Marqeta, Inc. Price & Performance (MQ)

Reconciliations to the most directly comparable GAAP measures can be found in today's earnings press release or earnings release supplemental materials which are available on our Investor Relations website. Hosting today's call is Mike Militich, Marqeta's Interim CEO, and CFO. With that, I'd like to turn the call over to Mike To begin, Thank you, Stacy, and thank you for joining us for Marketo's fourth quarter twenty twenty earnings call. Before I get into our quarterly results, first, I'd like to speak about the company's leadership transition. Earlier today, we announced that Simon Kolloff has stepped down as Marketa's CEO and as a Director. I've been appointed to serve as Interim CEO as our Board of Directors conducts a comprehensive search process to identify Marqeta's next CEO Marqeta. Behalf of our Board, the management team and our entire employee base, I'd like to thank Simon for his leadership and dedication to Marketa Marqeta. We are appreciative of his contributions to our company and we wish him well in his next endeavor. As many of you know, I joined Marqeta three years ago after witness was enabling new commerce experience that leverage the existing payment ecosystem while reducing risk and increasing user engagement.

Today, those opportunities are more compelling and widespread than ever. And I'm confident in our ability to capture them. I'm honored to be taking on this expanded role look forward to a seamless transition for our employees, partners and customers as we execute on our clear strategy to drive profitable growth and value creation.

Now let me turn to our quarterly performance. To start, I'll briefly highlight our Q4 results followed by an update on accomplishments for the quarter and outline our key priorities for 2025. Then I'll conclude the call by going over the quarter's financial Our fourth quarter results once again demonstrate our ability to grow at scale while improving our adjusted EBITDA margin and continuing on our path to profitability. Total process volume or TPV was $80,000,000,000 in the fourth quarter, a 29% increase compared to the same quarter of 2023. Our Q4 net revenue of $136,000,000 grew 14% year over year, Q4 gross profit was $98,000,000 an 18% increase versus Q4 of twenty twenty three resulting in a gross margin of 72%. Our adjusted EBITDA was $13,000,000 in the quarter translating into a 9% margin.

In addition to our results, I'm excited to share our recent achievements First, let me highlight the significant strides we've made in streamlining our program launch timelines comprehensively enhancing our bank partnerships, and the customer experience, We are making progress in adding additional banks while also streamlining our operations and program onboarding with existing bank partners with the introduction of a more structured approach for our customers, emphasizing pre approved frameworks that align with bank standards and compliance guidelines. We've partnered with our customers to adopt to this new approach while also implementing additional fees for mid process changes to align interests and maintain this efficiency, As a result of the previously delayed programs discussed in our last call, three remain pending launch. However, for these three, the delays are result of customer decisions, rather than capacity constraints on our part or from our bank partners. While this outcome represents great progress, we remain focused on continuously optimizing our launch timelines while enhancing the overall customer experience. In addition to these operational improvements, had several great wins in the fourth quarter underscore our competitive advantages from product innovation global reach and scale. First, we secured a consumer co brand credit partnership with a well established airline located outside The U. S. That wants to capitalize on its already strong U. S. Customer base.

While airlines cards have existed for many decades, the value proposition and user experience have remained relatively stagnant. Which is a view that we share with our customer. Rather than implementing a traditional mileage program, this airline to drive true customer engagement. They selected Marqeta for our payment innovation and our comprehensive program management capabilities. This includes dedicated support, built in risk management and compliance frameworks, allowing our customer to focus on their core business and passenger experience. This partnership is representative of a shift from loyalty programs that are more traditional to a daily engagement model. Our European business continues to gain momentum with Q4 TPV growth well over 100%. In Q4, we had two notable wins that will contribute to this momentum in the future. We've secured a deal to provide both commercial card processing and program management to one of Europe's fastest growing technology companies, which has a strong presence in Central And Eastern Europe This win is a result of our focus on elevating our European program management [indiscernible] to align with our U. S. Offering. Combined with our proven track record with innovative tech companies and our scalability. Although eight of our top 10 customers utilize our platform in more than one region, and by region, I mean U. S, Canada and Europe, Typically, they launch in one region first and expand over time.

So although our global platform might be one of the key reasons they select Marqeta Marqeta, they typically don't utilize globally from the start. We have said we expect this gradual expansion approach to change as we engage with more well established multinational companies with embedded finance ambitions And in Q4, we signed our first multinational solution sale. A U. S.-based B2B payments company has chosen to entrust Marqeta with a portion of their U. S. Volume and their European operations in one highly coordinated global effort. As we look forward, are building upon many of our previous year's accomplishments to make significant strides toward an even more transformative 2025. We aim to establish Marqeta as a preferred partner for embedded finance and fintech innovation [indiscernible] deepening our platform breadth, expanding the solutions we offer, and strengthening our leadership in payments innovation. Less than two months into 2025, we are already making meaningful progress on all of these fronts, For Platform breadth, let me highlight two focus areas. We are excited to welcome the American Express network as a new option for credit and debit card programs for our customers starting later in 2025. With their unique brand, assets and expertise, offering American Express will further widen the choices on our platform to differentiate provide even more options to fintech and embedded finance partners and prospects.

We have signed an agreement and are working together to make an American Express network available leveraging the American Express Express agile partnership platform, which enables fintechs and other partners to launch cards the American Express network.

We will share more details as we get closer to launch. With this addition completed in 2025, the breadth of our capabilities, combined with the ability to leverage all the major card networks, will further differentiate Marqeta Marqeta. Platform breadth also means having product parity no matter where our customer chooses to operate or expand their business. As I referenced earlier, especially for companies seeking to offer embedded finance. In The U. K. And Europe, an EMI license is required for companies to issue and manage electronic money. Including digital wallets or prepaid cards, and provide payment services such as online transactions, money transfers, virtual cards and the ability to store customer funds electronic electronically. Previously, we partnered with TransactPay to meet licensing needs. However, customer feedback consistently highlight the desire to avoid complexity associated with contracting multiple partners, Rather than building our licensing infrastructure which would take several years, and given the substantial European opportunity we see in our pipeline, we decided to acquire Transact Bay to integrate our offering. The close is subject to regulatory approvals which could take up to six months from now. I will share the financial impact of the acquisition later, when we discuss our expectations for 2025.

Next, let me touch on expanding solutions. In 2025, we will continue to deepen our offering harness our expertise and scale to solve specific customer pain points, specifically around risk, compliance and business insights. Our real time decisioning risk product exemplifies the success the success of this approach with revenue more than doubling from 2023 to 2024 and now serving over 20 global customers, This revenue stream carries significantly higher gross margins due to limited transaction costs Over the course of 2025, we plan to offer additional services improve visibility into key compliance activities, As a result, we believe this will give more customers the opportunity to use the Marqeta platform in a more holistic way. Lastly, we will continue to be a first mover on payments innovations to help our customers deliver unique value propositions Nowhere has this been more evident than with BNPL. Early on, Marqeta helped ease the burden of merchant adoption with instant issuance virtual cards. Then we were the first to help providers deliver the BNB BNPL value proposition via card that they issue making BNPL available anywhere a card is accepted. Recently, we are the first processor to work on Visa flexible credentials in The U. S. Which have launched and are already showing traction for multiple customers across multiple wallet solutions.

We are excited to partner with Mastercard, on their recent announcement of Mastercard One, and deliver flexible card credentials to many more of our customers. We are also making progress on Marqeta Marqeta, with the goal of enhancing how BNPL payment options can be delivered inside payment apps and wallets surfacing them when needed within the existing payment flow. From an operational perspective, Q4 demonstrated our ability to navigate challenges prioritize customer needs and maintain a strong focus on scale. Looking ahead, we are focused on leading in FinTech and embedded finance strengthening our platform, accelerating payment innovations while prioritizing compliance However, we are equally focused on driving profitable growth with a trajectory that is sustainable and diversified. [indiscernible] With that, I'm now going to transition over to discussing our Q4 financial results and 2025 guidance in more detail. Our financial results for Q4 were Q4 TPV growth of 29% remains strong and steady coupled with outperformance across net revenue, gross profit and expense, delivering an improved adjusted EBITDA margin of 9%.

Net revenue and gross profit growth outperformed by three to four points primarily due to a favorable business mix, new programs performing a little better than expected in the holiday season, the achievement of a performance incentive with a partner. The business outperformance combined with the continued execution of efficiency initiatives moderating expense growth, delivered a much higher adjusted EBITDA of $13,000,000 in the quarter, [indiscernible] Let me quickly share the Q4 highlights before spending more time discussing expectations for 2025. Q4 TPV was $80,000,000,000 growing 29% year over year one point slower than last quarter. TVV growth has been steady for some time now, growing between 2933% in each of the last seven quarters, resulting in Marqeta achieving new levels of scale. To put our growth at scale in perspective, in Q1 of twenty twenty four, we had our first day of over $1,000,000,000 of TPV, And in Q4, there were seventeen days where we crossed $1,000,000,000 Non block TPV grew roughly twice as fast as block fueled by customers big and small across several use cases. Consistent with the last several quarters, financial services, lending including buy now pay later, and expense management all grew at roughly the same rate in Q4 slightly faster than the overall company.

Growth within our financial services vertical continues to be fueled by Block's success as well as the rapid expansion of our non block neo banking customers, whose TPV grew roughly 100% year over year. Lending including buy now pay later growth remained strong due to several drivers including the adoption of our BNPL customers Pay Anywhere Card solutions, our customers' increased distribution through wallets, strong user growth among SMB lending solutions, and Klarna's migration to our platform in Europe in October. Which we discussed on our last call. Expense management growth accelerated a bit this quarter due to our as AP automation and modern corporate card platforms continue to gain share. On demand delivery growth remained in the single digits due to the maturity of this use case as well as three distinct instances of customers reducing card usage by connecting their platforms directly to an individual merchant as we discussed last quarter. Q4 net revenue was $136,000,000 growing 14% year over year. Our growth slowed four points versus last quarter primarily due to tougher year over year comparisons as well as a greater percentage of volume coming from Powered by Customers. Due to minimal cost of revenue. This mix shift was partially offset by our Powered by Marqeta take rate improving by more than one point due to favorable mix as consumer use cases are growing much faster than single use commercial virtual card.

BlockNet revenue concentration was 46% in Q4 decreasing one point from Q3 of twenty twenty four and down five points from Q4 of twenty twenty three.

Non block revenue growth accelerated a bit versus last quarter helped by the ramping of new programs. Our net revenue take rate of 17 basis points remains unchanged from last quarter. Q4 gross profit was 98,000,000 growth of 18% year over year resulting in a 72% gross profit margin. This is approximately four points higher we expected at the end of last quarter primarily driven by three factors. First, the growth contribution from new program launches was approximately two points better than we anticipated mostly due to stronger holiday season TPV among these programs. But also the program launch delays that we discussed extensively last quarter were a little less impactful than we expected. The other two factors were unforeseen benefits. We earned a performance incentive contributed one point of growth after achieving an unexpected milestone. [indiscernible] In addition, favorable customer mix also contributed one point of growth upside, as several of our higher yielding use cases and customers outperformed our expectations. [indiscernible] Non block gross profit growth was consistent with last quarter growing many points faster than the overall company. Our gross profit take rate was 12 basis points consistent with last quarter. Q4 adjusted operating expenses were $86,000,000 growing 7% year over year which was a little better than expected We continue to be focused on our hiring, utilizing multiple geographic locations to find the best talent, in part to rely less on professional services.

We are also benefiting from increased scale as our platform related costs grow slower than our process transactions and our gross profit. Q4 adjusted EBITDA was positive 13,000,000 margin of over 9% which are both new all time highs for the company. As we continue on our path to profitability. The Q4 GAAP net loss was $27,000,000 dollars including a $10,000,000 post combination expense related to the Power acquisition offset by interest income of $11,000,000 We ended the quarter with $1,100,000,000 of cash and short term investments. [indiscernible] To briefly summarize our full year 2024 performance, TPV growth was 31% the net revenue contracted 25% and gross profit grew 7%. Which does not reflect the strength of the underlying business due to the cash app renewal the change in the revenue presentation that impacted our year over year comparison in the first half of the year. The second half of twenty twenty four clearly demonstrates we are on a path to sustainable profitable growth. Adjusted EBITDA was $29,000,000 for the year which is a 6% margin on revenue or an 8% margin on gross profit. This is a milestone for the company as we leave our negative adjusted EBITDA EBITDA days behind us and drive toward GAAP profitability exiting 2026.

Before I transition to our expectations for 2025, let me spend a minute discussing share buybacks. We currently have $80,000,000 remaining on the Q2 twenty twenty four authorization. There was very little buyback activity in Q4 as the prior 10b5-one plan expired shortly after our November earnings release. At that time, the company was not in a position to trade or enter into a new 10b5-one plan because of legal restrictions. However, we expect to restart our share repurchase activity in the coming days as we do not believe the current valuation fairly represents the company's value or the market opportunity in front of us. To that end, our Board has approved an additional $300,000,000 share back buyback authorization, bringing our total authorization to $380,000,000 We intend to capitalize on this opportunity to return capital to shareholders at prices well below what we believe is fair market value. [indiscernible] Now let's transition to our expectations for 2025.

Let me first start with our full year 2025 expectations before diving into more details on the quarterly cadence. [indiscernible] Full year 2025 net revenue growth is expected to be be between 1618% which is relatively consistent with our second half performance in 2024. This is fueled by our expectation of TPV growth in the mid to high 20s which assumes a stable macroeconomic environment consistent with the past several quarters. The TBV growth is partially offset by a lower net revenue take rate, mostly driven by two factors. First, stronger growth among our Powered by Marcheta customers where our take rate is lower. It's important to note that this factor is much more impactful net revenue growth than to gross profit growth because a big component of the lower revenue take rate is the minimal cost of revenue. Which is not relevant for gross profit. And second, lower pricing as a result of expected contract renewal activity. New programs sold since the revitalization of our sales motion late [indiscernible] and launched since the start of 2024, are expected to contribute over $40,000,000 to net revenue. The contribution to 2025 net revenue growth will be roughly 5% based on our 2024 performance of less than $20,000,000 Unfortunately, this is behind our $60,000,000 goal we shared previously due to fewer new programs launching and ramping in 2024, well as launch delays, which we believe is partly due to heightened regulatory environment from our bank partners, we discussed in detail last quarter.

While we did not make great progress in launching delayed programs in 2020 while we did make great progress while we did make great progress in launching delayed programs in 2024, we are still not back to our 2023 time to value run rate. 2025 gross profit is expected to grow between 1416% which equates to a gross profit margin in the high 60s. Gross profit growth is expected to be slightly lower than net revenue growth mostly due to the contract renewals we expect to execute this year where our pricing changes, but our cost of revenue remains unchanged. There is always some renewal activity in any given year, but 2025 will be a little more significant than what we should typically see going forward. We have previously discussed renewing over 80% of our TPV over roughly eighteen months in 2022 and 2023 following the fintech boom. The last couple of significant remaining contracts are up for renewal in 2025. 2025 adjusted operating expenses are expected to grow in the mid to high single digits we continue to focus on efficiency, operating with a strong investment discipline and achieving economies of scale. Therefore, we expect full year 2025 adjusted EBITDA margin to be in the range of 9% to 10%, This equates to adjusted EBITDA of well over $50,000,000 One note on EBITDA margin.

We feel looking at EBITDA adjusted EBITDA margin on the basis of gross profit which is expected to be in the mid teens, better reflects the nature of our business As I mentioned earlier, we reached an agreement to acquire Transact to enhance our program management offering in Europe. For financial planning purposes, we are assuming we close at the start of Q3 twenty twenty five [indiscernible] The purchase price was €45,000,000 with an additional €5,000,000 tied to performance incentives. Based on consistent feedback from customers and prospects, we believe the transaction will drive value in three ways. More European customers will adopt our program management services we will attract additional customers looking for a single provider of processing, program management and three, geographic expansion on our platform will be even more seamless as there will be significantly more parity in our product offerings in The U. S. Canada and Europe. Therefore, we believe the value of the acquisition will mostly be visible in new sales, which typically take more than one year to meaningfully contribute to the P and L. Our 2025 expectations include two quarters of current TransactPay business included in our P and L which should contribute approximately one point to full year growth rate of both net revenue and gross profit and be neutral to adjusted EBITDA.

Before I share the quarterly cadence of our 2025 expectations, want to highlight a change to how incentives will be recorded starting in Q2 twenty twenty five which will be the largest driver of quarterly gross profit growth fluctuations. As a quick reminder, our two most significant incentive contracts both have contract years that run April to March. When our accounting was finalized prior to the IPO, we didn't have enough history to demonstrate an ability to forecast incentives, Therefore, it was determined we would report the benefits as they were earned. This meant our incentives increased significantly throughout the year as we reached additional tiers which resulted in our gross profit growth being lower in Q2 in particular. Now that we are approaching the four year anniversary of our IPO, and have an established track record, Starting in Q2 twenty twenty five, we anticipate that we will accrue incentives each [indiscernible] based on the forecasted annual contract tier we expect to achieve. As a result, we expect that there will be much less variation in the quarterly incentives recorded in the P and L even though this does not impact what we earn in any given contract year. Therefore, in 2025, as we implement this change, the quarterly gross profit growth rate will be impacted due to the differences in the year over year comparison.

We will provide the impact each quarter, so it is clue clear what our true growth trajectory is on an apples to apples basis. With that, let me turn to the quarterly cadence. In Q1 twenty twenty five, expect net revenue to grow between 1416% a little faster than we exited 2024 as we lap the renegotiated platform partner agreement that has weighed on revenue growth since Q1 twenty twenty four as a result of the new Cash App revenue presentation. We expect net revenue growth to accelerate by approximately one point each we progress through the year, bolstered by contributions from new programs launching and ramping, as well as the customers adopting new solutions as we continue to expand the services we offer. For quarterly gross profit, let me first share the growth trajectory on an apples to apples basis. Without the change to accrued incentives or the inclusion of transact pay, which is the best reflection of the underlying business performance, Q1 gross profit growth is expected to be 11% to 13% which will be our lowest quarter accelerating. This is six points lower than our Q4 twenty twenty four exit First, Q4 twenty twenty four benefited by a combined two points of growth, from a partner incentive tied to an annual performance favorable customer mix during the holiday season.

Second, there's an additional four points of drag on Q1 growth due to the timing of an incentive. Which was booked in Q1 twenty twenty four for the previous contract year but was earned in Q4 twenty twenty four in the most recent contract year. Creating an unfavorable year over year comparison in Q1. Q2 growth will be the highest quarter roughly four points faster than Q1, in the mid to high teens as new programs ramp and new services are adopted, but we don't yet have headwinds from renewals. Which we so we have the easiest year over year comparison. Q3 and Q4 growth should be similar, roughly two points slower than Q2 in the mid teens as expected renewals begin to offset the benefits of accelerating new programs and services. Is Let me share quarterly gross profit growth expectations on a reported basis including the noise from the change in accrued incentives and the inclusion of Transact Pay. Q1 gross profit growth is expected to grow between 1113%. Q2 gross profit growth is expected to accelerate into the mid-20s including an approximately eight point lift from the incentive accounting change. Q3 gross profit growth is expected to be in the mid teens on a reported basis approximately two points higher than Q1 due to the inclusion of Transact Bay, the incentive accounting change will contribute one to two points of growth drag which is offset by better business performance. [indiscernible] Q4 gross profit growth is expected to slow by three points versus Q3 into the low double digits due to the larger impact from the incentive accounting change.

Our 2025 investments are primarily focused on platform capabilities and innovation. Additional go to market resources to meet growing demand and maintaining high standards of compliance. Q1 adjusted operating expenses are expected to grow in the mid to high single digits roughly in line with Q4 twenty twenty four growth. We expect Q2 growth to be roughly two to three points lower than Q1 in the mid single digits Q3 and Q4 are expected to be approximately two to three points higher than Q1 in the high single to low double digits due to the expected inclusion of Transact Pay. Margin is expected to be 10% to 11% slightly better than Q4 twenty twenty four. We expect the remaining quarters of 2025 to be one point lower at 9% to 10%. In conclusion, we are exiting 2024 with a solid foundation and with many impactful business enhancements coming in 2025 that will enable us deliver sustainable profitable growth for years to come. Our excitement and confidence is primarily driven by four factors. First, our sales pipeline suggests embedded finance is getting close to breaking out. Offering card issuing solutions to drive engagement and enhance the monetization Our 2025 technology roadmap will deliver significant expansion of the and strengthen our payment innovation leadership This not only increases the value we can offer our customers, but also strengthens our ties with the customer.

Our Europe business continues to grow very fast and we are enhancing our program management capabilities to make our value proposition as comprehensive what we offer in The U. S. And finally, our platform continues to reach new levels of economies of scale to drive higher profit margins as we strive to accelerate growth in 2026 and beyond. The combination of strong gross profit growth and rapid adjusted EBITDA margin expansion will fuel value creation well beyond our 2026 exit with GAAP profitability. I will now turn it back over to the operator for questions. Thank you. At this time, we will be conducting a question and answer session.

A follow-up so that others may have an opportunity to ask questions. For participants using speaker equipment, it may be necessary to pick up your handset Our first question comes from Tien Tsin Huang with JPMorgan. Please proceed with your question.

Thanks so much. Mike, you went through a lot of stuff there. I know you have a lot on your plate. So thanks for that. I want to ask on this transact pay and better understand what exactly your you're acquiring here that you couldn't build yourself, Mike. I understand the life licenses and things like that. It doesn't sound like there's a customer list that you can hunt for [indiscernible] maybe a little bit more on that would be great.

Sure. So let me just explain the business a little bit. What TransactPay is a BIN sponsorship provider that is licensed with any money institution and regulated and authorized to issue eMoney and undertake payments in both The UK and The EU. And so if the way I think about it is what makes it different, Europe makes Europe different than in The U. S. When we offer program management, in The U. S. We still rely on the bank to be the BIN sponsor. So the bank controls the BINs and they are the member of the network. Either Visa or Mastercard. With this license, we actually become the BIN sponsor. So we are the member So Transax Pay is a member of the networks. And they control the BIN. So it makes it you have a little bit more control over the offering. And what we consistently hear from customers because oftentimes the processor and the license holder is different, They have to contract with multiple parties, which is not as attractive. So the ability to have one solution is what we are after. You're right, Tianjin, that we could have done this our the There's two aspects to it.

One, have to show that you're ready for all the compliance. And so to build that capability and then show the regulators that you are ready to do it is quite time consuming Our estimate is it would take several years for that. And we really did not want to wait given the amount of activity we see in Europe and the momentum we have in that business. The second thing is that once you have that license, the skill set is pretty specialized. [indiscernible] the value here is that TransactPay is already one of the leaders in that Marqeta as the the specialized resources and has proven to deliver on a great with great performance over many years. And so it becomes very seamless for us to just start inserting that into our value proposition to our customers. So that's really what we're getting. And again, the primary benefits for us is that we think more European customers will adopt our program management will attract more customers, new customers who right now are looking for that bundle offering that we don't provide. And the last thing is that it will make it even easier for our non European customers to expand on our platform in Europe and essentially get the same level of And so we're quite excited about the combination and look forward to closing in the coming months.

Okay. Thanks for the education there. That's great. My follow-up then just on the Trying to think what I should ask. I'll ask on the deal front. Couple of nice wins, airline win. I'm curious who you competed against to secure that business and what does the pipeline look like now, especially that it feels like the banking side is more in order. I know it takes you said another year, for Transact Pay to maybe translate for you P and L wise, but how would you qualify the pipeline at at this stage?

Yes, the pipeline is really strong. There's two dynamics that I I would say are favoring our pipeline. So one from an embedded finance perspective, as I mentioned in my prepared remarks, we're really starting to see more momentum And if we look at our pipeline today, roughly two thirds of it is embedded finance customers. And if you think about over the last several quarters and the last year, we've typically talked about of our new bookings that we've made roughly a third of them being in in embedded finance. So there's a pretty big [indiscernible] in the funnel And it's really driven by two areas. One is that a lot of these companies, these are bigger businesses that are in another industry altogether. And so the navigating the organization is a little more complicated, but also it's a bigger decision. They're going to insert this service into an already existing platform or product that they have. So it's just taking a little more time and there's just real momentum in the market now, which is something we're benefiting from. And then I'd say specifically in credit, we have been purposely going a little bit slow to make sure credit is not something you want to rush.

But also what we're trying to do is is pretty unique in credit. We are trying to offer the brand more control over the value proposition the marketing, the onboarding and have it be delivered as a truly embedded experience. And so we're trying to appeal to digital first companies who want to do it a little differently. And we're just starting to get more reception Of that, it's taking a little bit longer because it's different, but particularly customers who have done a traditional co brand are pretty open to it. So for example, this this airline that we just signed, they do have a card in their home Marqeta.

So they kind of understand how the traditional approach works. And when they were coming to The U. S, they were looking for something that was different, that they could be a lot more engaging, a lot more embedded in sort of the overall user experience that they want and that was key to us winning the business Our next question comes from Timothy Chiodo with UBS. Please proceed with your question.

Mike, a little bit of similar note there on embedded finance. So there was a recent Other large contract won by one of your competitors. It was very public and earnings calls, there was press release. On that company's earnings call, they talked about there being a pipeline other similar opportunities. Now whether or not they meant similar in that order of magnitude of size, unclear. But it seems like you're seeing similar So not specific to that deal, but in general for these larger embedded finance type deals, Do you does Marqeta have everything that you need to win one of those R whether it's the money movement, the issuer processing, program management, the core, I think all the pieces are there and just wanted to see if you're seeing similar things in terms of that size of potential deals that are in your pipeline because that was a pretty large one.

Yes.

No, that Tim, thank you for the question. And yes, we are seeing we're talking to many large companies that are interested. And I think that the few things that the embedded finance companies are looking one, they want it packaged through APIs, so they want to be easily make it easily to integrate into their existing business. Also looking for a full solution provider So many of them are interested in both credit and debit, as well as maybe some BNPL, depending on the provider to be included as part of that debit. They also want full program management because they want to sort of be a step removed from the complexity of all the regulatory requirements of card. And last but not least, almost all of them are already global companies. So they don't think about payments, we all understand that each country sort of has its unique flavors and You don't necessarily the service you deliver is not exactly the same from country to country or it's harder to replicate that. These businesses don't think that way. And so they're often looking for someone who can support them in many markets. And so where we think we have a big advantage is we are fully modern We operate at scale, right?

We have some very large customers. So it's hard for someone to look at our platform and say, you may not be able to handle success And we do credit and debit consumer and commercial with program management and we do it in many, many Marqeta. And we think that's that's quite unique and differentiated and should help us in this next year hopefully where there's some momentum behind embedded finance deals. Excellent. Really appreciate that. Thank you, Mike. Our next question comes from Ramsey El Assal with Barclays. Great. Thank you very much. This is actually John on for Ramsey.

Just a quick clarification question. When it comes to your guidance in all the quarterly cadence that you provided, all of this 100% Does able to acquiring Transact Pay in Q3. Is that right, Mike?

That's correct. That's correct. So we have filed the applications required to for the license transfer, but so it's with the regulators.

And so [indiscernible] our estimate for sort of financial planning purposes. It should be around that time plus or minus a month or two. To make it a little bit easier for financial purposes, we assumed sort of July 1 close All right, perfect. And just my other question was, I think you said you expected to exit 2026 with GAAP profitability. Any comments you can provide on from where we are now to that point as far as the cadence of what we might see as far as GAAP profitability?

Yes. So just and just to be clear, when we say that, we mean sort of the core like on a quarterly basis. So the full year, we don't expect to be GAAP profitable in 2026, but on a quarterly basis that we would be able to exit in that way. And really [indiscernible] drive gross profit growth at a significantly faster rate than our expense growth And there's a few reasons for that. One, One, again, we feel like embedded finance is gaining momentum. A lot of our existing customers are continuing to expand and do new business with us. So our existing customer base continues to thrive. And we have a unique set of capabilities that makes us an attractive partner And at the same time, we're at the size now that we're really just starting to benefit from our scale. We are largely a as most platform businesses are, we're fairly fixed costs, very people driven. So as we continue to grow, we're just finding more and more ways to do that efficiently. And we're simplifying a lot of things, a lot of automation is being done. And so that gap between gross profit growth and expense growth is going to stay relatively wide.

And as we compound over the quarters, that's what drives the GAAP profitability. Our next question comes from Darian Peller with Wolfe Research.

Please proceed with your question.

Hey, guys. Thanks.

To see things getting back on track here. I just want to start off with Again, from last quarter, obviously, we had a cut to your numbers of around nine points. Came in better than expected here and now you're looking at a guide that's basically mid teens. I'm just trying to figure out now, number one, what's embedded in the outlook for this year that might be sort of the layover impacts of the customers that were delayed and still going still being worked through combined with anybody that might have changed their model with you a little bit And then similarly, I mean, when you think of the improvement in launching the delayed programs you called out, was that internal or was that regulatory overhead? Lifted as that could continue to just probably improve from here? Sure. Thanks for your question, Darren.

So what's included in in the outlook is Our business doesn't sort of change significantly in short periods of time typically, unless it's related to new business and whether something launches and ramps. So our existing customers we're usually in pretty close contact with them. We know what they're growth expectations are. And the growth is a little bit in $25,000,000 is a little bit lower than our Q4 exit and it has to do with a couple of things that I called out that were very specific to Q4. That raised our growth profile. So we feel pretty good about the the growth delivery. From in terms of new business, we said that we will get we believe we'll get from new programs that launch starting in 2024 and 2025, we'll have over $40,000,000 of revenue. So it's about five points of revenue growth contribution for 2025. So it's pretty good, but it is below our goal. We wanted to be growing faster. And that's one of the big reasons why we are not in the 20s for from a growth perspective. The second piece that's important, Darren, is are the renewals. And we again, we always have renewals to do.

That's the case in any given year. And we talked a lot about in the past that in in 2022 and 2023, we renewed 80% of our TPV. And but we have two customers who are in our top 10 who are renewing in 2025 and they're good sized customers and they're growing fast. Each of them their volumes are more than double what they were last time we signed.

And so those are also fairly significant. We expect on a combined basis that that is about ways on our growth, our gross profit growth by about two percentage points on a full year basis. And since we expect them to be in the second half, it's about four points in each of those quarters. So those are the two things that are weighing on us a little bit. We're still getting strong growth from our existing customers and we're still getting again five points contribution to revenue growth from new business.

That's really helpful. I guess it sounds like putting those pieces aside, your growth rate obviously still is strong. So Mike, just to wrap it up with the underlying segments, or sectors, maybe just remind us the top three drivers from a sector industry vertical standpoint that you're seeing the most momentum with right now?

Yes. So I would say the top three drivers we're seeing in the Neo banking space, and we've talked about this for a while. There's more and more companies that are looking to bank their users, if you will, whether that's consumers or small mediums to small businesses that may be operating on their platform. And they want to offer a DDA like account, so account like features and then offer them spending tools and maybe do some lending. So So that is a big driver of both for consumers, employees, in some cases, as well as their small, medium sized customers BNPL and lending, we're seeing a lot of activity. So there's a lot of innovation going on in the buy now pay later space. Some of it is them issuing cards to deliver that value proposition, but you now have wallets who are starting to to integrate it more and that's just really creating additional distribution. And we are also, of course, working on our own solution for Marqeta Flex to really even provide more distribution to buy now pay later players. So that's a really exciting part of the business. And the only other thing I'd mention when it comes to lending, the other thing we include in there is small business.

Lending We have a couple of customers who are really doing well as platform businesses to drive really fantastic growth. And then the last one is expense management. As I mentioned in my comments, what we're seeing is the more modern corporate card and AP automation players in the that are out there are really taking a lot of share. And And they're doing a lot of that with capabilities that come from platforms like ours And so we're just even though it's the business has gotten quite big, it continues to compound at a very rapid rate because those those providers are growing significantly faster than the Marqeta. Thanks, Tern.

Our next question comes from Andrew Bach with Wells Fargo. Please proceed with your question.

Hey, thanks for taking the question.

I wanted to touch upon the international and European strength.

I think this quarter in your prepared remarks, there's probably more references to international success than we've really heard in a long time. So is there anything that's changed from where we are now to say six, nine, twelve months ago on the international front that is leading to this incremental momentum? Yes, I would say those two drivers. That's a great question, Andrew.

I would say one is that we have worked really hard to increase the capabilities we offer outside in Canada and Europe, we're offering a lot more services We're delivering them with a lot higher quality and reliability We the bank partners that we're talking to have become really great partners of ours to help meet our customer needs. So So one component of it is definitely our we're raising our game and the value prop is is just significantly enhanced from where we were two years ago in a lot of those markets outside The U. S. [indiscernible] big driver is sort of I guess interrelated between the blend of of FinTech and embedded finance. The FinTech customers who maybe started on our platform five plus years ago, Many of them have become big businesses and they are looking to doing that on our platform is pretty straightforward. And relatively seamless. And as we enhance the capabilities in those Marqeta, we're making it even easier for those customers to expand to those regions. And doing it on our platform. And the same thing is true in embedded finance, that usually those companies are already multinational. And so some of the deals we're doing, it might be a U. S. Company, and they actually start with us in Canada or Europe.

So they might already be in the market with a competitor of ours, in The U. S. They say, well, I want to see give Marqeta Marqeta shot and see how different the platform is. And so they use us in another market and then we hope to then cross sell and move into The U. S. Business. And so I would say those are the factors that are really fueling our international growth and the TPV growth for our non U. S. Business was over 100% this quarter. And Europe is well past that and Europe is the bulk of it. So So we are really seeing a lot of rapid growth outside The U. S. Got it. And then I guess for my follow-up, would like to ask about the CEO search.

Is it are you kind of leaning towards external, internal potential candidates? Are there characteristics or quality qualities in the potential CEO to have come on board that you're looking for? Just any incremental color on what this process would look like?

Sure. The Board is One, they take succession planning very seriously. So this leadership transition is is the succession plan in action. And [indiscernible] [indiscernible] way the Board is thinking about it is really this should be a relatively seamless transition with myself and the rest of the executive team members and all the the talented marketants that we have across the company we really shouldn't miss a beat because you still have the continuity of the whole team and that gives the Board a little bit of space to conduct a deliberate and thoughtful search process to identify the right next CEO. What they're really going to be looking for is someone who can help execute on our goal of being the preferred partner for embedded finance and fintech. So So that's someone who is a little bit of an innovative thinker and has some technology experience, but also understand some of the payment ecosystem. And has that the operational capabilities to to drive that sustainable profitable growth we're seeking. So So I think that's the kind of candidate that the Board will be looking for. And and but they're going to have a thorough process. And so I'm not going to jump ahead of it here.

We'll let that play out.

Understood. Thank you, Mike. Yes.

Our next question comes from Sanjay Sakhrani with KBW. Please proceed with your question.

Thank you.

You. Definitely very encouraging that you've made some improvements on the launch timeline and etcetera and all the new wins.

As we look for the year, Mike, like where are the risks? Obviously, lots of positive things happening now. After some [indiscernible] thanks for your question Sanjay. I mean, I think the areas that could go wrong macro, of course, is always a factor since we're very dependent on spending.

But the second area that I would say is, as I mentioned, we're expecting about five points of revenue growth from new programs that launched in either 2024 or 2025. And once Marketa and the bank partner have delivered everything, that is required for launch, it's really up to our customer at that point to launch the program, start onboarding their customers we really sort of hand the keys off to them And of course, we try to be helpful and consultative, but they're in the driver's seat [indiscernible] if they don't move quickly, then that means that the revenue may not come as quickly as we thought. And so so a great example are is, as you mentioned, the delivery improvements that we made we were ready to launch all the programs that had been delayed, but there are three that still remain on launch. Because the customer is still working through some things.

So So we do have that aspect to our business where we're not in complete control as to when a program may launch and aggressively they try to ramp the business. And we do our best to stay close to them and align on assumptions and use some of our to also make our own projections, but that is something that can catch us a little bit off guard But we feel like those things are more than outweighed by the the some of the tailwinds that we have behind us, right? We have an ever growing installed base and we have more and more services to offer them And so like for example, as I mentioned, our real time decisioning risk service where the revenue is more than doubled in 2024 versus 2023, and the pipeline growing with embedded finance Our leadership with the flexible credentials we do think that there are a number of people who are interested as we talk to prospects in the Marqeta. That ability to have one credential that's flexible between debit, maybe offer some BNPL and ultimately revolving credit. And so there are a number of things that are pretty unique to us that we're excited about.

Okay, great. Just a follow-up on the addition of American Express.

I guess, like, can you just define sort of what the terms? Can you sell that into existing customers? Like could you just dimensionalize how additive like how it is additive to you guys? Thanks.

Yes. So for sure. So there's a few ways. So one is that Amex is is really known for some of their capabilities in credit, particularly B2B lending and loyalty. Cards. And so they are also out there talking talking to customers and about from a making a brand decision And if those customers want a highly flexible modern platform, [indiscernible] going forward, by the end of twenty twenty five, they will. And so that experience and expertise that they have in credit we think combined with our modern capabilities will be very additive to us where we can go sell customers together. And then the second piece of it is Amex wants to continually expand their debit business, right? That's something that's much smaller for them.

But that's an area where we have a lot of expertise and we have a lot of track record. So that's an area where we can really help them. To grow that opportunity. So we see this one as a win win. And it's the last major network that we didn't have on the platform. And so it gives our customers the ultimate choice to make a brand decision. Okay. Thank you so much, Mike. Good luck. Thanks, Sanjay.

Our next question comes from Chris Kennedy with William Blair. Please Please proceed with your question.

Good afternoon. Thanks for taking the question.

Can you just give us an update on the accelerated wage access initiative? And the opportunity there? Yes, sure.

So our accelerated wage access, it continues to we have a few programs live. We have the two big ones that we've talked about many times. And then we have a few labor marketplaces that have also launched. So the business is still growing relatively quickly. We've been doing a lot of work to enhance our value proposition there. As we've talked about in the past, what we do, although for for customers if they're willing to do some of the pieces themselves, what we offer is pretty unique, but they definitely have some heavier lifting to do on their side. And we are actively taking steps to enhance our value proposition. So more complete and it's a little bit easier for our customers. We announced a partnership earlier this year with RAIN, for example, that helps enhance our capability. So we're starting to work more closely with them And so we're still making progress to sort of round out or fill out our value proposition to make it appeal to many more prospects.

Thank you for that. And just a quick follow-up, any thoughts on the regulatory environment around accelerated wage access?

Yes. I think when it comes to that, our view is that the solution that we're offering is especially the vision that we have for the space is better and avoids some of the regulatory scrutiny because it's not actually alone. Generally is done today, right, is even though you've earned those wages, the EWA provider is actually providing you a loan that then you pay back when you get paid. With our solution, what we're saying is more you've earned the money already and is distributed to you sooner. And so our view is that's a better approach and it avoids some of the sticking points that the existing solutions in the market today there's some concern about how sustainable those are.

We have reached the end of our question and answer session, which concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.