Advisor fees, safety and security fees, loyalty and reward solution fees and other payment-related products and services.
4 Includes the impact from timing of new, renewed and expired agreements.
5 Therelated impact of acquisitions contributed 2.5 and 1.5 percentage points of growthour foreign exchange derivative contracts designated as cash flow hedging instruments. See “Non-GAAP Financial Information - Currency-neutral Growth Rates” for the three and nine months ended September 30, 2017, respectively.further information on our currency impact non-GAAP adjustment.
The following table provides a summary of the trend in volume and transaction growth.
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 Growth (USD) Growth (Local) Growth (USD) Growth (Local) Growth (USD) Growth (Local) Growth (USD) Growth (Local)
Mastercard-branded GDV 1
11% 10% 5% 7% 6% 7% 7 % 10%
Asia Pacific/Middle East/Africa8% 9% 9% 10% 7% 8% 8 % 12%
Canada13% 9% 10% 9% 12% 10% 5 % 10%
Europe18% 15% 1% 4% 5% 7% 7 % 12%
Latin America17% 15% 7% 14% 17% 15% (1)% 15%
United States6% 6% 5% 5% 4% 4% 7 % 7%
Cross-border Volume 1
17% 15% 9% 12% 13% 14% 8 % 12%
Switched Transactions  17%   18%   17%   15%
1 Excludes volume generated by Maestro and Cirrus cards.


34

In 2016, our GDV was impacted by the EU Interchange Fee Regulation related to card payments, which became effective in June 2016. The regulation requires that we no longer collect fees on domestic European Economic Area payment transactions that do not use our network brand. Prior to that, we 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.
The following table reflects GDV growth rates for Europe and Worldwide Mastercard. For comparability purposes, we adjusted growth rates for the impact of Article 8 of the EU Interchange Fee Regulation related to card payments, to exclude the prior period co-badged volume processed by other networks.
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
 Growth (Local)
GDV 1
       
Worldwide as reported10% 7% 7% 10%
Worldwide as adjusted for EU Regulation10% 10% 9% 12%
        
Europe as reported15% 4% 7% 12%
Europe as adjusted for EU Regulation16% 17% 15% 19%
1 Excludes volume generated by Maestro and Cirrus cards.
A significant portion of our revenue is concentrated among our five largest customers. The loss of any of these customers or their significant card programs could adversely impact our revenue. In addition, as part of our business strategy, Mastercard, among other efforts, enters into business agreements with customers. These agreements can be terminated in a variety of circumstances. See our risk factor in “Risk Factor - Business Risks” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.
Operating Expenses
OurFor the three months ended March 31, 2024, operating expenses are comprised of general and administrative, advertising and marketing, depreciation and amortization and provision for litigation settlement. Operating expenses increased 20% and 13% for the three and nine months ended September 30, 2017, respectively,5% versus the comparable periodsperiod in 2016. Excluding the impact of the Special Items, adjusted2023. Adjusted operating expenses increased 20%9%, on both an as adjusted and 16%, or 19% and 16% on a currency-neutral basis, for the three and nine months ended September 30, 2017, respectively, versus the comparable periodsperiod in 2016. These increases were primarily due to higher personnel costs reflecting our continued investment in strategic initiatives.2023.
The components of operating expenses for the three and nine months ended September 30, 2017 and 2016 were as follows:
 Three Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease)
 2017 2016  2017 2016 
 ($ in millions)
General and administrative$1,136
 $933
 22% $3,162
 $2,731
 16%
Advertising and marketing      203
 184
 11% 587
 503
 17%
Depreciation and amortization 118
 93
 27% 321
 281
 14%
Provision for litigation settlement—
 —
 ** 15
 107
 **
Total operating expenses            1,457
 1,210
 20% 4,085
 3,622
 13%
Special Items1
—
 —
 ** (15) (107) **
Adjusted total operating expenses (excluding Special Items1)
$1,457
 $1,210
 20% $4,070
 $3,515
 16%
** Not meaningful.
1 See “Non-GAAP Financial Information” for further information on the Special Items.


35

The following table summarizes the primary drivers of changes in operating expenses in the three and nine months ended September 30, 2017 versus the comparable periods in 2016:
 Three Months Ended September 30, 2017
 Operational 
Special Items 1
 Acquisitions Foreign Currency Total
General and administrative13% —% 8% 1% 22%
Advertising and marketing      9% —% —% 1% 11%
Depreciation and amortization 1% —% 26% —% 27%
Total operating expenses            12% —% 8% 1% 20%
 Nine Months Ended September 30, 2017
 Operational 
Special Items 1
 Acquisitions Foreign Currency Total
General and administrative11% — % 5% — % 16%
Advertising and marketing      17% — % —% — % 17%
Depreciation and amortization 1% — % 14% (1)% 14%
Provision for litigation settlement** ** ** ** **
Total operating expenses            11% (3)% 5% — % 13%
Note: Tables may not sum due to rounding.
** Not meaningful.
1 See “Non-GAAP Financial Information” for further information on the Special Items.
General and Administrative
The significant components of our general and administrative expenses were as follows:
 Three Months Ended September 30, Increase (Decrease) Nine Months Ended September 30, Increase (Decrease)
 2017 2016  2017 2016 
 ($ in millions)
Personnel$723
 $575
 26% $1,961
 $1,646
 19%
Professional fees85
 81
 6% 240
 231
 4%
Data processing and telecommunications135
 111
 22% 366
 312
 17%
Foreign exchange activity23
 12
 ** 93
 43
 **
Other170
 154
 10% 502
 499
 1%
General and administrative$1,136
 $933
 22% $3,162
 $2,731
 16%
Three Months Ended March 31,Increase/ (Decrease)
20242023
($ in millions)
General and administrative$2,286 $2,043 12%
Advertising and marketing116 167 (31)%
Depreciation and amortization216 191 13%
Provision for litigation126 211 **
Total operating expenses2,744 2,612 5%
Special Items 1
(126)(211)**
Adjusted total operating expenses (excluding Special Items 1)
$2,617 $2,401 9%
Note: Table may not sum due to rounding.
**    Not meaningful.
1    See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.

32 MASTERCARD MARCH 31, 2024 FORM 10-Q

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Drivers of Change
The primaryfollowing table summarizes the drivers of changes in operating expenses:
Three Months Ended March 31, 2024
Increase/(Decrease)
OperationalAcquisitions
Currency Impact 1,2
Special
Items 2,3
Total
General and administrative11%—%—%**12%
Advertising and marketing(31)%—%—%**(31)%
Depreciation and amortization12%—%1%**13%
Provision for litigation**********
Total operating expenses8%—%—%(4)%5%
Note: Table may not sum due to rounding.
**    Not applicable/meaningful.
1Represents the translational and transactional impact of currency.
2See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.
3The Special Items driver of change related to provision for litigation is reflected in total operating expenses.
General and Administrative
For the three months ended March 31, 2024, general and administrative expenses for threeincreased 12% on both an as reported and nine months ended September 30, 2017currency-neutral basis, versus the comparable periodsperiod in 2016 were:
Personnel expenses increased 26% and 19%, or 25% and 19% on a currency-neutral basis, respectively, versus the comparable periods in 2016.2023. The increase was due to a higher number of employeespersonnel and data processing costs to support ourthe continued investment in the areasour strategic initiatives across payments, services and new network capabilities.
The components of digital, geographic expansiongeneral and Advisors capabilities. Acquisitions contributed 10 and 5 percentage points to personnel expense growth for the three and nine months ended September 30, 2017, respectively.
administrative expenses were as follows:
Three Months Ended March 31,Increase/(Decrease)
 20242023
 ($ in millions)
Personnel$1,514 $1,426 6%
Professional fees116 100 15%
Data processing and telecommunications263 235 12%
Foreign exchange activity 1
28 16 **
Other365 266 38%
Total general and administrative expenses$2,286 $2,043 12%
Data processing and telecommunication expense consists of expenses to support our global payments network infrastructure, expenses to operate and maintain our computer systems and other telecommunication systems. The increase isNote: Table may not sum due to capacity growth of our business. Acquisitions contributed 13 and 7 percentage points to expense growth for the three and nine months ended September 30, 2017, respectively.
rounding.
**    Not meaningful.
1Foreign exchange activity includes gains and losses on foreign exchange derivative contracts and the impact of remeasurement of assets and liabilities denominated in foreign currencies.currencies net of the impact of gains and losses on foreign exchange derivative contracts. See Note 13 (Foreign Exchange Risk


36

Management)15 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part I, Item 1 for further discussion.Foreign exchange activity contributed 1 and 2 percentage points to general and administrative expense growthfor the three and nine months ended September 30, 2017, respectively. For the nine months ended September 30, 2017, the increase was due to higher balance sheet remeasurement losses primarily due to the devaluation of the Venezuelan bolivar and the impact from foreign exchange derivative contracts due to the weakening of the U.S. dollar.
Other expenses include costs to provide loyalty and rewards solutions, travel and meeting expenses and rental expense for our facilities. For the three and nine months ended September 30, 2017, other expenses increased primarily due to higher cardholder services, partially offset by lower loyalty costs. For the nine months ended September 30, 2017, the increase in other expenses was partially offset by the lapping of costs related to a customer dispute in the second quarter of 2016.
Advertising and Marketing
Our brands, principally Mastercard, are valuable strategic assets that drive acceptance and usage of our products and facilitate our ability to successfully introduce new service offerings and access new markets globally. OurFor the three months ended March 31, 2024, advertising and marketing strategy is to increase global Mastercard brand awareness, preferenceexpenses decreased 31% on both an as reported and usage through integrated advertising, sponsorship, promotions, interactive media and public relations programs on a global scale. We will continue to invest in marketing programs at the regional and local levels and sponsor diverse events aimed at multiple target audiences. Advertising and marketing expenses increased 11% and 17%, or 10% and 17% on a currency-neutral basis, respectively, for the three and nine months ended September 30, 2017, versus the comparable periodsperiod in 2016,2023, primarily due to higher marketing spend primarily related to Masterpass.timing of spending on sponsorships.
Depreciation and Amortization
DepreciationFor the three months ended March 31, 2024, depreciation and amortization expenses increased 27% and 14%13%, or 27% and 15%12% on a currency-neutral basis, for the three and nine months ended September 30, 2017, versus the comparable periodsperiod in 2016,2023, primarily due to increased software capitalization driven by the impactcontinued growth of acquisitions.
our business.
Provision for Litigation Settlement
InFor the first quarter of 2017,three months ended March 31, 2024, we recorded $126 million, primarily due to a legal provision associated with the Canadian Merchant Litigation Provision of $15 million. In the second quarter of 2016, we recorded the U.K. Merchant Litigation Provision of $107 million.ATM non-discrimination rule surcharge complaints. See “Non-GAAP Financial Information” in this section and Note 1113 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part I, Item 1 of this Report for further discussion.

MASTERCARD MARCH 31, 2024 FORM 10-Q 33

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Other Income (Expense)
Other income (expense) is comprised primarily of investment income, interest expense, our share of income (losses) from equity method investments and other gains and losses. TotalFor the three months ended March 31, 2024, other income (expense) decreased $28$237 million, and $1 million for the three and nine months ended September 30, 2017, respectively, versus the comparable periodsperiod in 2016, primarily2023. Adjusted other income (expense) decreased $19 million versus the comparable period in 2023. See the table below for further detail on the changes in other income (expense).
The components of other income (expense) were as follows:
Three Months Ended March 31,Increase/ (Decrease)
 20242023
 ($ in millions)
Investment income$95 $55 $40 
Gains (losses) on equity investments, net6 (212)218 
Interest expense(150)(132)(18)
Other income (expense), net3 6 (3)
Total other income (expense)(46)(283)237 
(Gains) losses on equity investments 1
(6)212 (218)
Adjusted total other income (expense) 1
$(52)$(71)$19 
Note: Table may not sum due to an impairment charge takenrounding.
**    Not meaningful.
1    See “Non-GAAP Financial Information” for further information on an investment inour non-GAAP adjustments and the third quarter of 2016 and a gain relatingreconciliation to an investment we had in a company that we acquired in the third quarter of 2017, partially offset by higher interest expense related to our debt issuance in November 2016.GAAP reported amounts.
Income Taxes
The effective income tax rate was 26.0%rates were 15.4% and 26.8%17.2% for the three and nine months ended September 30, 2017, respectively, versus 27.5%March 31, 2024 and 27.9%2023, respectively. The adjusted effective income tax rates were 15.9% and 18.3% for the comparable periods in 2016. The lowerthree months ended March 31, 2024 and 2023, respectively. Both the as reported and as adjusted effective income tax rates as compared towere lower versus the prior year, werecomparable period in 2023, primarily due to a more favorable geographicalchange in our geographic mix of taxable earnings partially offset byas well as discrete tax benefits related to share-based payments.
The Organization for Economic Co-operation and Development (“OECD”) Pillar 2 guidelines published to date include transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax of 15%. Based on current enacted legislation effective in 2024 and our structure, we do not expect a lower U.S. foreignmaterial impact in 2024. We are monitoring developments and evaluating the impacts these new rules will have on our future effective income tax credit benefit associated with the repatriationrate, tax payments, financial condition and results of current year foreign earnings. operations.


37

Liquidity and Capital Resources
We rely on existing liquidity, cash generated from operations and access to capital to fund our global operations, credit and settlement exposure, capital expenditures, investments in our business and current and potential obligations. The following table summarizes the cash, cash equivalents, investments and credit available to us at September 30, 2017 and December 31, 2016:us:
March 31,
2024		December 31,
2023
(in billions)
Cash, cash equivalents and investments 1
$7.7 $9.2 
Unused line of credit$8.0 $8.0 
 September 30,
2017		 December 31,
2016
 (in billions)
Cash, cash equivalents and investments 1
$7.4
 $8.3
Unused line of credit3.8
 3.8
1    Investments include available-for-sale securities and short-term held-to-maturity securities. At September 30, 2017 and December 31, 2016, thisThis amount excludes restricted cash related to the U.S. merchant class litigation settlementand restricted cash equivalents of $545 million$1.9 billion and $543 million, respectively. This amount also excludes restricted security deposits held for customers of $1$1.9 billion at both September 30, 2017March 31, 2024 and December 31, 2016.2023, respectively.
Cash,We believe that our existing cash, cash equivalents and investments held byinvestment securities balances, our foreign subsidiaries (i.e., any entities where earnings would be subjectcash flow generating capabilities, and our access to U.S. tax upon repatriation) was $4.5 billioncapital resources are sufficient to satisfy our future operating cash needs, capital asset purchases, outstanding commitments and $3.8 billion at September 30, 2017 and December 31, 2016, or 61% and 45%, respectively, as of such dates. It is our present intention to indefinitely reinvest historic undistributed accumulated earningsother liquidity requirements associated with our foreign subsidiaries outside of the United States (as disclosed in Note 17 (Income Taxes) to the consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2016),existing operations and our current plans do not require repatriation of these earnings. If these earnings are needed for U.S. operations or can no longer be indefinitely reinvested outside of the United States, we would be required to record a liability for such U.S. taxes for the historic undistributed accumulated earnings at that time. Such taxes would be due upon repatriation of such earnings to the United States.potential obligations which include litigation provisions and credit and settlement exposure.
Our liquidity and access to capital could be negatively impacted by global credit market conditions. We guarantee the settlement of many Mastercard, Cirrus and Maestro-brandedof the transactions between our issuers and acquirers. See Note 12 (Settlement and Other Risk Management) to the consolidated financial statements in Part I, Item 1 of this Report for further information of these guarantees.customers. Historically, payments under these guarantees have not been significant; however, historical trends may not be an indicationindicative of potential future losses. The risk of loss on these guarantees is specific to individual customers, but may also be driven significantly by regional or global economic and market conditions, including, but not limited to the health of the financial institutions in a country or region. See Note 14 (Settlement and Other Risk Management) to the consolidated financial statements in Part I, Item 1 for a description of these guarantees.

34 MASTERCARD MARCH 31, 2024 FORM 10-Q

PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our liquidity and access to capital could also be negatively impacted by the outcome of any of the legal or regulatory proceedings to which we are a party. For additional discussion of these and other risks facing our business, see Part I, Item 1A - Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2016;2023 and Note 1113 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part I, Item 1 of this Report; and “Business Environment” within this section of this Report.
Cash FlowFlows
The table below shows a summary of the cash flows from operating, investing and financing activities for the nine months ended September 30, 2017 and 2016:activities:
 Nine Months Ended September 30,
 2017 2016
 (in millions)
Cash Flow Data:   
Net cash provided by operating activities$3,794
 $3,543
Net cash used in investing activities(1,656) (1,125)
Net cash used in financing activities(3,494) (3,019)


38

Three Months Ended March 31,
 20242023
 (in millions)
Net cash provided by operating activities$1,672 $1,919 
Net cash used in investing activities$(174)$(397)
Net cash used in financing activities$(2,681)$(1,955)
Net cash provided by operating activities increased $251decreased $247 million for the ninethree months ended September 30, 2017,March 31, 2024, versus the comparable periodsperiod in 2016,2023, primarily due to higher net income adjustedafter adjusting for non-cash items, partiallymore than offset by higher customer incentive payments and accounts receivable activity.payments.
Net cash used in investing activities increased by $531decreased $223 million for the ninethree months ended September 30, 2017,March 31, 2024, versus the comparable periodsperiod in 2016,2023, primarily due to acquisitions andhigher proceeds from the maturities of investments in nonmarketable equity investments, partially offset by lower net purchases of investment securities.time deposits.
Net cash used in financing activities increased by $475$726 million for the ninethree months ended September 30, 2017,March 31, 2024, versus the comparable periodsperiod in 2016,2023, primarily due to higherno cash proceeds received from debt issuances in the current period versus the comparable period, partially offset by less cash paid for repurchases of our Class A common stock and dividends paid in the current year, coupled with the payment of short-term debt assumed from our acquisition of Vocalink.
The table below shows a summary of select balance sheet data at September 30, 2017 and December 31, 2016:
 September 30,
2017		 December 31,
2016
 (in millions)
Balance Sheet Data:   
Current assets$13,231
 $13,228
Current liabilities7,984
 7,206
Long-term liabilities6,392
 5,785
Equity6,468
 5,684
We believe that our existing cash, cash equivalents and investment securities balances, our cash flow generating capabilities, our borrowing capacity and our access to capital resources are sufficient to satisfy our future operating cash needs, capital asset purchases, outstanding commitments and other liquidity requirements associated with our existing operations and potential obligations.stock.
Debt and Credit Availability
Our long-termtotal debt outstanding was $5.4$15.6 billion and $5.2$15.7 billion at September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively, with the earliest maturity of $1.0 billion of principal occurring in 2019.April 2024.
WeAs of March 31, 2024, we have a commercial paper program (the “Commercial Paper Program”), under which we are authorized to issue up to $3.75$8 billion in outstanding notes, with maturities up to 397 days from the date of issuance. In conjunction with the Commercial Paper Program, we have entered into a committed unsecured $3.75$8 billion revolving credit facility (the “Credit Facility”). In October 2017, the Company extended the Credit Facility for an additional year to October 2022. There were no material changes to the terms and conditions of the Credit Facility. We were which expires in compliance in all material respects with the covenants of the Credit Facility as of September 30, 2017 and December 31, 2016. The majority of Credit Facility lenders are our customers or their affiliates.November 2028.
Borrowings under the Commercial Paper Program and the Credit Facility are to be used to provide liquidity for general corporate purposes, including providing liquidity in the event of one or more settlement failures by our customers. In addition, we may borrow and repay amounts under these facilities for business continuity purposes. We had no borrowings outstanding under the Commercial Paper Program or the Credit Facility at September 30, 2017March 31, 2024 and December 31, 2016.2023.
See Note 1215 (Debt) to the consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 20162023 for further discussion of long-termon our debt, the Commercial Paper Program and the Credit Facility.
Dividends and Share Repurchases
We have historically paid quarterly dividends on our outstanding Class A common stock and Class B common stock. Subject to legally available funds, we intend to continue to pay a quarterly cash dividend. However, theThe declaration and payment of future dividends is at the sole discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, available cash and current and anticipated cash needs.


39

Aggregate payments for quarterly dividends totaled $709$616 million for the ninethree months ended September 30, 2017.March 31, 2024.
On December 6, 2016,5, 2023, our Board of Directors declared a quarterly cash dividend of $0.22$0.66 per share paid on February 9, 20172024 to holders of record on January 9, 20172024 of our Class A common stock and Class B common stock. The aggregate amount of this dividend was $238$616 million.
On February 7, 2017,6, 2024, our Board of Directors declared a quarterly cash dividend of $0.22$0.66 per share payable on May 9, 20172024 to holders of record on April 7, 20179, 2024 of our Class A common stock and Class B common stock. The aggregate amount of this dividend was $236is estimated to be $615 million.
On June 27, 2017, our Board of Directors declared a quarterly cash dividend of $0.22 per share payable on August 9, 2017 to holders of record on July 7, 2017 of our Class A common stock and Class B common stock. The aggregate amount of this dividend was $235 million.

On September 19, 2017, our Board of Directors declared a quarterly cash dividend of $0.22 per share payable on November 9, 2017 to holders of record on October 6, 2017 of our Class A common stock and Class B common stock. The aggregate amount of this dividend will be $234 million.MASTERCARD MARCH 31, 2024 FORM 10-Q 35

Share RepurchasesPART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Repurchased shares of our common stock are considered treasury stock. In December 2023 and 2022, our Board of Directors approved share repurchase programs of our Class A common stock authorizing us to repurchase up to $11.0 billion and $9.0 billion, respectively. The program approved in 2023 will become effective after the completion of the share repurchase program approved in 2022. The timing and actual number of additional shares repurchased will depend on a variety of factors, including cash requirements to meet the operating needs of the business, legal requirements, as well as the share price and economic and market conditions. In December 2016, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $4 billion of our Class A common stock.  This program became effective in April 2017 after completion of the share repurchase program authorized in December 2015.
The following table summarizes our share repurchase authorizations and repurchase activity of our Class A common stock through September 30, 2017, as well as historical purchases:March 31, 2024:
(in millions, except average price data)
Remaining authorization at December 31, 2023$14,142 
Dollar-value of shares repurchased during the three months ended March 31, 2024 1
$1,992 
Remaining authorization at March 31, 2024$12,150 
Shares repurchased during the three months ended March 31, 20244.4 
Average price paid per share during the three months ended March 31, 2024$454.23 
 Authorization Dates
 December 2016 December 2015 Total
 (in millions, except average price data)
Board authorization$4,000
 $4,000
 $8,000
Remaining authorization at December 31, 2016$4,000
 $996
 $4,996
Dollar value of shares repurchased during the nine months ended September 30, 2017$1,735
 $996
 $2,731
Remaining authorization at September 30, 2017$2,265
 $—
 $2,265
Shares repurchased during the nine months ended September 30, 201714.0
 9.1
 23.1
Average price paid per share during the nine months ended September 30, 2017$123.81
 $109.16
 $118.03
See Note 7 (Stockholders’ Equity) to1    The dollar-value of shares repurchased does not include a 1% excise tax. The incremental tax is recorded in treasury stock on the consolidated financial statements included in Part I, Item 1 of this Report for further discussion.balance sheet.
Off-Balance Sheet Arrangements
We have no off-balance sheet debt, other than lease arrangements and other commitments as presented in the future obligations table in Item 7 (Liquidity and Capital Resources) in Part II of our Annual Report on Form 10-K for the year ended December 31, 2016.
Recent Accounting Pronouncements
ReferFor a description of recent accounting pronouncements, if any, and the potential impact of these pronouncements refer to Note 1 (Summary of Significant Accounting Policies) to the consolidated financial statements included in Part I, Item 1 of this Report.1.


40

ITEMItem 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and qualitative disclosures about market risk
Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in market factors such as interest rates and foreign currency exchange rates and equity price risk.rates. Our exposure to market risk from changes in interest rates and foreign exchange rates and equity price risk is limited. Management monitors risk exposures on an ongoing basis and establishes and oversees the implementation of policies governing our funding, investments and use of derivative financial instruments. instruments to manage these risks.
Foreign currency and interest rate exposures are managed through our risk management activities, which are discussed further in Note 15 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part I, Item 1.
Foreign Exchange Risk
We monitor risk exposures on an ongoing basis.enter into foreign exchange derivative contracts to manage currency exposure associated with anticipated receipts and disbursements occurring in a currency other than the functional currency of the entity. We may also enter into foreign currency derivative contracts to offset possible changes in value of assets and liabilities due to foreign exchange fluctuations. The objective of these activities is to reduce our exposure to gains and losses resulting from fluctuations of foreign currencies against our functional currencies, principally the U.S. dollar and euro. The effect of a hypothetical 10% adverse change in foreign currency forward ratesthe value of the functional currencies could result in a fair value loss of approximately $97$416 million and $414 million on our foreign currencyexchange derivative contracts outstanding at September 30, 2017March 31, 2024 and December 31, 2023, respectively, before considering the offsetting effect of the underlying hedged activity.
We are also subject to foreign exchange risk as part of our daily settlement activities. To manage this risk, we enter into short duration foreign exchange derivative contracts based upon anticipated receipts and disbursements for the respective currency position. This risk is typically limited to a few days between when a payment transaction takes place and the subsequent settlement with our customers. A hypothetical 10% adverse change in the value of the functional currencies would not have a material impact to the fair value of our short duration foreign exchange derivative contracts outstanding at March 31, 2024 and December 31, 2023, respectively.
We are further exposed to foreign exchange rate risk related to translation of our net investment in foreign subsidiaries where the hedging program.functional currency is different than our U.S. dollar reporting currency. To manage this risk, we may enter into foreign exchange derivative contracts to hedge a portion of our net investment in foreign subsidiaries. As of March 31, 2024 and December 31, 2023, we did not have any foreign exchange derivative contracts designated as a net investment hedge.
Interest Rate Risk
Our available-for-sale debt investments include fixed and variable rate securities that are sensitive to interest rate fluctuations. Our policy is to invest in high quality securities, while providing adequate liquidity and maintaining diversification to avoid significant exposure. A hypothetical 100 basis point adverse change in interest rates would not have a material impact onto the fair value of our investments at September 30, 2017. Our euro-denominated debt is vulnerableMarch 31, 2024 and December 31, 2023.

36 MASTERCARD MARCH 31, 2024 FORM 10-Q

PART I
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are also exposed to changes in the eurointerest rate risk related to U.S. dollar exchange rates.  We use the euro-denominated debtour fixed-rate debt. To manage this risk, we may enter into interest rate derivative contracts to hedge a portion of our net investment in foreign operations against adverse movements in exchange rates, withfixed-rate debt that is exposed to changes in the translatedfair value attributable to changes in a benchmark interest rate. The effect of the debt recorded within currency translation adjustmenta hypothetical 100 basis point adverse change in accumulated other comprehensive income (loss). In addition to euro-denominated debt, we have U.S. dollar-denominated debt, bothinterest rates could result in a fair value loss of which carry a fixed interest rateapproximately $26 million and thus$29 million on the fair value of our debt is subject to interest rate risk.  There was no material equity price riskderivative contracts designated as a fair value hedge of our fixed-rate debt at September 30, 2017.March 31, 2024 and December 31, 2023, respectively, before considering the offsetting effect of the underlying hedged activity.
ITEMItem 4. CONTROLS AND PROCEDURESControls and procedures
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information that is required to be disclosed in the reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our President and Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding disclosure. The President and Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.
Changes in Internal Control over Financial Reporting
There was no change in Mastercard’s internal control over financial reporting that occurred during the three months ended September 30, 2017March 31, 2024 that has materially affected, or is reasonably likely to materially affect, Mastercard's internal control over financial reporting.
Other Financial Information

With respect to the unaudited consolidated financial information of Mastercard Incorporated and its subsidiaries as of September 30, 2017 and for the three and nine months ended September 30, 2017 and 2016, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their report dated OctoberMASTERCARD MARCH 31, 2017 appearing below, states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 (the “Act”) for their report on the unaudited consolidated financial information because that report is not a “report” or a “part” of a registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.2024 FORM 10-Q 37



PART II


41
Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
of Mastercard Incorporated:
We have reviewed the consolidated balance sheet of Mastercard Incorporated and its subsidiaries as of September 30, 2017, and the related consolidated statements of operations and of comprehensive income for the three-month and nine-month periods ended September 30, 2017 and 2016, and the consolidated statement of changes in equity for the nine-month period ended September 30, 2017, and the consolidated statement of cash flows for the nine-month periods ended September 30, 2017 and 2016, included within Part I, Item 1 of this Form 10-Q. These interim financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2016, and the related consolidated statements of operations, of comprehensive income, of changes in equity, and of cash flows for the year then ended (not presented herein), and in our report dated February 15, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2016, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP
New York, New York
October 31, 2017




42


PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Item 1. Legal proceedings
Refer to Note 1113 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part I, Item 1 of this Report.1.
ITEMItem 1A. RISK FACTORSRisk factors
For a discussion of our risk factors, see Part I, Item 1A (Risk Factors) in Part I- Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2016.2023.
ITEMItem 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSUnregistered sales of equity securities, use of proceeds and issuer purchases of equity securities
ISSUER PURCHASES OF EQUITY SECURITIESIssuer Purchases of Equity Securities
During the thirdfirst quarter of 2017, Mastercard2024, we repurchased a total of approximately 6.44.4 million shares for $838 million$2.0 billion at an average price of $130.48$454.23 per share of Class A common stock. See Note 7 (Stockholders’ Equity) to the consolidated financial statements included in Part I, Item 1 of this Report for further discussion with respect toThe following table presents our share repurchase programs. Our repurchase activity on a cash basis during the thirdfirst quarter of 2017 is summarized in the following table:2024:
PeriodTotal Number
of Shares
Purchased		Average Price
Paid per Share
(including
commission cost)		Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Dollar Value of
Shares that may yet
be Purchased under
the Plans or
Programs 1
January 1 - 311,584,245 $428.76 1,584,245 $13,463,128,353 
February 1 - 291,399,546 $461.26 1,399,546 $12,817,572,326 
March 1 - 311,401,883 $475.98 1,401,883 $12,150,300,756 
Total4,385,674 $454.23 4,385,674 
Period 
Total Number
of Shares
Purchased
 
Average Price
Paid per Share
(including
commission cost)
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
 
Dollar Value of
Shares that may yet
be Purchased under
the Plans or
Programs 1
July 1 - 31 2,381,085
 $125.34
 2,381,085
 $2,804,396,714
August 1 - 31 2,618,874
 $130.64
 2,618,874
 $2,462,274,940
September 1 - 30 1,424,063
 $138.76
 1,424,063
 $2,264,668,632
Total 6,424,022
 $130.48
 6,424,022
  
1    Dollar value of shares that may yet be purchased under the repurchase programs is as of the end of the period. In December 2023 and 2022, our Board of Directors approved share repurchase programs of our Class A common stock authorizing us to repurchase up to $11.0 billion and $9.0 billion, respectively.

MASTERCARD MARCH 31, 2024 FORM 10-Q 39

PART II
ITEM 5. OTHER INFORMATION
Item 5. Other information
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
During the three months ended March 31, 2024, certain of our officers and directors adopted or terminated trading arrangements for the sale of shares of our common stock as follows:
ActionDatePlansNumber of Securities to be SoldExpiration
Rule 10b5-1 1
Non-Rule 10b5-1 2
Tim Murphy,
Chief Administrative Officer
AdoptionFebruary 1, 2024X-15,724 shares of Class A Common StockThe earlier of (i) the date when all securities under plan are sold and (ii) December 31, 2024
Ling Hai,
President, Asia Pacific, Europe, Middle East and Africa
AdoptionFebruary 1, 2024X-8,676 shares of Class A Common Stock underlying employee stock optionsThe earlier of (i) the date when all securities under plan are exercised and sold and (ii) February 28, 2025
Craig Vosburg,
Chief Services Officer
AdoptionFebruary 21, 2024X-27,084 shares of Class A Common Stock underlying employee stock optionsThe earlier of (i) the date when all securities under plan are exercised and sold and (ii) November 22, 2024
Ajay Bhalla,
Former President, Cyber and Intelligence Solutions 3
AdoptionFebruary 23, 2024X-42,248 shares of Class A Common Stock underlying employee stock optionsThe earlier of (i) the date when all securities under plan are exercised and sold and (ii) September 11, 2024
Raj Seshadri,
Chief Commercial Payments Officer
AdoptionFebruary 26, 2024X-(i) 20,764 shares of Class A Common Stock underlying employee stock options and (ii) 3,199 shares of Class A Common StockThe earlier of (i) the date when all securities under plan are exercised and sold and (ii) December 31, 2024
1Intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).
2Not intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).
3Mr. Bhalla departed Mastercard on April 5, 2024.
Other Information
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, we hereby incorporate by reference herein the disclosure contained in Exhibit 99.1 of this Report.
ITEMItem 6. EXHIBITSExhibits
Refer to the Exhibit Index included herein.


40 MASTERCARD MARCH 31, 2024 FORM 10-Q

PART II
EXHIBIT INDEX
Exhibit index
Exhibit
Number		Exhibit Description
Form of Restricted Stock Unit Agreement for awards under 2006 Long Term Incentive Plan (effective for awards granted on and subsequent to March 1, 2024).
Form of Stock Option Agreement for awards under 2006 Long Term Incentive Plan (effective for awards granted on and subsequent to March 1, 2024).
Form of Performance Stock Unit Agreement for awards under 2006 Long Term Incentive Plan (effective for awards granted on and subsequent to March 1, 2024).
Certification of Michael Miebach, President and Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Sachin Mehra, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Michael Miebach, President and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Sachin Mehra, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Disclosure pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012.
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*XBRL Taxonomy Extension Schema Document
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
+    Management contracts or compensatory plans or arrangements.
*    Filed or furnished herewith.
The agreements and other documents filed as exhibits to this Report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and should not be relied upon for that purpose. In particular, any representations and warranties made by the Company in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.


43MASTERCARD MARCH 31, 2024 FORM 10-Q 41


SIGNATURES
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MASTERCARD INCORPORATED
(Registrant)
Date:May 1, 2024MASTERCARD INCORPORATEDBy:/S/ MICHAEL MIEBACH
(Registrant)Michael Miebach
Date:October 31, 2017By:/S/ AJAY BANGA
Ajay Banga
President and Chief Executive Officer
(Principal Executive Officer)
Date:May 1, 2024By:/S/ SACHIN MEHRA
Date:October 31, 2017By:/S/ MARTINA HUND-MEJEANSachin Mehra
Martina Hund-Mejean
Chief Financial Officer
(Principal Financial Officer)
Date:October 31, 2017May 1, 2024By:/S/ SANDRA ARKELL
Sandra Arkell
Corporate Controller
(Principal Accounting Officer)




4442 MASTERCARD MARCH 31, 2024 FORM 10-Q

EXHIBIT INDEX
Exhibit
Number
Exhibit Description
15*
Awareness Letter from the Company’s Independent Registered Public Accounting Firm.
31.1*
Certification of Ajay Banga, President and Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Martina Hund-Mejean, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Ajay Banga, President and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Martina Hund-Mejean, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1*
Disclosure pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012.
101.INS*XBRL Instance Document
101.SCH*XBRL Taxonomy Extension Schema Document
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document

*Filed or furnished herewith.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and should not be relied upon for that purpose. In particular, any representations and warranties made by the Company in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.



45