Q3 2021 Marqeta Inc Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by welcome to Marcelo third quarter, 2020 One earnings conference call.
At this time lines have been placed on mute to prevent any background noise. After the speaker's remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded I would now like to turn the call over to Steve see firemen, Vice President of Investor Relations to begin.
Thanks, operator, before we begin I would like to remind everyone that today's call may contain forward looking statements. These forward looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our Investor Relations Web site, including our quarterly report on Form 10-Q.
For the quarter ended September 30th 'twenty, 'twenty, one and our subsequent periodic filings with the SEC.
Actual results may differ materially from any forward looking statements we make today.
These forward looking statements speak only as of the time of this call and the company does not assume any obligation or intent to update them, except as required by law.
In addition, today's call includes non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures reconciliation to the most directly comparable GAAP measures can be found in today's earnings press release or earnings release supplement materials, which are available on our investor.
Relations website.
Hosting todays call are Jason Gardner Marquette is founder and CEO video, Peter Mckenna, Chief operating Officer, and trip day, Mark Harris, Chief Financial Officer with that I'd like to turn the call over to Jason to begin.
Thank you Stacey. Thank you everyone for joining us for <unk> third quarter earnings call strip and I are excited to share of our third quarter results and the exciting ways. We are using modern card issuing the power of the digital economy.
First of all this afternoon I will cover our financial highlights for the quarter.
Then discuss how modern card issuing and industry that mark had pioneered.
Powering the digital economy before I discuss our strategic approach to deepen our moat in this industry.
Later triple discuss the financial results in greater detail with that let's begin.
Our third quarter results show the impact of monitor card issuing as already having in Marquette is momentum in this market.
$8 billion in total processing volume or PPV, a 68% increase compared to the same quarter of 2020.
$132 million in net revenue, a 56% increase compared to the same quarter of 2020, we believe monarch card issuing is at the heart of global money movement.
Look back at market as third quarter I see a wealth of examples that highlight the breadth and power of moderate traditionally.
Our kiddos monarch card issuing platform enables unique new payments use cases for companies of all types from digital Disruptors, who are looking for scale to legacy payment providers looking to launch cutting edge solutions to stay competitive.
Similar to how we've seen our just in time or jet funding technology enable on demand delivery and buy now pay later services. We're now seeing jet play a key role, enabling a new wave of innovative crypto currency card products.
Just in time funding used in tandem with our open API allows fiat currency to be spent at the point of sale for like crypto wallet and for consumers to earn crypto currency rewards on traditional spending highlighted by companies like coinbase back fold and shape PE.
We're coinbase users swiping, a mark Hyrdopower card at the point of sale and having a transaction funded and Fiat currency in real time based on their crypto currency balance is an exciting application of our technology. When you put this side by side with our recently announced partnership with Bill Dot Com It demonstrates the huge part.
The ability for our technology in the market.
Our work with Bill Dot Com is an innovative application of monarch card issuing in the payments landscape.
<unk> and medium businesses represent the engine room of the global economy.
It had little access to innovation to streamline their payment processes before companies like build dot com came along.
Using our best in class open API payment solutions, Bill Dot com plans to offer virtual card payment capabilities to its financial institution partners and their customers. This will give small and mid sized businesses access to enterprise level tools, which can save time and money.
We see our third quarter results is yet another proof point of the tremendous progress and the impact we are already having in global money movement, and we are only scratching the surface when it comes to the many ways Marquette. It enables monitor card issuing a market we estimate at 30 trillion globally.
As we look at this ocean of opportunity you see four key strategic pillars to growth, which will help US service. This large addressable market and card issuing as well as deepen our competitive mode. Our first pillar, adding new customers our value proposition for new customers is as strong as it's ever been we have had.
Proven track record of executing large and innovative payment programs. We've also shown how we can deliver innovation for large financial institutions that legacy card issuers cannot simply put marchetta can out scale, new entrants to this market and out innovate legacy platforms.
We've recently added several major new customers to our platform I've already highlighted our new partnership with Bill Dot Com. The Marquette a platform. It's also powering figures me figure paid product a digital payments account with native buy now pay later functionality and has spotlighted this quarter a range of crypto.
<unk> Coinbase shake PE backed and fold chose <unk> to build great card products, our second pillar, expanding and growing our relationships with our existing customer base.
<unk> has been named our credit customer since 2019, and we recently expanded our relationship and partnership with branch, we launched a new card product to power unique driver car for Uber freight carriers, which lets them get paid in two hours instead of 30 days.
Our third pillar broadening our global reach.
It is enabled in 36 countries worldwide, we successfully launched our Australian office in Q2 of this year and in Q3 announced our partnership with Cisco in the market.
Our European business launched in 2018 continues to see considerable growth and momentum in the market, we've seen over 340% year over year growth in the number of transactions processed by your European customers in the third quarter. In addition, we've doubled the number of Mark Hurd as European customers since Sept.
Timber 30 of 2020.
Our fourth pillar, expanding our ecosystem product offering and partnership network.
This is a critical strategic priority for marchetta to ensure we're properly attacking our total addressable market and continuing to deepen our competitive moat and modern card issuing.
Earlier in the year, we announced the launch of our credit product, which we believe makes us the first modern platform to offer prepaid debit and credit card issuing services.
After launching our first credit program in Q2 of this year, we continued to onboard new credit card programs with our partner does or the.
The owners rewards card by N. One went live last month. It is a unique credit product that offers its clients up a 10% cash back when they transact at brands they own stock in through there and one our investment portfolio and offer them the ability to reinvest rewards in there.
Folio, the flexible and innovative card experience, we're excited to enable.
Given that credit is a new offering from our Canada I'd like to highlight this for a moment with 52% of card spend happening one credit in the U S. This is a massive market opportunity that is underserved by current technology, which has done little to modernize the credit card experience.
Therefore, our credit card issuing platform is a critical strategic priority for Mercado.
To bring our vision to market, we're working with an ecosystem of partners, who have a similar commitment to disrupting the status quo in the credit industry.
First being deserve a modern mobile first credit card platform through.
Through this ecosystem of partners all core programs launched through Mark hurdle will be powered by modern underwriting models.
Corporate non traditional signal and mobile first consumer experience.
In addition to new products, a robust ecosystem of partners is crucial to market it to capture the significant market opportunity in front of us in a bad market technology into a greater range of use cases and <unk>.
Q3, we were named as a large partner for Mastercard, New installments program, which leverages the power of Mastercard's merchant network to built in the infrastructure to support buy now pay later payments.
This allows banks and fintech to more easily tap into a new payment type alongside this we recently announced partnerships with pay fair Tara and amount, helping us better payments technology into driver payout and community banking as a service programs.
In addition to a great Q3 results I would like to inform you of a leadership change in Marquette up Darrin Mori is resigning his position as chief revenue Officer effective November 32021, Darin has decided to return to enterprise cloud software sales, where he worked for 10 years prior to joining mark header in June we think that.
And for his contributions and wish him the greatest success.
So Darren departure, we feel it's time to combine our entire customer go to market functions under one operational leader.
I'm very excited to announce that video Peters will become market as chief operating officer.
His professional experience is extraordinary and first success up market has led us to new Heights.
Video will lead our marketing revenue and program management teams combining these three functions lead to a superior customer experience overall, the positions of Chief revenue Officer, and Chief Marketing Officer will be eliminated I will now turn it over to video for some brief remarks.
Thank you for the introduction and Jason I'm excited to speak with you all today.
We will have the opportunity to move into this new role as the Chief operating officer and Macchiato in.
In the past two years that Mark had a I've seen significant growth of the company engaged with customers across industry and a massive untapped opportunity in front of us.
Building and scaling marketing, while creating industry excitement for modern card issuing has been an impactful journey.
Also had the opportunity to take an interim leadership positions running our revenue and product organization overseeing vastly different parts of the business.
By unifying them behind a cohesive strategy.
We have a tremendous opportunity ahead of us we currently process less than 1% of the wells transaction.
We believe a unified go to market vision and strategy across marketing sales customer success and delivery.
<unk>, an integrated experience that puts the customer at the heart of all that we do.
I'm excited about the unified experience, we can create for our customers from their first interaction with us.
Adoption and growth on our platform.
I look forward to sharing back with you in future quarters, the progress and benefits. This change has helped us.
And back to you Jason.
Thank you video rolling up our entire go to market operation under one leader helps us create an even more unified global vision for <unk> as we expand we believe this will expand the scope of what we can achieve as a company and see video as a seamless fit for this new position.
With that I'd like to turn it over to truck Bay, Mark Harris, Chief Financial Officer to discuss our third quarter financial results.
Thanks, Jason Good afternoon, everyone.
I am excited to discuss our strong third quarter financial results and provide guidance for the fourth quarter.
Total net revenue increased by 56% to $132 million in the third quarter of 2021 from $84 million in the comparable quarter of 2020.
The increase was primarily driven by 60% growth in total processing volume for TPG compared to the third quarter of 2020 slightly offset by increases in our revenue share payments as a reminder, revenue share payments, our incentives to customers to increase processing volumes.
On our platform.
As a result, net interchange fees increased 51% to $101 million and processing and other fees increased 73% to $25 million in the third quarter of 2021 versus the same quarter of 2020, primarily due to increased ATM fees.
I'll now discuss some of the key drivers of our TPG growth in the quarter.
<unk> for the quarter was 28 billion, an increase of 60% compared to the third quarter of 2020.
We view <unk> as a key indicator of the market adoption of our platform the growth of our business and our customers continued usage of the platform.
Similar to the second quarter of 2021 growth was driven by outperformance from both our digital banking and BNP all customers.
This growth was offset in part by some reductions in our on demand delivery volume from considerable peaks, we saw last year in the midst of the Covid pandemic.
We want to call out that our top customer concentration decreased from 72% in Q3 of 2020% to 68% in Q3 of 2021 as we continue to both add new customers to the platform and expand with our existing customers as they add additional programs in <unk>.
Yes.
Furthermore, we continue to benefit from the key secular tailwind within payments accelerated by government stimulus and the Covid pandemic.
I will highlight that our non top five customers grew 226% from a volume perspective in Q3 of 2021 as compared to Q3 of 2020 and we're very pleased with this result.
Gross profit increased by 67% year over year to $59 million compared to $35 million from the third quarter of 2020.
Gross margin increased from 42% in the third quarter of 2020% to 45% in the third quarter of 2021 as.
As we stated on the Q2 call. We did expect this to be in line with our long term gross margin target.
Of note, we amended one of our card network incentive agreements, which will result in higher incentives to Marquette at going forward and provided a $2 million catch up benefit in the third quarter of 2021.
These incentive agreements are a testament to both our strong alignment with our network partners and these strategic relationships and the powerful operating leverage that can be achieved in the payments business excluding.
Excluding this onetime benefit our gross margin would have been 43% in the quarter.
Furthermore, for the nine month period ended September 30th.
<unk> achieved a gross margin of 43%.
As we discussed during our second quarter call, our margins can vary quarter to quarter as interchange and network fees can vary considerably by merchant MCC code transaction type card present or not and the like.
Therefore, rather than paid to strict attention to quarterly gross margin results. We maintain that we remain committed to our long term gross margin target of between 40% and 45%.
Overall, our GAAP net loss was $46 million driven by our continued investment in people as well as an increase in stock based compensation.
In fact, the third quarter represented our largest hiring quarter to date as we welcomed 77 net new marketing employees from a quarter over quarter perspective.
As of the end of the quarter, we had a total of 696 more curtains.
On a non-GAAP basis, adjusted EBITDA for the quarter was negative $4 $9 million compared to positive 686000 in the comparable quarter of 2020.
The change was largely driven by compensation related costs, excluding stock based compensation, which increased 61% from the same quarter of 2020.
We view this spending is critical.
As we look to invest back into the business to support future growth.
Our four key strategic pillars of growth are adding new customers and growing with our existing customers broadening our global reach and expanding our ecosystem.
We ended the quarter with over $1 7 billion in available liquidity and cash and marketable securities which is constant from the end of the second quarter.
We believe that we are just scratching the surface of a large addressable market.
Therefore, we feel that the best way to capitalize on that opportunity.
To invest in our products, our technology and our people.
I'll now move on to guidance as we noted in our press release, we are providing the following guidance for the fourth quarter of 2021 based on our current assumptions.
Net revenue for the quarter is expected to be in the range of $134 million to $139 million at the midpoint. This would represent growth of 55% on a year over year basis.
Our topline guidance for the fourth quarter reflects continued strength from the NPL and digital banking sectors, which we believe will be especially strong owning to the consumer spending and consumers financing their holiday purchases.
From a full year 2021 perspective.
Net revenue would be in the range of 496 million to $501 million at.
At the midpoint this would represent growth of 72% on a year over year basis.
Our range for adjusted EBITDA for the quarter is negative $10 million to negative $7 million.
Also for the full year 2021 perspective, adjusted EBITDA would be in the range of negative $24 million to negative $21 million.
This guidance takes into account increased head count investment as we look to add additional talent, primarily in our product and technology teams to deepen our moat within modern card issuing.
In summary, we are very pleased with our strong Q3 results overall and are optimistic about our business our customers and the opportunity ahead of us and modern card issuing.
Thanks trip, it's a theme you're going to hear from US a lot of huge opportunity we see in front of Mercado.
During the remarkable events of 2020 Marchetta supported mission critical sectors of the economy that consumers turn to in large numbers out of necessity.
A question we got throughout all of this is this growth sustainable we sit here one year rolling and are seeing considerable year over year growth from what at the time, we felt like a peak people question would be sustained.
When we look out at the next year, we are more energized than ever we look forward to reporting back on new customers, we signed to our platform new geographies where were enabled in an ever deepening stack of money in money out technologies that would empower modern global money movement now.
I'd like to turn the call over to the operator and open line for Q&A operator.
If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Our first question is from Tien Tsin Huang with Jpmorgan. Please proceed.
Thank you. Thank you strong results here it sounds like buy now pay later remains really really strong I think you said, especially strong. So I was wondering if you can give us an idea of how fast.
It's growing now I think it was up $3, 50% last quarter, if I remember correctly and I'm curious how broad based it is from a from a customer perspective.
Hey, Tien tsin its Jason.
Buy now pay later grew over 300% in Q3, we continue to see our customers, Florida affirm says old Zip after pay really focus on creating new payment types are at the point of sale, whether that's in person here, where I live close the Walnut Creek, we're seeing lots of Florida signs.
The pay in the offline world the payment type is here to stay so we're really seeing just.
Strong sustained growth in this area.
We've also talked about we've seen 71% buy now pay later user surveyed said they were going to increase their usage from last year.
Just on.
Where we've seen in the market, 40% of consumers even tried a buy now pay later last year. So the the buy now pay later usage is definitely here to stay.
Yes, that's getting a lot of news Mastercard talked about it today.
Affirm affirm is talking about as well so as my follow up if you don't mind I get this question a lot Jason and team just with affirm and debit plus I know, it's caught a lot of attention I'm curious are you involved with that.
And then any way anything you can say on that front.
So yes, I can confirm that we are powering affirms debit plus card.
Can't comment any more beyond that until it's in market, but our firm has been a great partner Marquette out for many years.
Continuing that partnership with a debit card.
Terrific. Thanks, a lot guys.
Thanks Sandra.
Our next question is from Bob Napoli with William Blair. Please proceed.
Thank you nice job.
The quarter great to see.
Suffocation, especially in.
From.
Your largest customer is growing very well, but.
Trip.
You gave on.
The non top five.
And it can be other than buy now pay later what are the other sectors that are showing the most growth and I get a lot of questions on <unk>.
After your largest customer what is the mix.
<unk>, maybe buy now pay later versus expenses versus on demand delivery.
Now if you can give any color on that would be helpful.
Okay.
Good to hear from you Bob.
<unk> and everyone's doing well and so I'll, maybe comment a little bit on on growth, Jason I already commented on <unk>.
NPL, which grew over 300% year.
Year over year in Q3 of 2021.
Also highlight that we have seen strength from our digital banking.
<unk> group, which we believe is because of continued user engagement.
I'd say the third item that I'll comment on is we have seen strength.
In our expense management vertical, which we saw grow a 164%.
Year over year for the quarter.
I'd highlight that we have seen some reduction in OLED.
From the considerable peaks that we saw last year.
That being said we strongly believe that ODT is is is here to stay people want better experiences.
We believe that they can achieve on our platform.
Thank you Lynn.
As a follow up on the international will get to hear the growth doubling your customers in Europe year over year.
Maybe a little.
Jason if you could give some more color on the strategy and where you think international can be over the next five years and where you are where you are having success with which products.
Yeah, and also just a draft off of.
Trips comments, we're also seeing growth in crypto we've talked about.
Creating a gateway between crypto currencies, and Fiat currencies and the ability for companies like coinbase to spend those at the at the point of sale.
So as we talked about monitoring card issuing Bob is a global phenomenon.
And Mastercard have interconnected every single merchant in the globe, whether online or offline that wants to accept card. So we see this happening not only in the U S and Canada, we definitely see it happening in Europe, we see it happening in Australia, New Zealand new countries that we launched.
This year and it will continue to operate and drive monitor card issuing flowing into global money movement. In the next five years I mean, one thing that you and I will keep doing.
And probably for next 10000 years is the exchange of value so consumers paying each other are people paying each other consumers paying businesses businesses businesses.
Opinion, each other and when we think about the growth specifically in Europe. We have found nothing like Mark had existed in Europe.
<unk>, we launched under Ian Johnson's leadership to run Europe, we've seen obviously tremendous growth.
In that in that.
Area so that.
That will continue.
Talked about we've launched 36 countries that is absolutely growing.
And specifically the numbers, we had 340% year over year growth in the number of transactions processed in Europe, and we've doubled the number of customers signing with <unk> on a year to year basis.
This is all geared towards monarch card issuing.
Dot com choose marchetta, and Uber freight choosing Marquette in partnership with our customer branch because we know scale. You know we started this business over 11 years ago. The numbers in the volume that'd be processes significant we have busted through scale all the time.
Over the years, so when companies like Bill Dot com on a scale. They think about okay. What about Marquette a success in modern issuing we need virtual card issuing capabilities alongside the ability to seem spend data inject metadata into the transaction set spend controls it was very much a powerful sort of differentiator.
For us.
Versus our competitor so as you can imagine what it billed dot com goes out to the industry to go build these new products. There's a range of customers that they can talk to range of companies. They can speak to and they chose marchetta. It's not just about one product and I think you see this with companies like square and others on our plan.
Form.
The surface area of our platform is very bad so as they begin to pick one product. They when they go build a test that product and market find success went to go build other products. They can build that on top of our platform customers choose Marquette up because he seems scale, we know modern card issuing whether they want to build virtual cars are.
Tokenized cards to fit into Apple pay or Google pay or Samsung pay or they wanted to build physical plastic cards, they're able to do that based on what we've already proven and market. So the bill dot com choose Marquette up because of who we are and what we've been able to accomplish absolutely are we always a single source provider when company.
He's come to us sometime and we definitely see competitors and market, but we're obviously winning a lot of strong businesses, who believe and trust our cat is platform for their future.
Okay.
And a follow up I know, it's a bit early but I wanted to see if you could provide any kind of preliminary thoughts on on on physical 22.
Yeah. Thank you on this topic I'll I'll talk more about 2022, and our queue for earnings call boat, but will share a few comments today.
We we are absolutely encouraged by our Q3 2021 performance in our our progress as we finish out the year and move into 20 twenty-two whether it's recent wins like Uber free or bill dot com or strengthen our vehicles like B M. P L or urging verticals like crypto along with our partnerships.
That will take some time to ramp and then accelerate our go to market motion.
As you know 2021 was was stronger than we anticipated benefiting from both stimulus in the macro COVID-19 environment, we will be starting 20 twenty-two with a larger revenue base than than we anticipated and I would not I would not expect growth rates in 2022 to be as high as 2021.
Business inputs remain strong and our view of the long term growth rates has not changed.
Our focus is on building this business for the long term.
Same strategy same expectation.
Got it Super helpful. Thanks, so much.
Our next question is from Ashwin sort of car with city. Please proceed.
[noise] you guys. Congratulations on the on the very strong quarter, and maybe a congratulations especially to U double congratulations I guess I wanted to you have many good announcements get into last separately.
I wanted to pick out one of them the terminus marketplace because it seemed to me gave you an opportunity to get embedded within a.
Long list of potential financial services client I'm looking at it that way if I consider it like that I mean could you talk a little bit more about the opportunity to to a market places.
Yeah, So tendinosis creates with bark at places, where we are providing or a P. I is through their their platform. This allows us to focus on partnerships. So I think as you've seen us grow, especially on modern card issuing partnerships is a big part of what we do and how we grow around the world.
So you don't Trust is the foundation of every single relationship. If you look at what we've been able to create in modern card issuing we have created very long term trusting relationships and these partnerships really help us spread our wings in areas, where people maybe don't know about us went to learn about us in an attempt to assist the platform helps us help with.
Do that.
Got it okay and tip, if I can ask you a little a little bit more color on on 22 from the perspective of.
You know seasonality or what to watch for it from you know your basics I would imagine that is quite a few hired based <unk> probably is is.
Is it tougher calm just because of the stimulus does that.
Is that a good way to think of it for any any details with regards to how Cortes should be set up for 22, I know too appealing shortly but to do it.
It is a little early and you're absolutely right in Q1 of 2022 or excuse me cute in Q1 of 2021, we did have a stimulus and you know we also highlighted queue for this year, we highlighted on the Q2 earnings call. In addition to today.
<unk> you know, it's it's the holiday season and so.
I am happy to talk more about what I'll call Quarterization. After we closed the year, but hopefully that's that's a good color for Ya.
Okay got it thank you.
Our next question is from Darren Paller with Wolf Research. Please proceed.
Thanks, guys.
Nice job on the revenue growth outside of square accelerating what looks like to us up to over 70% from the 40% plus right last quarter. It. It just underscores the diversification in the business and to strengthen categories, you're talking about whether it's P. M P L or expense management or crypto, so really just on that topic.
What I really just would love to hear is more examples of what you know Marquette has been doing that's truly technologically differentiated that's resonating so well.
With the likes of maybe you know customers in each of those areas or maybe just pick one or two of them doing there's so many but just enough to give us a sense of how sustainable the barriers to entry for you guys are <unk> that this can keep going because of your favorite kind of color.
As I talked about it in a trust is the foundation of every single relationship and the deep moats and very tall walls. We built are truly based on experience like we know how to operate modern card issuing a massive scale and companies, where we're either single threaded like.
We already there supporting their core business or we are there for business or where they're thinking about entering the market with a card product that can be physical plastic it can be tokenize to fit in to Apple pay or Google pay or Samsung pay where they can be virtual they use our platform like many of our customers use our platform you know they think.
About their constituency, whether that's consumers or businesses, whether that small medium businesses like like bill dot com or its markets by Goldman Sachs. The create new debit products work for consumers. So as we think about new vertical we've always been very thoughtful about when we when we go in or a vertical we want to create the best.
Syrians the best Technology people, who really understand that vertical will <unk> capture that that that is very clear with crypto. We leveraged yet we wanted to create a gateway because we felt that you have all this crypto currency that you want to spend at the point of sale. How do you do it you've got a quite a gateway to go do that so so we focused on.
That.
So as we begin to get more and more companies on our platform when they get physical cards and market when they get tokenized cards and market a virtual cards, they're using our technology to build services and practices and products within a company and we spent a lot of time with them helping them.
Think about the future I mean, we're very much you know we're gonna hit the park, we're gonna tell you, where it's Gonna go and we're Gonna help me get there and we will continue to do that as we entered the vertical <unk> countries new products.
That is what builds the barriers to entry we see new entrants entering in the market, we see existing entrance whether they've been here for 40 years or two years still attempting to scratch the surface in regards to what we created we have magic over here will continue to do that and.
And continue to grow the business and I think that's absolutely evidenced by our third quarter results.
That's really helpful. Very quick follow up on the is an engineering talent demand. It's obviously going to play Margaret but you guys seem to have a very strong talented spreadsheet just touch for a minute on your ability to keep hiring in this market and are obviously your growth is going to require some of that so I appreciate it guys and thanks.
Yeah, Tex hiring and you know the competition for it is not just the marchetta problems, it's absolutely a global problem.
Because we've built something uhm payments is deceptively complex issuing and processing. If you look at the four pillars of card issuing acquiring the issuing bank the acquiring bank and then issuing a processing itself. We are very complex complex technology. So.
We tend to attract really good engineering talent that wants to really digging the problems of you know the engineering room or the engine room, but a ship like we've gone in belt. So and I've also found two is like being a public company and obviously you know sort of ups your understanding of what we do.
And and never seeing just the attraction of of that does have a very strong recruiting team led by Ryan whether or she talent officers just done an extraordinary job in the last few months and we will continue to hire to meet global need.
[noise], Thanks, a lot guys Joe Yep.
Our next question is from Angie, Andrew Jeffrey with Chili Securities. Please proceed.
Hi, Good afternoon I appreciate you taking the question guys.
You know you've described a lot of use cases, Jason Richard which I think are great and and I'd like to touch on I'd build dot com in terms of how we should think about attaching.
And what some of the the marketing drivers and customer acquisition cost kind of looks like there, but but I'm wondering sort of more broadly when I think about.
Perhaps.
More traditional consumer cards, both debit and credit. Thank you should cards can you talk a little bit about the opportunity there in the selling cycle and and kind of how you see that perhaps emerging over the next several quarters, perhaps or maybe it takes longer than that.
[noise] Yeah. So is the question specifically around consumer debit and consumer revolving credit.
Yes traditional back issued cards.
Yep.
So our strategy in the very early days of Marquette I was to focus on Congress Disruptors Bye now pay later expense management.
On on demand delivery and you know we we felt there was a good DNA mash in regards to the work that we were doing there and and really purpose built solutions, introducing <unk> or just in time, which allowed them to authorize their own transactions, which which created are very crisp.
<unk> awesome customer experience.
We then went on to digital banking with companies like square and in 26 and Lydia in Europe. We then went onto large tech Giants you know we've talked publicly about Uber in Google and then you know and the large financial institutions, we've talked about Marcus by Goldman Sachs and J P. Morgan Chase. So we know the card business extra.
Greenlee, well, we know debit extremely well and we are beginning to scratch the surface within credit and we really wanted to rethink that customer experience and partner with companies like deserve we've seen the early success uhm from M. One financing their credit card and market.
So we are beginning to spread our wings, even more than the credit space you will hear more from us certainly in the coming quarters in the coming years in regards to how to really think that you and I probably have a credit card within our wallet in the I'll pretty much do the same thing you know maybe the rewards are different we want to try.
To figure out is how can we help our customers both on the consumer side on and the business side sort of rethink credit cards and capture more of the market. I mean, we talked about 80, 552% of Americans use credit cards today, we definitely see credit cards growing within Europe, It's an untapped part of Asia.
And as we began to grow on spread her wings, you're gonna see a lot more of this that that is not going away in regards to growth and how consumers are going to use it. So we're absolutely investing.
More and more in our business and our customers to see that early success and then begin to grow upon that with more features and functions just like we've done with our other products.
Okay, Yeah, let's look forward to hearing more in it and then with regard to bill.
Can you talk a little bit about to go to market you just piggyback directly on them from our customer acquisition perspective, how can we think about that.
Beginning to control what well <unk>.
Yeah, as I talked about and we we support our customers core products or we support products that are part of their ecosystem. So bill Dot com is financial institution customers or will now be able to pay bills and get paid faster using virtual cards issued through our market a platform.
And it and it represents a major new efficiencies over over paying a check. So in 2018, you know the last I think it was the last complete federal reserve data set that we have there was 6.8 billion checks written totaling approximately I think 20 trillion dollars and spend.
Uhm and creating a much faster way of getting paid a bill dot com, obviously coding tore a P. I using just to help them not only generate these cards is the first step in the direction of Bill Dot Com using car parks Windows service. Their constituency Uhm. This is a constituency that has been asking for this.
You know bill Dot Com, we believe is gonna be a great partner of Marquette as they begin to build out and I love when we lay on these customers and just see them get started and what they want to go build I've actually known a renee with search for probably a decade, he's a payment nerd like me and our ability.
To work together and create some great products for their customers or something I'm Super excited about.
Alright look forward to hearing about how that relationship matures involved.
Yep.
As a reminder to star one on your telephone keypad. If you would like to ask a question. Our next question is from Andrew Ouch with.
C M D scene Ecosecurities. Please proceed.
Hey, guys. Thanks for taking my question I, just wanted to touch upon the EBITDA and a quarter came in a little bit better than the guide and then fourthquarter looks strong as well relative to you know original expectations. I mean is this really a function the revenue strange purely or is there maybe an augmentation of the.
No operating leverage inefficiency that you're seeing in the mall relative to where you were last year.
Thanks for the question. We obviously finished just needed that adjusted EBITDA negative for nine for for the quarter Uhm. That's due to a couple of things. One is we certainly saw revenue shrinks higher than we anticipated and we.
Highlighted you know outperformance in digital banking, we highlighted R. B N P. L. A vertical which grew over 300% this quarter and we highlighted that expense management accelerated to 164% I'll start there.
<unk>. In addition, we amended one of our card network arrangement, so and we did receive benefit from that so we finished with a higher gross profit.
It is Jason said, we're we're we're hiring a number of folks here at marchetta to support our future growth and we will continue to invest back in the business because we have an incredible tan and an incredible market opportunity in front of us that that is our goal is to.
Build this business for the long term.
Mmm no definitely hurt.
Thinking about all of these new headlines in new customers you bring onto the platform and this made an <expletive>, but it kinda Wanna ask in a different way you know when you get a new platform.
Or a new business into your kind of ecosystem I know that you have an easy to plug in API that allow your customer should get the market faster, but you know. In addition, you also have a white gloved type level of service that you provided these customers. So maybe you can get a sense of what's the time I, usually look like from signing a new client to really seen those transactions.
Come through the model.
I'm happy to take that question and the time it takes for our customers to unbearable point very significantly.
By the industry the complexity of the use case the size of the program and what is constant is on a level of partnership with that so right friend. When we are talking about the program, which I'm very early on in a discussion we are side by side with cracking. The program. Alongside then you have to remember our customers are not always payments expert so they rely on.
To help design the card program you can advice on what's on strike cause that their developers can can cigarette the right way and that Onboarding can can there is so it can be fairly quick for a small program and that is looking to experiment and weren't gonna get something nimble and they can help you with a daring out and it could be longer when you were talking about.
A large financial institution with large volumes of today. So there's no there is there and Mister from both of them and with with great skill because it's something that we have taken a lot of pride in immediately developing our experience and open the last few years and and we continue to Sir These customers are coffees industries ahead.
Mhm and that's helpful color and congratulations idea well deserved.
Thank you I appreciate it.
Our last question today is from Josh back with Keybanc capital markets. Please proceed.
Thank you for taking the question I wanted to ask maybe a high level question for for Jason I know that you're coming out of money 2020 last month that's.
Important event for you over the years just curious if there were any really kind of new learnings for you coming out of it obviously a lot of the the big trends, whether it's crypto or by now pay later, you're really closely involved with anyway, but just curious if if anything stood out there and maybe how you would characterize the pipeline.
We obviously it to the vet and we'd go through every year. So just loved to hear a little contacts there.
Yeah, Hey, Josh Uhm, it's money 2020th wasn't drinks and so people who on a call and we don't know what money 2020 years. It's it's a conference that as soon as the 11th year was actually canceled last year.
And it's a <unk> a conference we started with from the beginning it really gave a platform for syntech when fintech wasn't even a thing and it's really helped us grow our business over the years get or get our message out with new customers and prospects if it's been great.
So.
About I think a month before money 2020, we had actually made a decision not to attend because of the pandemic I think they went from 2000 attendees. The 8000 attendees in three weeks and then we sent 30 people there we had a number of dinners.
We set up a lot of meeting rooms. It was actually the first time that we didn't have a booth.
And interestingly enough even during a pandemic. We had the same result, the same number of meetings. The same prospects that'd be got connected with it's always been a great event for us what I saw that was very different was was two things uhm and the service to it to a third one with a lot of rock though.
Uhm around not only creating the gateway to spend crypto, what the point of sale, but a lot around from defy or decentralize financed leveraging.
Leveraging Brock blockchain and four o'clock change to create new ways of not only moving money, but controlling identity. It was really interesting I saw some of this stuff two years ago, but it was front and center. The second thing I saw was a lot around K y C.
M L really around sort of the compliance end of things and it's interesting that's how I'm beginning to see is crypto and to talk about crypto is tying that back to finance and I think that's all these into the third which were finding a lot around trusting verify so so when you're moving money both consumer.
<unk> and businesses money Trust and verify is a is a very very in court and important part of the ecosystem. So I think when you see crypto and you see compliance it's gotta be sped into this whole area of what I like to refer to as it was really trust and verify so uhm I'm really.
Curious as what's gonna happen next year I definitely think we're gonna see more around from decentralized finance, we're gonna see a lot more around card products, we're gonna see a lot more around countries in new networks, but I'm always sort of astounded by what happens next and and money 2020 is gonna something we will continue to be a part of in the future for for.
Sure.
Great Yeah, it's one of those events, it's always fun to see what's gonna happen next year, Yeah did you agree with that.
This year I actually I did it I had some about two minutes ago, but a book in my ticket for next year now so it will be there for for for 21 22.
Maybe a follow up for you trip just wanted to ask about kind of how your model in queue for so you certainly talked a bit about the by that'll pay later strength, obviously, that's a trend that is well under way what are the other things that I think has come up with some of the other <unk>.
Earnings calls that are a little bit more e-commerce oriented as some of the supply chain issues and concerns that you have a holiday season, this year might be more dispersed or right it might evolve a little bit differently than the prior year. So I'm just kind of curious how you were trying to balance those factors as you build out the the forecast for.
Two four.
Yeah, we're worse, but first of all Jack excuse me, Josh Great Great to hear from you again, and you know, we're well aware of of the supply chain and that kind of marketplace until we we tried to factor some of those elements into into our our forecast in as an assumption.
<unk> for Q4, I will say you know.
We highlighted that we expect continued strengthen and buy now pay later certainly were coming off a great quarter growth you know I would I would also highlight our expense management vertical, especially if people start to travel war and returned to the office.
We do expect continued shrank from digital banking and you know as as we mentioned today on the call crypto as an early days were particularly excited about it but we expect that to be a contributor in queue for.
Really helpful like C.
Thank you.
Yeah, and if our question and answer session I would like to turn the conference back over to Jason for closing comments.
Excellent. Thank operator, so in closing just want to thank everyone for joining us for a third quarter call. We believe that our results for the quarter serve as a testament that modern card issuing is powering the digital economy.
From scaling buy now pay later to new Heights, two enabling our customers cardholders to more easily spend their crypto currency balances <unk> solutions were purpose built for the shifts were experiencing in modern global money movement.
Recent customer wins with disruptive companies like Bill Dot com and he <unk> or excellent proof points to the competitiveness.
Pettitte, a desk and possibility of our platform I'm already looking forward to updating all of you on our fourth quarter have a great rest of the year happy holidays and best wishes for the new year. Thank you.
Thank you that does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
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