[October 30, 2014]

MasterCard Incorporated Reports Third-Quarter 2014 Financial Results

MasterCard Incorporated (NYSE:MA) today announced financial results for the third quarter of 2014. The company reported net income of $1 billion, up 15%, and earnings per diluted share of $0.87, up 19%. In each case, growth rates are reflective of both as-reported and adjusted for currency, and are versus the year-ago period. Acquisitions had a $0.02 dilutive impact on earnings per diluted share.

Net revenue for the third quarter of 2014 was $2.5 billion, a 13% increase versus the same period in 2013, both as-reported and adjusted for currency. Net revenue growth was driven by the impact of the following:

• A 12% increase in gross dollar volume, on a local currency basis, to $1.2 trillion;
• An increase in cross-border volume of 15%; and
• An increase in processed transactions of 10%, to 11 billion.

These factors were partially offset by an increase in rebates and incentives. Acquisitions contributed 3 percentage points to total net revenue growth.

Worldwide purchase volume during the quarter was up 11% on a local currency basis versus the third quarter of 2013, to $843 billion. As of September 30, 2014, the company's customers had issued 2.1 billion MasterCard and Maestro-branded cards.

"We delivered strong results for the quarter, reporting double-digit revenue and net income growth, despite a mixed economic environment," said Ajay Banga, president and CEO, MasterCard. "We also continue to invest and partner to make payments safer, easier and faster. Within the past two months alone, we opened our new technology hub in New York City, delivered our technology and security protocols as part of the launch of Apple Pay and partnered with the Transport for London to deliver contactless payments system-wide. Through our commitment to innovation, we are making it safer and simpler for people to pay and get paid - today and in the future."

Total operating expenses increased 12%, both as-reported and adjusted for currency, to $1.1 billion, during the third quarter of 2014 compared to the same period in 2013. The increase was primarily driven by investments in strategic initiatives including acquisitions, which contributed 9 percentage points to the growth.

Operating income for the third quarter of 2014 increased 14% over the year-ago period, or 13% adjusted for currency, and the company delivered an operating margin of 56.7%.

MasterCard reported other expense of $2 million in the third quarter of 2014 versus other income of $6 million in the third quarter of 2013. The change was mainly driven by higher interest expense related to the company's inaugural debt issuance in late March.

MasterCard's effective tax rate was 28.5% in the third quarter of 2014 versus a rate of 29.9% in the comparable period in 2013. The decrease was primarily due to the impact of higher discrete tax benefits recognized in this year's quarter.

During the third quarter of 2014, MasterCard repurchased approximately 5.3 million shares of Class A common stock at a cost of $404 million. Quarter-to-date through October 23, the company repurchased an additional 1.7 million shares at a cost of $121 million, with $310 million remaining under the current repurchase program authorization.

Year-to-Date 2014 Results

For the nine months ended September 30, 2014, MasterCard reported net income of $2.8 billion, up 13%, both as-reported and adjusted for currency, versus the year-ago period. Earnings per diluted share was $2.40, up 17%. Acquisitions had a $0.02 dilutive impact on earnings per diluted share.

Net revenue for the nine months ended September 30, 2014 was $7.1 billion, an increase of 13% versus the same period in 2013, both as-reported and adjusted for currency. Gross dollar volume growth of 13%, transaction processing growth of 12% and cross-border volume growth of 16% contributed to the net revenue growth in the year-to-date period. These factors were partially offset by an increase in rebates and incentives. Acquisitions contributed 1 percentage point to total net revenue growth.

Total operating expenses increased 13%, or 12% after adjusting for currency, to $3 billion, for the nine months ended September 30, 2014, compared to the same period in 2013. The increase was primarily due to higher personnel costs related to strategic initiatives. Acquisitions contributed 5 percentage points to total operating expense growth.

Operating income increased 14% for the nine months of 2014 versus the same period in 2013, resulting in an operating margin of 57.9%.

MasterCard's effective tax rate was 30.9% in the nine months ended September 30, 2014 versus a rate of 30.5% in the same period in 2013. The increase was primarily due to a less favorable geographic mix of taxable earnings, partially offset by the impact of higher discrete benefits.

Third-Quarter Financial Results Conference Call Details

At 9:00 a.m. ET today, the company will host a conference call to discuss its third-quarter financial results.

The dial-in information for this call is 800-708-4540 (within the U.S.) and 847-619-6397 (outside the U.S.), and the passcode is 38167441. A replay of the call will be available for one week and can be accessed by dialing 888-843-7419 (within the U.S.) and 630-652-3042 (outside the U.S.), and using passcode 38167441.

This call can also be accessed through the Investor Relations section of the company's website at www.mastercard.com.

Non-GAAP Financial Information

The presentation of growth rates adjusted for currency represent a non-GAAP measure and are calculated by remeasuring the prior period's results using the current period's exchange rates.

About MasterCard Incorporated

MasterCard (NYSE:MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world's fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard's 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 Cashless Pioneers Blog and subscribe for the latest news on the Engagement Bureau.

Forward-Looking Statements

Statements in this press release which are not historical facts, including statements about MasterCard's plans, strategies, beliefs and expectations, are forward-looking and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date they are made. Accordingly, 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. Such forward-looking statements include, without limitation, statements related to the Company's ability to simplify payments through innovation.

Actual results may differ materially from such forward-looking statements for a number of reasons, including those set forth in the company's filings with the Securities and Exchange Commission (SEC), including the company's Annual Report on Form 10-K for the year ended December 31, 2013, the company's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that have been filed with the SEC during 2014, as well as reasons including difficulties, delays or the inability of the company to achieve its strategic initiatives set forth above. Factors other than those listed above could also cause the company's results to differ materially from expected results.

Footnote

The tables set forth the gross dollar volume ("GDV"), purchase volume, cash volume and the number of purchase transactions, cash transactions, accounts and cards on a regional and global basis for MasterCard®-branded and MasterCard Electronic™-branded cards. Growth rates over prior periods are provided for volume-based data.

Debit transactions on Maestro® and Cirrus®-branded cards and transactions involving brands other than MasterCard are not included in the preceding tables.

For purposes of the table: GDV represents purchase volume plus cash volume and includes the impact of balance transfers and convenience checks; "purchase volume" means the aggregate dollar amount of purchases made with MasterCard-branded cards for the relevant period; and "cash volume" means the aggregate dollar amount of cash disbursements obtained with MasterCard-branded cards for the relevant period. The number of cards includes virtual cards, which are MasterCard-branded payment accounts that do not generally have physical cards associated with them.

The MasterCard payment product is comprised of credit, charge and debit programs, and data relating to each type of program is included in the tables. Debit programs include MasterCard-branded debit programs where the primary means of cardholder validation at the point of sale is for cardholders either to sign a sales receipt or enter a PIN. The tables include information with respect to transactions involving MasterCard-branded cards that are not processed by MasterCard and transactions for which MasterCard does not earn significant revenues.

Information denominated in U.S. dollars is calculated by applying an established U.S. dollar/local currency exchange rate for each local currency in which MasterCard volumes are reported. These exchange rates are calculated on a quarterly basis using the average exchange rate for each quarter. MasterCard reports period-over-period rates of change in purchase volume and cash volume on the basis of local currency information, in order to eliminate the impact of changes in the value of foreign currencies against the U.S. dollar in calculating such rates of change.

The data set forth in the GDV, purchase volume, purchase transactions, cash volume and cash transactions columns is provided by MasterCard customers and is subject to verification by MasterCard and partial cross-checking against information provided by MasterCard's transaction processing systems. The data set forth in the accounts and cards columns is provided by MasterCard customers and is subject to certain limited verification by MasterCard. A portion of the data set forth in the accounts and cards columns reflects the impact of routine portfolio changes among customers and other practices that may lead to over counting of the underlying data in certain circumstances. All data is subject to revision and amendment by MasterCard's customers subsequent to the date of its release.

In 2013 Q4, a large Maestro customer revised their number of Maestro cards to exclude inactive cards. Data for the comparable periods in 2013 and 2012 have been revised to be consistent with this approach. In 2014 Q2, a large customer revised their number of MasterCard credit cards to exclude inactive cards. Data for the comparable periods in 2013 have been revised to be consistent with this approach. MasterCard revenue is not impacted from these historical changes.

Performance information for prior periods can be found in the "Investor Relations" section of the MasterCard website at www.mastercard.com.

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