MasterCard : 2021 Q2 Earnings Release

Earnings Release

Mastercard Incorporated Reports Second-Quarter 2021 Financial Results

• Second-quarternet income of $2.1 billion, and diluted earnings per share (EPS) of $2.08
• Second-quarteradjusted net income of $1.9 billion, and adjusted diluted EPS of $1.95
• Second-quarternet revenue of $4.5 billion, an increase of 36%, or 31% on a currency-neutral basis
• Second-quartergross dollar volume up 33% and purchase volume up 36%

Purchase, NY - July 29, 2021 - Mastercard Incorporated (NYSE: MA) today announced financial results for the second-quarter 2021.

"We delivered solid revenue and earnings growth this quarter, fueled by the execution of our strategy and the continued recovery in domestic and cross-border spending. International travel is still in the early stages of recovery and represents additional upside potential," said Michael Miebach, Mastercard CEO. "We continue to focus on diversifying our business and investing for sustained long-term growth. With the closing of the Ekata acquisition, we are excited to have advanced our digital identity capabilities and value delivered to our customers."

Quarterly Results

Second-Quarter Operating Results					Increase / (Decrease)
$ in billions, except per share data	Q2 2021		Q2 2020		Reported		Currency-
		GAAP		neutral
Net revenue	$4.5	$3.3		36%	31%
Operating expenses	$2.2	$1.6		34%	31%
Operating income	$2.3	$1.7		37%	32%
Operating margin	51.7%	51.2%		0.5 ppt		0.2 ppt
Effective income tax rate	16.6%	16.0%		0.6 ppt		0.4 ppt
Net income	$2.1	$1.4		46%	40%
Diluted EPS	$2.08	$1.41		48%	41%
Key Second-QuarterNon-GAAP Results 1					Increase / (Decrease)
$ in billions, except per share data	Q2 2021		Q2 2020		As adjusted		Currency-
			neutral
Net revenue	$4.5	$3.3		36%	31%
Adjusted operating expenses	$2.1	$1.6		32%	28%
Adjusted operating margin	53.2%	51.8%		1.3 ppt		1.0 ppt
Adjusted effective income tax rate	15.9%	16.3%		(0.4) ppt		(0.6) ppt
Adjusted net income	$1.9	$1.4		41%	36%
Adjusted diluted EPS	$1.95	$1.36		43%	37%

1. The Key Second-QuarterNon-GAAP Results exclude the impact of gains and losses on the company's equity investments, special items as described on page 10 ("Special Items") and/or currency. See page 10 for the company's non-GAAP adjustments and the reconciliation to GAAP reported amounts.

Q2 2021 Key Business Drivers

(YoY growth)

Gross dollar volume	Cross-border volume2	Switched	2
(local currency basis)	(local currency basis)	transactions
up 33%	up 58%	up 41%

2. Growth rates normalized to eliminate the effects of differing switching and carryover days between periods.

The following additional details are provided to aid in understanding Mastercard's second-quarter 2021 results, versus the year-ago period:

• Net revenue increased 36%, or 31% on a currency-neutral basis, which includes a 3 percentage point benefit from acquisitions. The increase was driven by the impact of the following factors:
• • Gross dollar volume growth of 33%, on a local currency basis, to $1.9 trillion.
  • Cross-bordervolume growth of 58% on a local currency basis.
  • Switched transactions growth of 41%.
  • Other revenues increased 37%. On a currency-neutral basis, other revenues increased 32%, which includes 9 percentage points of growth due to acquisitions. The remaining growth was driven primarily by the company's Cyber & Intelligence and Data & Services solutions.
  • These increases to net revenue were partially offset by:
  • • Rebates and incentives growth of 53%, or 49% on a currency-neutral basis, reflecting the higher growth in volume and transactions and new and renewed deals.
• Total operating expenses increased 34%. Excluding the impact of Special Items, adjusted operating expenses increased 32%, or 28% on a currency-neutral basis. This includes an 8 percentage point increase from acquisitions. The remaining increase was primarily due to higher personnel costs to support our continued investment in our strategic initiatives, increased spending on advertising and marketing and increased data processing costs.
• Other income (expense) was favorable $154 million versus the year-ago period, primarily due to higher net gains in the current period versus the prior period related to unrealized fair market value adjustments on marketable and non-marketable equity securities. Excluding this activity, adjusted other income (expense) was unfavorable $14 million versus the year-ago period.
• The effective tax rate for the second quarter of 2021 was 16.6%, versus 16.0% for the comparable period in 2020. The adjusted effective tax rate for the second quarter of 2021 was 15.9%, versus 16.3% for the comparable period in 2020, primarily driven by a discrete tax benefit related to the remeasurement of our net deferred tax asset in the U.K. due to a recently enacted tax rate, partially offset by a change in our geographic mix of earnings.
• As of June 30, 2021, the company's customers had issued 2.9 billion Mastercard and Maestro-branded cards.

Return of Capital to Shareholders

During the second quarter of 2021, Mastercard repurchased approximately 4.6 million shares at a cost of $1.7 billion and paid $434 million in dividends. Quarter-to-date through July 26, the company repurchased approximately 1.1 million shares at a cost of $398 million, which leaves $6.4 billion remaining under the current repurchase program authorizations.

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Year-to-Date Results

Year-to-date Operating Results					Increase / (decrease)
$ in billions, except per share data	2021		2020		Reported		Currency-
		GAAP		neutral
Net revenue	$8.7	$7.3		18%	16%
Operating expenses	$4.1	$3.4		21%	18%
Operating income	$4.5	$3.9		16%	14%
Operating margin	52.3%	53.3%		(1.1) ppt		(0.9) ppt
Effective income tax rate	16.6%	15.4%		1.2 ppt		1.2 ppt
Net income	$3.9	$3.1		25%	23%
Diluted EPS	$3.91	$3.08		27%	25%
Key Year-to-dateNon-GAAP Results 1					Increase / (decrease)
$ in billions, except per share data	2021		2020		As adjusted		Currency-
			neutral
Net revenue	$8.7	$7.3		18%	16%
Adjusted operating expenses	$4.1	$3.4		20%	17%
Adjusted operating margin	53.0%	53.7%		(0.7) ppt		(0.6) ppt
Adjusted effective income tax rate	16.4%	15.5%		0.9 ppt		0.8 ppt
Adjusted net income	$3.7	$3.2		14%	12%
Adjusted diluted EPS	$3.69	$3.19		16%	14%

1. The Key Year-to-DateNon-GAAP Results exclude the impact of gains and losses on the company's equity investments, special items as described on page 11 ("Year- to-Date Special Items") and/or currency. See page 11 for the company's non-GAAP adjustments and the reconciliation to GAAP reported amounts.

Year-to-date 2021 Key Business Drivers

(YoY growth)

Gross dollar volume	Cross-border volume2	Switched
(local currency basis)	(local currency basis)	Transactions2
up 19%	up 11%	up 24%

2. Growth rates normalized to eliminate the effects of differing switching and carryover days between periods.

The following additional details are provided to aid in understanding Mastercard's Year-to-date 2021 results, versus the year-ago period:

• Net revenue increased 18%, or 16% on a currency-neutral basis, which includes a 2 percentage point benefit from acquisitions. The increase was driven by the impact of the following factors:
• • Gross dollar volume growth of 19%, on a local currency basis, to $3.6 trillion.
  • Cross-bordervolume growth of 11% on a local currency basis.
  • Switched transactions growth of 24%.
  • Other revenues increased 32%. On a currency-neutral basis, other revenues increased 29%, which includes 6 percentage points of growth due to acquisitions. The remaining growth was driven primarily by the company's Cyber & Intelligence and Data & Services solutions.
  • These increases to net revenue were partially offset by:
  • • Rebates and incentives growth of 27%, or 24% on a currency-neutral basis, primarily due to increased volumes and transactions and new and renewed deals.

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• Total operating expenses increased 21%. Excluding the impact of Special Items, adjusted operating expenses increased 20%, or 17% on a currency-neutral basis. This includes a 6 percentage point increase from acquisitions. The remaining increase was primarily due to higher personnel costs to support our continued investment in our strategic initiatives, increased spending on advertising and marketing and the lapping of a favorable hedging gain in the prior year.
• Other income (expense) was favorable $371 million versus the year-ago period, primarily due to net unrealized gains recorded on equity investments in the current period versus net unrealized losses in the prior period. Excluding this activity, adjusted other income (expense) was unfavorable $65 million versus the year-ago period, primarily due to increased interest expense related to debt issuances and a decrease in investment income.
• The effective tax rate for the first half of 2021 was 16.6%, versus 15.4% for the comparable period in 2020. The adjusted effective tax rate for the first half of 2021 was 16.4%, versus 15.5% for the comparable period in 2020, primarily due to a lower discrete tax benefit related to share-based payments and a change in our geographic mix of earnings, partially offset by a discrete tax benefit related to the remeasurement of our net deferred tax asset in the U.K. due to a recently enacted tax rate.

Second-Quarter 2021 Financial Results Conference Call Details

At 9:00 a.m. ET today, the company will host a conference call to discuss its second-quarter 2021 results. The dial-in information for this call is 833-714-0894 (within the U.S.) and 778-560-2664 (outside the U.S.). A replay of the call will be available for 30 days and can be accessed by dialing 800-585-8367 (within the U.S.) and 416-621-4642 (outside the U.S.), using passcode 4561068.

A live audio webcast of this call, along with presentation slides, can also be accessed through the Investor Relations section of the company's website at investor.mastercard.com.

Forward-Looking Statements

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

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

• regulation directly related to the payments industry (including regulatory, legislative and litigation activity with respect to interchange rates and surcharging)
• the impact of preferential or protective government actions

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• regulation of privacy, data, security and the digital economy
• regulation that directly or indirectly applies to us based on our participation in the global payments industry (including anti-money laundering, counter financing of terrorism, economic sanctions and anti- corruption; account-based payment systems and issuer practice legislation and regulation)
• the impact of changes in tax laws, as well as regulations and interpretations of such laws or challenges to our tax positions
• potential or incurred liability and limitations on business related to any litigation or litigation settlements
• the impact of the global coronavirus (COVID-19) pandemic and containment taken in response
• 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-timeaccount-based payment system and to working with new customers and end users
• the impact of information security incidents, account data breaches or service disruptions
• issues related to our relationships with our stakeholders (including loss of substantial business from significant customers, competitor relationships with our customers, banking industry consolidation, merchants' continued focus on acceptance costs and unique risks from our work with governments)
• exposure to loss or illiquidity due to our role as guarantor and other contractual obligations
• the impact of global economic, political, financial and societal events and conditions, including adverse currency fluctuations and foreign exchange controls
• reputational impact, including impact related to brand perception and lack of visibility of our brands in products and services
• the inability to attract, hire 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
• issues related to our Class A common stock and corporate governance structure

For additional information on these and other factors that could cause the company's actual results to differ materially from expected results, please see the company's filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K for the year ended December 31, 2020 and any subsequent reports on Forms 10-Q and 8-K.

About Mastercard Incorporated

Mastercard (NYSE: MA), www.mastercard.com, is a technology company in the global payments industry. Our global payments processing network connects consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. Mastercard products and solutions make everyday commerce activities - such as shopping, traveling, running a business and managing finances

• easier, more secure and more efficient for everyone. Follow us on Twitter @MastercardNews, join the discussion on the Beyond the Transaction Blog and subscribe for the latest news on the Engagement Bureau.

Contacts:

Investor Relations:	Media Relations:
Warren Kneeshaw or Jud Staniar	Seth Eisen
[e-mail]	[e-mail]
914-249-4565	914-249-3153

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