Mastercard Inc: Form 10-Q for the period ended Sep 30, 2024

The following supplements management's discussion and analysis of Mastercard Incorporated for the year ended December 31, 2023 as contained in the Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on February 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.

Financial Results Overview

The following table provides a summary of our key GAAP operating results, as reported:

(in millions, except percentages and per share data)

Note: Table may not sum due to rounding.

The following table provides a summary of our key non-GAAP operating results1, adjusted to exclude the impact of gains and losses on our equity investments, Special Items (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:

($ in millions, except per share data)

Note: Table may not sum due to rounding.

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

Key highlights for the three and nine months ended September 30, 2024, versus the comparable periods in 2023:

Other financial highlights for the nine months ended September 30, 2024 were as follows:

• We generated net cash flows from operations of $9.9 billion.
• We repurchased 16.5 million shares of our common stock for $7.6 billion and paid dividends of $1.8 billion.
• We completed debt offerings for an aggregate principal amount of $4.0 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”). 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”). We also present growth rates adjusted for the impact of currency, which is a non-GAAP financial measure. We 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. We 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. We excluded these items because management evaluates the underlying operations and performance of the 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 currency, 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 and nine months ended September 30, 2024, we recorded net losses of $62 million ($63 million after tax, or $0.07 per diluted share) and $69 million ($67 million after tax, or $0.07 per diluted share), respectively, primarily related to unrealized fair market value adjustments on marketable and nonmarketable equity securities.
• In the three and nine months ended September 30, 2023, we recorded net losses of $6 million ($5 million after tax, or an immaterial impact per diluted share) and $95 million ($63 million after tax, or $0.07 per diluted share), respectively, primarily related to unrealized fair market value adjustments on marketable and nonmarketable equity securities.

Special Items

Litigation provisions

• In the three months ended September 30, 2024, we recorded charges of $176 million ($120 million after tax, or $0.13 per diluted share), primarily as a result of a change in estimate related to the claims of merchants who opted out of the U.S. merchant class litigation. In the nine months ended September 30, 2024, we recorded charges of $400 million ($281 million after tax, or $0.30 per diluted share), primarily as a result of a change in estimate related to the claims of merchants who opted out of the U.S. merchant class litigation, settlements with a number of U.K. merchants and a legal provision associated with the ATM non-discrimination rule surcharge complaints.
• In the nine months ended September 30, 2023, we recorded charges of $231 million ($156 million after tax, or $0.16 per diluted share) primarily as a result of a change in estimate related to the claims of merchants who opted out of the U.S. merchant class litigation.

Restructuring charge

• In the three and nine months ended September 30, 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.

See Note 6 (Investments) and Note 15 (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 (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 statement 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:

Note: Tables may not sum due to rounding.

** Not applicable.

The following tables represent the reconciliation of our growth rates reported under GAAP to our non-GAAP growth rates:

Note: Tables 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.

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

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:

($ in millions)

MASTERCARD SEPTEMBER 30, 2024 FORM 10-Q 35

Foreign Currency

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 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 are also impacted by transactional currency. 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 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. dollars and euros using average exchange rates for the period. As a result, our key metrics related to domestic assessments and cross-border assessments as well as certain volume-related rebates and incentives are impacted by the strengthening or weakening of the U.S. dollar and euro versus local currencies. For example, our billing in Australia is in the U.S. dollar, however, consumer spend in Australia is in the Australian dollar. The transactional currency 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, 2024, GDV on a U.S. dollar-converted basis increased 9% and 8%, respectively, while GDV on a local currency basis increased 10% for each of the periods, versus the comparable periods in 2023. 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 17 (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 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 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 this foreign exchange activity, including the related hedging activities, has not been eliminated in our currency-neutral results.

Our foreign exchange risk management activities are discussed further in Note 17 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part I, Item 1.

Financial Results

Net Revenue

The components of net revenue were as follows:

($ in millions)

For the three months ended September 30, 2024, net revenue increased 13%, or 14% 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 10%, or 11% 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 number of switched transactions, reflecting trends of growth in our key drivers. Net revenue from our payment network included $4,630 million of rebates and incentives provided to customers, which increased 17%, or 19% on a currency-neutral basis, versus the comparable period in 2023, 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 19% on a currency-neutral basis, versus the comparable period in 2023. The increase was driven primarily by (1) growth in our underlying key drivers, (2) our consulting and marketing services, and fraud and security and identity and authentication solutions and (3) pricing.

For the nine months ended September 30, 2024, net revenue increased 11%, or 12% 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 8%, or 9% 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 number of switched transactions, reflecting trends of growth in our key drivers. Net revenue from our payment network included $12,952 million of rebates and incentives provided to customers, which increased 17%, or 18% on a currency-neutral basis, versus the comparable period in 2023, 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, versus the comparable period in 2023. The increase was driven primarily by (1) growth in our underlying key drivers and (2) our consulting and marketing services, and fraud and security and identity and authentication solutions.

See Note 3 (Revenue) 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 a further discussion of our revenue recognition policies.

Drivers of Change

The following table summarizes the drivers of change in net revenue:

Note: Tables may not sum due to rounding.

** Not applicable.

1Includes the translational and transactional impact of currency and the related impact of our foreign exchange derivative contracts designated as cash flow hedging instruments. See “Non-GAAP Financial Information - Currency-neutral Growth Rates” for further information on our currency impact non-GAAP adjustment.

Operating Expenses

For the three months ended September 30, 2024, operating expenses increased 25% versus the comparable period in 2023. Adjusted operating expenses increased 12%, on both an as adjusted and currency-neutral basis, versus the comparable period in 2023.

For the nine months ended September 30, 2024, operating expenses increased 14% versus the comparable period in 2023. Adjusted operating expenses increased 10%, on both an as adjusted and currency-neutral basis, versus the comparable period in 2023.

The components of operating expenses were as follows:

($ in millions)

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.

Drivers of Change

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

Note: Tables 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 September 30, 2024, general and administrative expenses increased 20%, on both an as reported and currency-neutral basis, versus the comparable period in 2023. Current period results include an increase of 8 percentage points from a restructuring charge of $190 million. The remaining increase was primarily due to higher personnel 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.

For the nine months ended September 30, 2024, general and administrative expenses increased 14%, on both an as reported and currency-neutral basis, versus the comparable period in 2023. Current period results include an increase of 3 percentage points from a restructuring charge of $190 million. 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.

The components of general and administrative expenses were as follows:

($ in millions)

Note: Table may not sum due to rounding.

** Not meaningful.

1For the three and nine months ended September 30, 2024, total general and administrative expenses includes a restructuring charge of $190 million. See “Non-GAAP Financial Information” for further information.

2Foreign 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 17 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part I, Item 1 for further discussion.

Advertising and Marketing

For the three months ended September 30, 2024, advertising and marketing expenses increased 14%, on both an as reported and currency-neutral basis, versus the comparable period in 2023, primarily due to timing of marketing campaigns.

For the nine months ended September 30, 2024, advertising and marketing expenses decreased 7%, on both an as reported and currency-neutral basis, versus the comparable period in 2023, primarily due to timing of spending on sponsorships as well as timing of marketing campaigns.

Depreciation and Amortization

For the three months ended September 30, 2024, depreciation and amortization expenses increased 7%, on both an as reported and currency-neutral basis, versus the comparable period in 2023. For the nine months ended September 30, 2024, depreciation and amortization expenses increased 12%, on both an as reported and currency-neutral basis, versus the comparable period in 2023. The increase for both the three and nine months ended September 30, 2024 was primarily due to increased software capitalization driven by the continued growth of our business.

Provision for Litigation

For the three months ended September 30, 2024, we recorded charges of $176 million, primarily as a result of a change in estimate related to the claims of merchants who opted out of the U.S. merchant class litigation. For the nine months ended September 30, 2024, we recorded charges of $400 million, primarily as a result of a change in estimate related to the claims of merchants who opted out of the U.S. merchant class litigation, settlements with a number of U.K. merchants and a legal provision associated with the ATM non-discrimination rule surcharge complaints. See “Non-GAAP Financial Information” in this section and Note 15 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part I, Item 1 of this Report for further discussion.

Other Income (Expense)

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

($ in millions)

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.

Income Taxes

The effective income tax rates were 15.6% and 15.0% for the three months ended September 30, 2024 and 2023, respectively. The adjusted effective income tax rates were 16.3% and 15.0% for the three months ended September 30, 2024 and 2023, respectively. Both the as-reported and as-adjusted effective income tax rates for the three months ended September 30, 2024 and 2023 were higher versus the comparable period in 2023, primarily due to our ability to claim more U.S. foreign tax credits generated in 2022 and 2023 resulting from Notice 2023-55 (the “Notice”), released by the U.S. Department of Treasury (“Treasury”) in 2023. The higher effective income tax rates were partially offset by a $115 million discrete tax expense in 2023 to establish a valuation allowance on the deferred tax asset related to U.S. foreign tax credits generated prior to 2022, as well as a change in our geographic mix of earnings in the current period.

The effective income tax rates were 16.1% and 18.6% for the nine months ended September 30, 2024 and 2023, respectively. The adjusted effective income tax rates were 16.6% and 19.0% for the nine months ended September 30, 2024 and 2023, respectively. Both the as-reported and as-adjusted effective income tax rates for the nine months ended September 30, 2024 and 2023 were lower versus the comparable period in 2023, 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 the Notice released by Treasury. Therefore, we recognized a total $327 million discrete tax expense in 2023 to establish the valuation allowance. 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.

The Organization for Economic Co-operation and Development (the “OECD”) Pillar 2 guidelines published to date include transition and safe harbor rules around the implementation of the 15% global minimum tax (the “Pillar 2 Rules”). Based on current enacted legislation, we do not expect a material impact in 2024. 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 nine months ended September 30, 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.

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:

(in billions)

1 Investments include available-for-sale securities and held-to-maturity securities. This amount excludes restricted cash and restricted cash equivalents of $1.9 billion at September 30, 2024 and December 31, 2023.

We believe that our existing cash, cash equivalents and investment securities balances, our cash flow generating capabilities, 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, 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 of the transactions between our customers. Historically, payments under these guarantees have not been significant; however, historical trends may not be indicative of potential future losses. The risk of loss on these guarantees is specific to individual customers, but may also be driven 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 16 (Settlement and Other Risk Management) to the consolidated financial statements in Part I, Item 1 for a description of these guarantees.

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, 2023 and Note 15 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part I, Item 1 of this Report.

Cash Flows

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

(in millions)

Net cash provided by operating activities increased $2,096 million for the nine months ended September 30, 2024, versus the comparable period in 2023, primarily due to higher net income after adjusting for non-cash items as well as lower cash payments for litigation settlements, partially offset by higher customer incentive payments.

Net cash used in investing activities decreased $413 million for the nine months ended September 30, 2024, versus the comparable period in 2023, primarily due to higher proceeds from maturities and sales of investment securities.

Net cash used in financing activities decreased $343 million for the nine months ended September 30, 2024, versus the comparable period in 2023, primarily due to higher cash proceeds received from debt issuances, partially offset by repayments of debt and higher cash paid for repurchases of our Class A common stock and dividends.

Debt and Credit Availability

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 the nine months ended September 30, 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.

Our total debt outstanding was $18.4 billion and $15.7 billion at September 30, 2024 and December 31, 2023, respectively, with the earliest maturity of $750 million of principal occurring in March 2025.

As of September 30, 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”) that expires in 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, 2024 and December 31, 2023.

See Note 10 (Debt) to the consolidated financial statements included in Part I, Item 1 for further discussion on our debt and 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 discussion on 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. 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.

Aggregate payments for quarterly dividends totaled $1,842 million for the nine months ended September 30, 2024.

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. The aggregate amount of this dividend was $616 million.

On February 6, 2024, our Board of Directors declared a quarterly cash dividend of $0.66 per share paid on May 9, 2024 to holders of record on April 9, 2024 of our Class A common stock and Class B common stock. The aggregate amount of this dividend was $615 million.

On June 18, 2024, our Board of Directors declared a quarterly cash dividend of $0.66 per share paid on August 9, 2024 to holders of record on July 9, 2024 of our Class A common stock and Class B common stock. The aggregate amount of this dividend was $611 million.

On September 16, 2024, our Board of Directors declared a quarterly cash dividend of $0.66 per share payable on November 8, 2024 to holders of record on October 9, 2024 of our Class A common stock and Class B common stock. The aggregate amount of this dividend is $606 million.

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 became effective in May 2024 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. The following table summarizes our share repurchase authorizations and repurchase activity of our Class A common stock through September 30, 2024:

(in millions, except average price data)

Note: Table may not sum due to rounding.

1 The 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.

Recent Accounting Pronouncements

For 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.

Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in factors such as foreign currency exchange rates and interest rates. Our exposure to market risk from changes in foreign currency exchange rates and interest 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 17 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part I, Item 1.

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 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 the value of the functional currencies could result in a fair value loss of approximately $529 million and $414 million on our foreign exchange derivative contracts outstanding at September 30, 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 September 30, 2024 and December 31, 2023.

We are further exposed to foreign exchange rate risk related to translation of our net investment in foreign subsidiaries where the 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. The effect of a hypothetical 10% adverse change in the value of the U.S. dollar could result in a fair value loss of approximately $297 million on our foreign exchange derivative contracts designated as a net investment hedge at September 30, 2024, before considering the offsetting effect of the underlying hedged activity. As of December 31, 2023, we did not have any foreign exchange derivative contracts designated as a net investment hedge.

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, 2024 that has materially affected, or is reasonably likely to materially affect, Mastercard's internal control over financial reporting.

For a discussion of our risk factors, see Part I, Item 1A - Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023.