What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-12 compared with 2024-02-13 · 117 added, 141 removed, 353 unchanged (42% of the section changed)

2 unchanged sentences

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”).

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 and the related tax impacts.

As 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 related tax impacts.

Our non-GAAP financial measures also exclude the impact of special items, where applicable, which represent litigation judgments and settlements and certain one-time items, as well as the related tax impacts (“Special Items”).

6 unchanged sentences

Gains and Losses on Equity Investments

• During 2023, 2022 and 2021, we recorded net pre-tax losses of $61 million ($36 million after tax, or $0.04 per diluted share), net pre-tax losses of $145 million ($126 million after tax, or $0.13 per diluted share) and net pre-tax gains of $645 million ($497 million after tax, or $0.50 per diluted share), respectively.

These net gains and losses were primarily related to unrealized fair market value adjustments on marketable and nonmarketable equity securities.

In addition, in 2021, net gains also included realized gains on sales of marketable equity securities.

• During 2024, 2023 and 2022, we recorded net pre-tax losses of $29 million ($25 million after tax, or $0.03 per diluted share), $61 million ($36 million after tax, or $0.04 per diluted share) and $145 million ($126 million after tax, or $0.13 per diluted share), respectively.

These net losses were primarily related to unrealized fair market value adjustments on marketable and nonmarketable equity securities.

Special Items

Litigation provisions

• During 2023, we recorded pre-tax charges of $539 million ($376 million after tax, or $0.40 per diluted share) related to litigation provisions, which included pre-tax charges of:

◦ $344 million as a result of changes in the estimate related to the claims of merchants who opted out of the U.S.

merchant class litigation, and

◦ $195 million as a result of settlements with a number of U.K.

and Pan-European merchants.

• During 2022, we recorded pre-tax charges of $356 million ($263 million after tax, or $0.27 per diluted share) related to litigation provisions, which included pre-tax charges of:

◦ $223 million as a result of settlements (both final and agreements in principle) with a number of U.K.

merchants, and

◦ $133 million as a result of a change in estimate related to the claims of merchants who opted out of the U.S.

• During 2024, we recorded pre-tax charges of $680 million ($495 million after tax, or $0.53 per diluted share), primarily as a result of a legal provision associated with the U.K.

consumer class action settlement, settlements with a number of U.K.

merchants and a change in estimate related to the claims of merchants who opted out of the U.S.

merchant class litigation.

• During 2021, we recorded pre-tax charges of $94 million ($74 million after tax, or $0.07 per diluted share) related to litigation settlements and estimated attorneys’ fees with U.K.

• During 2023, we recorded pre-tax charges of $539 million ($376 million after tax, or $0.40 per diluted share), primarily as a result of changes in the estimate related to the claims of merchants who opted out of the U.S.

merchant class litigation and settlements with a number of U.K.

and Pan-European merchants.

• During 2022, we recorded pre-tax charges of $356 million ($263 million after tax, or $0.27 per diluted share), primarily as a result of settlements (both final and agreements in principle) with a number of U.K.

merchants and a change in estimate related to the claims of merchants who opted out of the U.S.

merchant class litigation.

Restructuring charge

• During 2024, we recorded a restructuring charge of $190 million ($147 million after tax, or $0.16 per diluted share).

The restructuring action is intended to streamline our organization, delivering efficiencies to enable reinvestment in our business to support the realization of our long-term growth opportunities.

Russia-related impacts

2 unchanged sentences

This charge was offset by net benefits of $37 million in net revenue, primarily related to a reduction in payment network rebates and incentives liabilities as a result of lower estimates of customer performance for certain customer business agreements due to the suspension of our business operations in Russia.

Indirect tax matter

• During 2021, we recorded a pre-tax charge of $88 million ($69 million after tax, or $0.07 per diluted share) to resolve a foreign indirect tax matter for 2015 through 2021 and the related interest expense.

The charge was comprised of general and administrative expenses of $82 million and other income (expense) of $6 million.

See Note 7 (Investments) and Note 21 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8 of this Report for further discussion related to certain of the items discussed above.

MASTERCARD 2024 FORM 10-K 48

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 than our U.S.

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.

The impact of the related realized gains and losses resulting from our foreign exchange derivative contracts designated as cash flow hedging instruments (specifically those that manage the impact of foreign currency variability on anticipated revenues and expenses) is recognized in the respective financial statement line item on the statements of operations when the underlying forecasted transactions impact earnings.

The translational and transactional impact of currency and the related impact of our foreign exchange derivative contracts designated as cash flow hedging instruments as specified in the preceding paragraph (collectively the “Currency Impact”) has been excluded from our currency-neutral growth rates and has been identified in the “Non-GAAP Reconciliations” tables 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.

Non-GAAP Reconciliations

The following tables reconcile our reported financial measures calculated in accordance with GAAP to the respective adjusted non-GAAP financial measures:

5 unchanged sentences

Litigation provisions ** (680) 2.4 % ** 0.5 % 495 0.53

Restructuring charge

** (190) 0.7 % ** 0.1 % 147 0.16

Adjusted - Non-GAAP $ 28,167 $ 11,714 58.4 % $ (300) 16.2 % $ 13,541 $ 14.60

7 unchanged sentences

Litigation provisions ** (539) 2.1 % ** 0.5 % 376 0.40

Russia-related impacts (37) (67) 0.2 % ** — % 24 0.02

Adjusted - Non-GAAP $ 25,098 $ 10,551 58.0 % $ (308) 18.5 % $ 11,607 $ 12.26

7 unchanged sentences

Litigation provisions ** (356) 1.6 % ** 0.3 % 263 0.27

Indirect tax matter ** (82) 0.4 % 6 0.1 % 69 0.07

Russia-related impacts (37) (67) 0.2 % ** — % 24 0.02

Adjusted - Non-GAAP $ 22,200 $ 9,549 57.0 % $ (387) 15.7 % $ 10,342 $ 10.65

10 unchanged sentences

Litigation provisions ** (1) % 0.3 ppt — ppt 1 % 1 %

Russia-related impacts — % 1 % (0.1) ppt — ppt — % — %

Restructuring charge

** (2) % 0.7 ppt 0.1 ppt 1 % 1 %

Adjusted - Non-GAAP 12 % 11 % 0.4 ppt (2.3) ppt 17 % 19 %

Currency impact — % — % (0.1) ppt (0.1) ppt — % — %

Currency Impact

1 % — % 0.3 ppt 0.1 ppt 1 % 1 %

Adjusted - Non-GAAP - currency-neutral 13 % 11 % 0.7 ppt (2.2) ppt 18 % 21 %

6 unchanged sentences

Russia-related impacts — % 1 % (0.1) ppt — ppt — % — %

Indirect tax matter ** 1 % (0.4) ppt (0.1) ppt (1) % (1) %

Adjusted - Non-GAAP 13 % 10 % 1.0 ppt 2.8 ppt 12 % 15 %

Currency impact 5 % 3 % 0.8 ppt 0.2 ppt 8 % 8 %

Currency Impact

— % — % (0.1) ppt (0.1) ppt — % — %

Adjusted - Non-GAAP - currency-neutral 13 % 11 % 0.9 ppt 2.7 ppt 12 % 15 %

17 unchanged sentences

dollar in calculating such rates of change.

MASTERCARD 2023 FORM 10-K 52

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

MASTERCARD 2024 FORM 10-K 50

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 unchanged sentence

All data is subject to revision and amendment by Mastercard or Mastercard’s customers.

Starting in the first quarter of 2022, data related to sanctioned Russian banks was not reported to us and therefore such amounts are not included.

Subsequent to the suspension of our business operations in Russia in March 2022, there is no Russian data to be reported.

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

Carryover days are those where transactions and volumes from days where the Company does not clear and settle are processed.

The following tables provide a summary of the growth trends in our key drivers.

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17% 18% 25% 24%

Mastercard-branded GDV growth adjusted for Russia 1,2

11% 12% 10% 18%

Worldwide less United States GDV growth adjusted for Russia 1,2

13% 15% 11% 22%

Cross-border volume growth adjusted for Russia 1,2

25% 25% 37% 50%

For the Years Ended December 31,

1 unchanged sentence

Switched transactions growth 11% 14%

Switched transactions growth adjusted for Russia 2

1 Excludes volume generated by Maestro and Cirrus cards.

2 Starting in the first quarter of 2022, as a result of imposed sanctions and the suspension of our business operations in Russia, we have provided adjusted growth rates for our key drivers excluding activity from Russian issued cards from the prior periods.

Key Metrics related to the Payment Network

7 unchanged sentences

These assessments are primarily driven by the cross-border dollar volume of activity (e.g., cross-border purchase volume, cross-border cash volume).

53 MASTERCARD 2023 FORM 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• Transaction processing assessments are charges primarily driven by the number of switched transactions on our payment network.

4 unchanged sentences

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 primarily charges for licensing, implementation and other franchise fees.

• Other network assessments are charges for licensing, implementation and other franchise fees.

51 MASTERCARD 2024 FORM 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table provides a summary of our key metrics related to the payment network.

Year ended December 31, 2023 2022

Years ended December 31, 2024 2023

Increase/(Decrease)

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Currency Impact

Our primary revenue functional currencies are the U.S.

Our primary functional currencies are the U.S.

dollar, euro, British pound and the Brazilian real.

3 unchanged sentences

The impact of the transactional currency represents the effect of converting revenue and expense transactions occurring in a currency other than the functional currency.

Changes in currency exchange rates directly impact the calculation of gross dollar volume (“GDV”), which are used in the calculation of our key metrics related to domestic assessments and cross-border assessments as well as certain volume-related rebates and incentives.

Changes in currency exchange rates directly impact the calculation of gross dollar volume (“GDV”), which is used in the calculation of our key metrics related to domestic assessments and cross-border assessments as well as certain volume-related rebates and incentives.

GDV is calculated based on local currency spending volume converted to U.S.

13 unchanged sentences

dollar-converted basis increased 10.6%, while GDV on a local currency basis increased 12.2% versus 2022.

Further, the impact from transactional currency occurs in our key metric related to transaction processing assessments as well as value-added services and solutions revenue and operating expenses when the transacting currency of these items is different than the functional currency of the entity.

Further, the impact from transactional currency occurs in our key metrics related to transaction processing assessments and other network assessments as well as value-added services and solutions revenue and operating expenses when the transacting currency of these items is different than the functional currency of the entity.

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 23 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part II, Item 8.

1 unchanged sentence

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 of the entity.

To manage this foreign exchange risk, we may enter into foreign exchange derivative contracts to economically hedge the foreign currency exposure of our

To manage this foreign exchange risk, we may enter into foreign exchange derivative contracts 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 statements of operations.

The impact of this foreign exchange activity, including with the related hedging activities, has not been eliminated in our currency-neutral results.

Our foreign exchange risk management activities are discussed further in Note 23 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part II, Item 8.

MASTERCARD 2024 FORM 10-K 52

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

nonfunctional currency monetary assets and liabilities.

The impact of this foreign exchange activity, along with the related hedging activities, is included in our currency-neutral results.

Our foreign exchange risk management activities are discussed further in Note 23 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part II, Item 8.

Financial Results

13 unchanged sentences

1 See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.

For the year ended December 31, 2023, net revenue increased 13% versus the comparable period in 2022.

On both an as adjusted and currency-neutral basis, net revenue increased 13%.

The increase in net revenue on both an as reported and as adjusted basis was attributable to growth in our payment network and value-added services and solutions.

Net revenue from our payment network increased 10%, on both an as reported and currency neutral basis, in 2023 versus 2022.

The increase was primarily driven by growth in domestic and cross-border dollar volumes and an increase in the number of switched transactions, reflecting trends of growth in our key drivers.

Net revenue from our payment network includes $15,182 million of rebates and incentives provided to customers, which increased 22% on both an as reported and currency-neutral basis, in 2023 versus 2022, primarily due to an increase in our key drivers as well as new and renewed deals.

Net revenue from our value-added services and solutions increased 18%, or 17% on a currency-neutral basis, in 2023 versus 2022.

The increase was driven primarily by the continued growth of (i) our cyber and intelligence solutions, driven by our underlying key drivers and the scaling of our fraud and security solutions, as well as (ii) our consulting, marketing and loyalty solutions.

Net revenue increased 12%, or 13% on a currency-neutral basis, in 2024 versus the prior year.

The increase in net revenue was attributable to growth in our payment network and value-added services and solutions.

Net revenue from our payment network increased 10%, or 11% on a currency-neutral basis, in 2024 versus the prior year.

The increase was primarily driven by growth in domestic and cross-border dollar volumes and an increase in the number of switched transactions, reflecting growth trends across all of our key drivers.

Net revenue from our payment network includes $17,629 million of rebates and incentives provided to customers, which increased 16%, or 18% on a currency-neutral basis, in 2024 versus the prior year, primarily due to an increase in our key drivers as well as new and renewed deals.

Net revenue from our value-added services and solutions increased 17%, on both an as-reported and currency-neutral basis, in 2024 versus the prior year.

The increase was driven primarily by (1) growth in our underlying key drivers, (2) our consumer acquisition and engagement and business and market insight services, (3) our security and digital and authentication solutions and (4) pricing.

See Note 3 (Revenue) to the consolidated financial statements included in Part II, Item 8 for a further discussion of how we recognize revenue.

55 MASTERCARD 2023 FORM 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Drivers of Change

1 unchanged sentence

For the Years Ended December 31,

Operational Acquisitions Currency Impact 1,2

Operational Acquisitions Currency

Special Items 2

2024 2023 2024 2023 2024 2023 2024

2023 2024 2023

Payment network 11% 11% ** —% (1)% —% ** — % 10 % 10 %

9 unchanged sentences

The loss of any of these customers or their significant card programs could adversely impact our revenue.

53 MASTERCARD 2024 FORM 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Operating Expenses

Operating expenses increased 13% in 2024 versus the prior year.

Adjusted operating expenses increased 10%, or 11% on a currency-neutral basis, versus the prior year, which includes a 1 percentage point increase from acquisitions.

On both an as reported and as adjusted basis, the increase was primarily due to higher personnel costs to support the continued investment in our business and the delivery of services to our customers.

Adjusted operating expenses increased 11%, on both an as-adjusted and currency-neutral basis, versus the prior year.

The components of operating expenses were as follows:

14 unchanged sentences

1 See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.

MASTERCARD 2023 FORM 10-K 56

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Drivers of Change

The following table summarizes the drivers of changes in operating expenses:

The following table summarizes the drivers of change in operating expenses:

For the Years Ended December 31,

Operational Acquisitions Currency Impact 1,2

Operational Acquisitions Currency

2024 2023 2024 2023 2024 2023 2024 2023 2024 2023

3 unchanged sentences

Provision for litigation

** ** ** ** ** ** 26 % 51 % 26 % 51 %

Total operating expenses 11% 10 % — % 1 % — % — % 2 % 1 % 13 % 11 %

Table may not sum due to rounding.

** Not applicable/meaningful

** Not applicable.

1 Represents the translational and transactional impact of currency.

2 See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.

3 The Special Items driver of change related to provision for litigation is reflected in total operating expenses.

General and Administrative

General and administrative expenses increased 11% on an as reported and currency-neutral basis, in 2023 versus the prior year.

Current year results include growth of 1 percentage point from acquisitions.

The remaining increase was primarily due to higher personnel costs resulting from incremental headcount to support the continued investment in our business and the delivery of services to our customers.

General and administrative expenses increased 14%, on both an as-reported and currency-neutral basis, in 2024 versus the prior year.

Current year results include an increase of 2 percentage points from a restructuring charge of $190 million and 1 percentage point from acquisitions.

The remaining increase was primarily due to higher personnel and data processing costs to support the continued investment in our strategic initiatives across payments and value-added services and solutions, as well as fulfillment costs to provide marketing services.

MASTERCARD 2024 FORM 10-K 54

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The components of general and administrative expenses were as follows:

10 unchanged sentences

Table may not sum due to rounding.

** Not meaningful

1 For the year ended December 31, 2022, total general and administrative expenses includes a Special Item for Russia-related impacts of $67 million, of which $35 million is included within Personnel and $32 million is included within Other.

See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.

1 Foreign exchange activity includes the impact of remeasurement of assets and liabilities denominated in foreign currencies net of the impact of gains and losses on foreign exchange derivative contracts.

See Note 23 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part II, Item 8 for further discussion.

3 The year ended December 31, 2021 includes a Special Item related to a foreign indirect tax matter of $82 million.

See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.

Advertising and Marketing

Advertising and marketing expenses increased 5%, or 4% on a currency-neutral basis, in 2023 versus the prior year, primarily due to an increase in spending on sponsorships, partially offset by a decrease in media spending.

Advertising and marketing expenses decreased 1%, on both an as-reported and a currency-neutral basis, in 2024 versus the prior year.

Depreciation and Amortization

Depreciation and amortization expenses increased 7%, or 6% on a currency-neutral basis, in 2023 versus the prior year, primarily due to increased software capitalization to support the continued growth of our business.

57 MASTERCARD 2023 FORM 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Depreciation and amortization expenses increased 12%, on both an as-reported and a currency-neutral basis, in 2024 versus the prior year, primarily due to increased software capitalization driven by the continued growth of and investment in our business.

Provision for Litigation

In 2023, 2022 and 2021, we recorded $539 million, $356 million and $94 million, respectively, related to various legal proceedings.

See “Non-GAAP Financial Information” in this section and Note 21 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8 for further discussion.

In 2024, we recorded charges of $680 million, primarily as a result of a legal provision associated with the U.K.

consumer class action settlement, settlements with a number of U.K.

merchants and a change in estimate related to the claims of merchants who opted out of the U.S.

merchant class litigation.

In 2023, we recorded charges of $539 million, primarily as a result of changes in the estimate related to the claims of merchants who opted out of the U.S.

merchant class litigation and settlements with a number of U.K.

and Pan-European merchants.

In 2022, we recorded charges of $356 million, primarily as a result of settlements (both final and agreements in principle) with a number of U.K.

merchants and a change in estimate related to the claims of merchants who opted out of the U.S.

merchant class litigation.

See Note 21 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8 for further discussion.

Other Income (Expense)

Other income (expense) decreased $163 million in 2023 versus the prior year, primarily due to an increase in our investment income and lower mark-to-market losses on our equity investments in 2023, partially offset by increased interest expense related to our debt portfolio as well as losses on sales of certain assets.

Adjusted other income (expense) decreased $79 million versus the prior year, primarily due to an increase in our investment income, partially offset by increased interest expense related to our debt portfolio as well as losses on sales of certain assets.

The components of other income (expense) were as follows:

The components of total other income (expense) were as follows:

For the Years Ended December 31, Increase (Decrease)

8 unchanged sentences

29 61 145 (32) (84)

Special Items 1

Adjusted total other income (expense) 1

1 unchanged sentence

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.

55 MASTERCARD 2024 FORM 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The effective income tax rates for the years ended December 31, 2024 and 2023 were 15.6% and 17.9%, respectively.

The adjusted effective income tax rates for the years ended December 31, 2024 and 2023 were 16.2% and 18.5%, respectively.

Both the as reported and as adjusted effective income tax rates were higher in 2023, primarily due to changes in the valuation allowance associated with the deferred tax asset related to U.S.

foreign tax credits.

In 2022, we recognized a discrete tax benefit of $333 million to release the valuation allowance resulting from U.S.

tax regulations published in the first quarter of 2022 (the “2022 Regulations”).

In 2023, the treatment of foreign taxes paid under the 2022 Regulations changed due to the foreign tax legislation enacted in Brazil and Notice 2023-55 (the “Notice”), released by the U.S.

Department of Treasury (“Treasury”).

Both the as-reported and as-adjusted effective income tax rates were lower in 2024, primarily due to a discrete tax expense in 2023 related to changes in the valuation allowance associated with the U.S.

foreign tax credits deferred tax asset.

In 2023, the treatment of foreign taxes paid under the U.S.

tax regulations published in 2022 changed due to the foreign tax legislation enacted in Brazil and Notice 2023-55 (the “Notice”) released by the U.S.

Department of Treasury.

Therefore, we recognized a total $327 million discrete tax expense in 2023 to establish the valuation allowance.

The discrete tax expense recognized in 2023 was partially offset by our ability to claim more U.S.

foreign tax credits generated in 2022 and 2023 due to the Notice released by Treasury.

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 material impact in 2024.

We are monitoring developments and evaluating the impacts these new rules will have on our future effective income tax rate, tax payments, financial condition and results of operations.

This discrete tax expense was partially offset by our ability to claim more U.S.

foreign tax credits generated in 2022 and 2023 due to the Notice.

Additionally, a change in our geographic mix of earnings in 2024 contributed to the lower effective income tax rates compared to the prior year.

In 2024, we did not experience a material impact as a result of Pillar 2 Rules.

However, in 2025, we expect the Pillar 2 Rules will primarily offset the reduction to our effective income tax rate resulting from our incentive grant received from the Singapore Ministry of Finance.

For the year ended December 31, 2024, this incentive grant reduced our effective income tax rate by approximately 4%.

We are continuously monitoring developments and evaluating the impacts these new rules may have on our future effective income tax rate, tax payments, financial condition and results of operations.

See Note 20 (Income Taxes) to the consolidated financial statements included in Part II, Item 8 for further discussion.

MASTERCARD 2023 FORM 10-K 58

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

15 unchanged sentences

For additional discussion of these and other risks facing our business, see Part I, Item 1A - Risk Factors - Legal and Regulatory Risks and Note 21 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8.

MASTERCARD 2024 FORM 10-K 56

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The table below shows a summary of the cash flows from operating, investing and financing activities:

5 unchanged sentences

Net cash used in financing activities $ (10,836) $ (9,488) $ (10,328)

Net cash provided by operating activities increased $0.8 billion in 2023 versus the prior year, primarily due to higher net income after adjusting for non-cash items and an increase in restricted security deposits held for customers, partially offset by restricted cash paid for litigation settlement, higher employee incentives paid and higher customer incentives payments.

Net cash used in investing activities decreased $0.1 billion in 2023 versus the prior year, primarily due to less cash paid for business acquisitions in the current year, partially offset by an increase in purchases of investments in time deposits.

Net cash used in financing activities decreased $0.8 billion in 2023 versus the prior year, primarily due to lower debt payments and higher proceeds from debt issuances in the current year, partially offset by higher repurchases of our Class A common stock and higher dividend payments.

59 MASTERCARD 2023 FORM 10-K

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net cash provided by operating activities increased $2.8 billion in 2024 versus the prior year, primarily due to higher net income after adjusting for non-cash items, an increase in billing collections, and less cash paid for litigation settlement, partially offset by a decrease in restricted security deposits received from customers.

Net cash used in investing activities increased $2.1 billion in 2024 versus the prior year, primarily due to cash paid for business acquisitions in the current year, partially offset by a net decrease in purchases of investments in time deposits.

Net cash used in financing activities increased $1.3 billion in 2024 versus the prior year, primarily due to higher cash paid for repurchases of our Class A common stock, dividends, and repayments of debt, partially offset by an increase in cash proceeds received from debt issuances.

Debt and Credit Availability

In March 2023, we issued $750 million principal amount of notes due March 2028 and $750 million principal amount of notes due March 2033 (collectively the “2023 USD Notes”).

In April 2024, $1 billion of principal related to the 2014 USD Notes matured and was paid.

In July 2024, INR28.1 billion ($336 million as of payment date) of principal related to the 2023 INR Term Loan matured and was paid.

During 2024, we issued a total of $4 billion of debt, as follows:

• In May 2024, we issued $1 billion principal amount of notes due May 2034

• In September 2024, we issued $750 million principal amount of notes due January 2028, $1,150 million principal amount of notes due January 2032 and $1,100 million principal amount of notes due January 2035

The issuances in 2024 are collectively referred to as the “2024 USD Notes”.

The net proceeds from the issuance of the 2024 USD Notes, after deducting the original issue discount, underwriting discount and offering expenses, were $3.96 billion.

In April 2023, we entered into an additional unsecured INR4.97 billion ($61 million as of the date of settlement) term loan, originally due July 2023 (the “April 2023 INR Term Loan”).

In July 2023, we modified and combined the existing 2022 INR Term Loan and April 2023 INR Term Loan (the “2023 INR Term Loan”), increasing the total unsecured loans to INR28.1 billion ($342 million as of the date of settlement).

The 2023 INR Term Loan is due July 2024.

Our total debt outstanding was $15.7 billion at December 31, 2023, with the earliest maturity of $1.0 billion of principal occurring in April 2024.

Our total debt outstanding was $18.2 billion at December 31, 2024, with the earliest maturity of $750 million of principal occurring in March 2025.

As of December 31, 2024, we have a commercial paper program (the “Commercial Paper Program”), under which we are authorized to issue up to $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 a committed unsecured $8 billion revolving credit facility (the “Credit Facility”) which now expires in November 2028.

In conjunction with the Commercial Paper Program, we have a committed unsecured $8 billion revolving credit facility (the “Credit Facility”) that expires in November 2029.

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.

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The 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.

The following table summarizes the annual, per share dividends paid in the years reflected:

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table summarizes the annual total and per share dividends paid in the years reflected:

For the Years Ended December 31,

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Cash dividends paid $ 2,448 $ 2,158 $ 1,903

On December 5, 2023, our Board of Directors declared a quarterly cash dividend of $0.66 per share paid on February 9, 2024 to holders of record on January 9, 2024 of our Class A common stock and Class B common stock.

On December 17, 2024, our Board of Directors declared a quarterly cash dividend of $0.76 per share paid on February 7, 2025 to holders of record as of January 9, 2025 of our Class A common stock and Class B common stock.

The aggregate amount of this dividend was $694 million.

On February 6, 2024, our Board of Directors declared a quarterly cash dividend of $0.66 per share payable on May 9, 2024 to holders of record on April 9, 2024 of our Class A common stock and Class B common stock.

On February 10, 2025, our Board of Directors declared a quarterly cash dividend of $0.76 per share payable on May 9, 2025 to holders of record as of April 9, 2025 of our Class A common stock and Class B common stock.

The aggregate amount of this dividend is estimated to be $693 million.

MASTERCARD 2023 FORM 10-K 60

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, December 2022 and November 2021, our Board of Directors approved share repurchase programs of our Class A common stock authorizing us to repurchase up to $11.0 billion, $9.0 billion and $8.0 billion, respectively.

The program approved in 2023 will become effective after the completion of the share repurchase program approved in 2022.

In December 2024 and 2023, our Board of Directors approved share repurchase programs of our Class A common stock authorizing us to repurchase up to $12.0 billion and $11.0 billion, respectively.

The program approved in 2024 will become effective after the completion of the program approved in 2023.

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.

The following table summarizes our share repurchase authorizations and repurchase activity of our Class A common stock through December 31, 2023:

The following table summarizes our share repurchase authorizations and repurchase activity of our Class A common stock for the year ended December 31, 2024, unless otherwise noted:

(in millions, except per share data)

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Average price paid per share in 2024 $ 475.35

1 The dollar-value of shares repurchased does not include a 1% excise tax that became effective January 1, 2023.

The incremental tax is recorded in treasury stock on the consolidated balance sheet and is payable annually beginning in 2024.

Dollar-value of shares repurchased in 2025 (through February 7, 2025) $ 959

Table may not sum due to rounding.

See Note 16 (Stockholders' Equity) to the consolidated financial statements included in Part II, Item 8 for further discussion.

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If our customers’ actual performance is not consistent with our estimates of their performance, net revenue may be materially different.

MASTERCARD 2024 FORM 10-K 58

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Loss Contingencies

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Although we believe that our estimates and judgments discussed herein are reasonable, actual results may be materially different than the estimated amounts.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.

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In certain situations, we will have offsetting tax credits or taxes in other jurisdictions.

Deferred taxes are established on the estimated foreign exchange gains or losses for foreign earnings that are not considered permanently reinvested, which will be recognized through cumulative translation adjustments as incurred.

Ultimately, the working capital requirements of foreign affiliates will determine the amount of cash to be remitted from respective jurisdictions.

Business Combinations

8 unchanged sentences

Our estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable.

Quantitative 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 factors such as interest rates and foreign currency exchange rates.

Our exposure to market risk from changes in interest rates and foreign exchange rates 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 to manage these risks.

Foreign currency and interest rate exposures are managed through our risk management activities, which are discussed further in Note 23 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part II, Item 8.

Foreign Exchange Risk

We 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 exchange 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 transaction 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 the value of the functional currencies could result in a fair value loss of approximately $414 million and $94 million on our foreign exchange derivative contracts outstanding at December 31, 2023 and 2022, respectively, before considering the offsetting effect of the underlying hedged activity.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis