Item 6. [Reserved]

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7. Management’s discussion and analysis of financial condition and results of operations

The following discussion should be read in conjunction with the consolidated financial statements and notes of Mastercard Incorporated and its consolidated subsidiaries, including Mastercard International Incorporated (“Mastercard International”) (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. For discussion related to the results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020, please see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021. During 2022, the Company updated its disaggregated net revenue presentation by category and geography to reflect the nature of its payment services and to align such information with the way in which management will prospectively view its categories of net revenue. Prior period amounts have been reclassified to conform to the 2022 presentation. The reclassification had no impact on previously reported total net revenue, operating income or net income.

Business Overview

Mastercard is a technology company in the global payments industry. We connect consumers, financial institutions, merchants, governments, digital partners, businesses and other organizations worldwide by enabling electronic payments instead of cash and checks and making those payment transactions safe, simple, smart, and accessible. We make payments easier and more efficient by providing a wide range of payment solutions and services using our family of well-known and trusted brands, including Mastercard®, Maestro® and Cirrus®. We operate a multi-rail payments network that provides choice and flexibility for consumers, merchants and our customers. Through our unique and proprietary core global payments network, we switch (authorize, clear and settle) payment transactions. We have additional payment capabilities that include automated clearing house (“ACH”) transactions (both batch and real-time account-based payments). Using these capabilities, we offer integrated payment products and services and capture new payment flows. Our value-added services include, among others, cyber and intelligence solutions to allow all parties to transact easily and with confidence, as well as other services that provide proprietary insights, drawing on our principled use of secure consumer and merchant data. Our investments in new networks, such as open banking solutions and digital identity capabilities, support and strengthen our payments and services solutions. Our franchise model sets the standards and ground-rules for our core global payments network that balance value and risk across all stakeholders and allows for interoperability among them. Our payment solutions are designed to ensure safety and security for the global payments ecosystem.

Mastercard is not a financial institution. We do not issue cards, extend credit, determine or receive revenue from interest rates or other fees charged to account holders by issuers, or establish the rates charged by acquirers in connection with merchants’ acceptance of our products. In most cases, account holder relationships belong to, and are managed by, our customers.

Russia and Ukraine

Beginning in February 2022, in response to the Russian invasion of Ukraine, the United States, the European Union and other governments imposed sanctions and other restrictive measures on certain Russian-related entities and individuals and, in March 2022, we suspended our business operations in Russia1. We have taken steps necessary to ensure compliance with all applicable regulatory restrictions with sanctioned entities and individuals and have suspended our business operations with non-sanctioned customers in Russia. Throughout this process, our priority has been the safety and well-being of our employees and their families.

These actions have impacted our full year 2022 performance. As a point of reference, for the year ended December 31, 2021, approximately 4% of our net revenues were derived from business conducted within, into and out of Russia. Additional financial implications directly related to these actions include, but are not limited to, incremental employee-related costs, reserves on uncollectible balances with certain customers and impacts to net revenue, primarily related to rebates and incentives as a result of revised estimates of customer performance through the date of the suspension of our business operations.

We continue to monitor the effects of the Russian invasion of Ukraine and the related impacts to regional and global economies. The full extent to which this matter affects our business, results of operations and financial condition will depend on future developments, including the duration of the invasion and the impacts on regional and global economies, which are uncertain, and cannot be predicted at this time.

1 As a result of the suspension of our business operations, which included the suspension of our network services, cards issued by Russian banks are no longer supported by the Mastercard network regardless of where the cards are used, inside or outside of Russia. In addition, any Mastercard issued outside of Russia will not work at merchants or ATMs located in Russia.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financial Results Overview

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

						Year ended December 31,																		2022 Increase/ (Decrease)						2021 Increase/ (Decrease)
						2022						2021						2020
						($ in millions, except per share data)
Net revenue						$	22,237					$	18,884					$	15,301					18%						23%
Operating expenses						$	9,973					$	8,802					$	7,220					13%						22%
Operating income						$	12,264					$	10,082					$	8,081					22%						25%
Operating margin						55.2		%				53.4		%				52.8		%				1.8 ppt						0.6 ppt
Income tax expense						$	1,802					$	1,620					$	1,349					11%						20%
Effective income tax rate						15.4		%				15.7		%				17.4		%				(0.4) ppt						(1.7) ppt
Net income						$	9,930					$	8,687					$	6,411					14%						35%
Diluted earnings per share						$	10.22					$	8.76					$	6.37					17%						38%
Diluted weighted-average shares outstanding						971						992						1,006						(2)%						(1)%

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:

						Year ended December 31,																		2022 Increase/(Decrease)												2021 Increase/(Decrease)
						2022						2021						2020						As adjusted						Currency-neutral						As adjusted						Currency-neutral
						($ in millions, except per share data)
Adjusted net revenue						$	22,200					$	18,884					$	15,301					18%						23%						23%						22%
Adjusted operating expenses						$	9,549					$	8,627					$	7,147					11%						14%						21%						19%
Adjusted operating margin						57.0		%				54.3		%				53.3		%				2.7 ppt						3.4 ppt						1.0 ppt						1.2 ppt
Adjusted effective income tax rate						15.7		%				15.4		%				17.2		%				0.3 ppt						0.5 ppt						(1.8) ppt						(1.8) ppt
Adjusted net income						$	10,342					$	8,333					$	6,463					24%						32%						29%						28%
Adjusted diluted earnings per share						$	10.65					$	8.40					$	6.43					27%						34%						31%						30%

Note: Tables 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.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Key highlights for 2022 as compared to 2021 were as follows:

Net revenue						Adjusted net revenue
GAAP						Non-GAAP (currency-neutral)			Adjusted net revenue increased 23% on a currency-neutral basis. The increase was attributable to our payment network and our value-added services and solutions, which increased 26% and 18%, on a currency-neutral basis, respectively.
up 18%						up 23%

Operating expenses						Adjusted operating expenses
GAAP						Non-GAAP (currency-neutral)			Adjusted operating expenses increased 14% on a currency-neutral basis, which includes 4 percentage points of growth due to acquisitions. The remaining increase was primarily due to higher personnel costs, travel and meeting costs, and unfavorable foreign exchange activity.
up 13%						up 14%

Effective income tax rate						Adjusted effective income tax rate
GAAP						Non-GAAP (currency-neutral)			The adjusted effective income tax rate of 15.7% was higher than prior year due to the recognition of U.S. tax benefits in 2021 (the majority of which were discrete), a discrete tax benefit in 2021 related to the remeasurement of our net deferred tax asset in the U.K. and a discrete tax expense related to an unfavorable court ruling in 2022, all of which were partially offset by a discrete tax benefit in the first quarter of 2022 due to final U.S. tax regulations published in the current year.
15.4%						15.7%

Other 2022 financial highlights were as follows:

• We generated net cash flows from operations of $11.2 billion.

• We completed the acquisition of a business for total consideration of $0.3 billion.

• We repurchased 25.7 million shares of our common stock for $8.8 billion and paid dividends of $1.9 billion.

• We completed a euro-denominated debt offering for an aggregate principal amount of $0.8 billion and entered into an Indian rupee-denominated term loan for $0.3 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”). 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. 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”). Our non-GAAP financial measures for the comparable periods exclude the impact of the following:

Gains and Losses on Equity Investments

• During 2022, 2021 and 2020, we recorded net losses of $145 million ($126 million after tax, or $0.13 per diluted share), net gains of $645 million ($497 million after tax, or $0.50 per diluted share) and net gains of $30 million ($15 million after tax, or $0.01 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.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Items

Litigation provisions

• 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. 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. and Pan-European merchants.

• During 2020, we recorded pre-tax charges of $73 million ($67 million after tax, or $0.07 per diluted share) related to litigation provisions which included pre-tax charges of:

◦$45 million related to a legal matter associated with our prepaid cards in the U.K., and

◦$28 million related to estimated attorneys’ fees and litigation settlements with U.K. and Pan-European merchants.

Russia-related impacts

• During 2022, we recorded a net charge of $30 million ($24 million after tax, or $0.02 per diluted share), directly related to imposed sanctions and the suspension of our business operations in Russia. The net charge is comprised of general and administrative expenses of $67 million, primarily related to incremental employee-related costs and reserves on uncollectible balances with certain sanctioned customers. These charges are offset by net benefits of $37 million in net revenue, primarily related to a reduction in 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 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 is 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 and “Key Developments” above for further discussion related to certain of our non-GAAP financial measures. We excluded these items because management evaluates the underlying operations and performance of the Company separately from these recurring and nonrecurring items.

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.

Currency-neutral Growth Rates

We present growth rates adjusted for the impact of currency, which is a non-GAAP financial measure. Currency-neutral growth rates are calculated by remeasuring the prior period’s results using the current period’s exchange rates for both the translational and transactional impacts on operating results. The impact of currency translation represents the effect of translating operating results where the functional currency is different than our U.S. dollar reporting currency. The impact of the transactional 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 our “Drivers of Change” tables. See “Foreign Currency - Currency Impact” for further information on our currency impacts and “Financial Results - Revenue and Operating Expenses” for our “Drivers of Change” tables.

Net revenue, 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

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

currency, are non-GAAP financial measures and should not be relied upon as substitutes for measures calculated in accordance with GAAP.

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

						Year ended December 31, 2022
						Net revenue						Operating expenses						Operating margin						Other income (expense)						Effective income tax rate						Net income						Diluted earnings per share
						($ in millions, except per share data)
Reported - GAAP						$	22,237					$	9,973					55.2		%				$	(532)					15.4		%				$	9,930					$	10.22
(Gains) losses on equity investments						**						**						**						145						—		%				126						0.13
Litigation provisions						**						(356)						1.6		%				**						0.3		%				263						0.27
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

						Year ended December 31, 2021
						Net revenue						Operating expenses						Operating margin						Other income (expense)						Effective income tax rate						Net income						Diluted earnings per share
						($ in millions, except per share data)
Reported - GAAP						$	18,884					$	8,802					53.4		%				$	225					15.7		%				$	8,687					$	8.76
(Gains) losses on equity investments						**						**						**						(645)						(0.5)		%				(497)						(0.50)
Litigation provisions						**						(94)						0.5		%				**						0.1		%				74						0.07
Indirect tax matter						**						(82)						0.4		%				6						0.1		%				69						0.07
Adjusted - Non-GAAP						$	18,884					$	8,627					54.3		%				$	(413)					15.4		%				$	8,333					$	8.40

						Year ended December 31, 2020
						Net revenue						Operating expenses						Operating margin						Other income (expense)						Effective income tax rate						Net income						Diluted earnings per share
						($ in millions, except per share data)
Reported - GAAP						$	15,301					$	7,220					52.8		%				$	(321)					17.4		%				$	6,411					6.37
(Gains) losses on equity investments						**						**						**						(30)						(0.1)		%				(15)						(0.01)
Litigation provisions						**						(73)						0.5		%				**						(0.1)		%				67						0.07
Adjusted - Non-GAAP						$	15,301					$	7,147					53.3		%				$	(351)					17.2		%				$	6,463					$	6.43

Note: Tables may not sum due to rounding.

** Not applicable

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

						Year Ended December 31, 2022 as compared to the Year Ended December 31, 2021
						Increase/(Decrease)
						Net revenue						Operating expenses						Operating margin						Effective income tax rate						Net income						Diluted earnings per share
Reported - GAAP						18		%				13		%				1.8		ppt				(0.4)		ppt				14		%				17		%
(Gains) losses on equity investments						**						**						**						0.5 ppt						8		%				9		%
Litigation provisions						**						(3)		%				1.1		ppt				0.3 ppt						2		%				2		%
Russia-related impacts						—						(1)		%				0.2 ppt						— ppt						—		%				—		%
Indirect tax matter						**						1		%				(0.4) ppt						(0.1) ppt						(1)		%				(1)		%
Adjusted - Non-GAAP						18		%				11		%				2.7		ppt				0.3 ppt						24		%				27		%
Currency impact 1						5		%				3		%				0.8		ppt				0.2 ppt						8		%				8		%
Adjusted - Non-GAAP - currency-neutral						23		%				14		%				3.4		ppt				0.5 ppt						32		%				34		%

						Year Ended December 31, 2021 as compared to the Year Ended December 31, 2020
						Increase/(Decrease)
						Net revenue						Operating expenses						Operating margin						Effective income tax rate						Net income						Diluted earnings per share
Reported - GAAP						23		%				22		%				0.6		ppt				(1.7)		ppt				35		%				38		%
(Gains) losses on equity investments						**						**						**						(0.4) ppt						(7)		%				(8)		%
Litigation provisions						**						—		%				— ppt						0.1 ppt						—		%				—		%
Indirect tax matter						**						(1)		%				0.4 ppt						0.1 ppt						1		%				1		%
Adjusted - Non-GAAP						23		%				21		%				1.0 ppt						(1.8) ppt						29		%				31		%
Currency impact 1						(1)		%				(2)		%				0.2 ppt						— ppt						(1)		%				(1)		%
Adjusted - Non-GAAP - currency-neutral						22		%				19		%				1.2 ppt						(1.8) ppt						28		%				30		%

Note: Tables may not sum due to rounding.

** Not applicable

1See “Non-GAAP Financial Information” for further information on Currency impact.

Key Metrics

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.

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Cross-border Volume Growth2 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 Transactions2 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. 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. Carryover days are those where transactions and volumes from days where the Company does not clear and settle are processed. In the fourth quarter of 2021, we began clearing and settling transactions and volumes on a daily basis.

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

						For the Years Ended December 31,
						2022												2021
						Increase/(Decrease)
						USD						Local						USD						Local
Mastercard-branded GDV growth 1						6%						12%						22%						21%
United States						10%						10%						23%						23%
Worldwide less United States						4%						13%						22%						20%
Cross-border volume growth 1						33%						45%						35%						32%
Mastercard-branded GDV growth adjusted for Russia 1,2						10%						18%						22%						20%
Worldwide less United States GDV growth adjusted for Russia 1,2						10%						22%						22%						19%
Cross-border volume growth adjusted for Russia 1,2						37%						50%						35%						31%

						For the Years Ended December 31,
						Increase/(Decrease)
						2022						2021
Switched transactions growth						12%						25%
Switched transactions growth adjusted for Russia 2						21%						24%

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 current and prior periods.

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).

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• 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.

						Year ended December 31,																		2022												2021
						2022						2021						2020						Increase/(Decrease)						Currency-neutral Increase/(Decrease)						Increase/(Decrease)						Currency-neutral Increase/(Decrease)
						($ in millions)
Domestic assessments						$	8,794					$	8,064					$	6,598					9%						12%						22%						22%
Cross-border assessments						6,597						4,646						3,498						42%						53%						33%						30%
Transaction processing assessments						10,646						9,041						7,137						18%						23%						27%						26%
Other network assessments						766						668						659						15%						14%						1%						4%

Foreign Currency

Currency Impact

Our primary revenue functional currencies are the U.S. dollar, euro, Brazilian real and the British pound. 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”) and gross euro volume (“GEV”), 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. In most non-European regions, GDV is calculated based on local currency spending volume converted to U.S. dollars using average exchange rates for the period. In Europe, GEV is calculated based on local currency spending volume converted to 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 versus non-European local currencies and the strengthening or weakening of the euro versus other European local currencies. For example, our billing in Australia is in the U.S. dollar, however, consumer spend in Australia is in the Australian dollar. The currency transactional impact of converting Australian dollars to our U.S. dollar billing currency will have an impact on the revenue generated. The strengthening or weakening of the U.S. dollar is evident when GDV growth on a U.S. dollar-converted basis is compared to GDV growth on a local currency basis. In 2022, GDV on a U.S. dollar-converted basis increased 5.9%, while GDV on a local currency basis increased 12.3% versus 2021. In 2021, GDV on a U.S. dollar-converted basis increased 22.0%, while GDV on a local currency basis increased 20.6% versus 2020. Further, the impact from transactional currency occurs in transaction processing revenue, other revenue and operating expenses when the local currency of these items is different than the functional currency of the entity.

Through December 31, 2020, our approach to managing transactional currency exposure consisted of hedging a portion of anticipated revenues impacted by transactional currencies by entering into foreign exchange derivative contracts, and recording the related changes in fair value in general and administrative expenses on the consolidated statement of operations. During the first quarter of 2021, we started to formally designate certain newly-executed foreign exchange derivative contracts, which meet the established accounting criteria, as cash flow hedges. Gains and losses resulting from changes in fair value of these designated

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contracts are deferred in accumulated other comprehensive income (loss) and subsequently recognized in the respective component of net revenue when the underlying forecasted transactions impact earnings.

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

Risk of Currency Devaluation

We are exposed to currency devaluation in certain countries. In addition, we are subject to exchange control regulations that restrict the conversion of financial assets into U.S. dollars. While these revenues and assets are not material to us on a consolidated basis, we can be negatively impacted should there be a continued and sustained devaluation of local currencies relative to the U.S. dollar and/or a continued and sustained deterioration of economic conditions in these countries.

Financial Results

Net Revenue

The components of net revenue were as follows:

						For the Years Ended December 31,																		Increase (Decrease)
						2022						2021						2020						2022						2021
						($ in millions)
Payment network						$	14,358					$	11,943					$	9,897					20%						21%
Value-added services and solutions						7,879						6,941						5,404						14%						28%
Net revenue						$	22,237					$	18,884					$	15,301					18%						23%

2022

For the year ended December 31, 2022, net revenue increased 18% versus the comparable period in 2021. Adjusted net revenue increased 18%, or 23% on a currency-neutral basis. The increase in net revenue was attributable to both our payment network and our value-added services and solutions and included 1 percentage point of growth from acquisitions. Net revenue includes $13,084 million of rebates and incentives provided to our customers, an increase of 19%, or 23% on a currency-neutral basis, in 2022 versus 2021.

Net revenue from our payment network increased 20%, or 26% on a currency-neutral basis, in 2022 versus 2021. 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 $12,445 million of rebates and incentives provided to customers, which increased 19%, or 23% on a currency-neutral basis, in 2022 versus 2021, 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 14%, or 18% on a currency-neutral basis, in 2022 versus 2021, which includes a 4 percentage point increase from acquisitions. The remaining increase was primarily driven by our cyber and intelligence and data and services solutions.

2021

For the year ended December 31, 2021, net revenue increased 23%, or 22% on a currency neutral basis, versus the comparable period in 2020. The increase in net revenue was attributable to both our payment network and our value-added services and solutions and included 2 percentage points of growth from acquisitions. Net revenue includes $10,961 million of rebates and incentives provided to our customers, an increase of 32%, or 31% on a currency-neutral basis, in 2021 versus 2020.

53 MASTERCARD 2022 FORM 10-K

PART II